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

                                  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 March 31, 2005

                                       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)

   1211 Avenue of the Americas, New York, New York          10036
(Address of Registrant's principal executive offices)     (Zip Code)

                                 (212) 536-1211
                         (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 April 29, 2005, there were 210,481,259 shares of the Registrant's
common stock outstanding.

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                         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).......   5-17
Item 2.    Management's Discussion and Analysis of Financial Condition
and           and Results of Operations and
Item 3.    Quantitative and Qualitative Disclosure about Market Risk....   18-41
Item 4.    Controls and Procedures......................................    42

                           Part II--Other Information:
Item 1.    Legal Proceedings............................................    43
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds..    43
Item 3.    Default Upon Senior Securities...............................    44
Item 4.    Submission of Matters to a Vote of Security Holders..........    44
Item 5.    Other Information............................................    44
Item 6.    Exhibits.....................................................    44

Signatures .............................................................    45

                                       i


                          PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                        CIT GROUP INC. AND SUBSIDIARIES

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



                                                                          March 31,     December 31,
                                                                            2005            2004
                                                                          ---------     ------------
                                                                                   
                                   ASSETS
Financing and leasing assets:
   Finance receivables ..............................................     $36,859.6      $35,048.2
   Education lending receivables pledged ............................       4,322.9             --
   Reserve for credit losses ........................................        (620.4)        (617.2)
                                                                          ---------      ---------
   Net finance receivables ..........................................      40,562.1       34,431.0
   Operating lease equipment, net ...................................       8,313.1        8,290.9
   Finance receivables held for sale ................................       1,481.3        1,640.8
Cash and cash equivalents, including $234.4 and $0.0 restricted .....       1,638.1        2,210.2
Retained interest in securitizations and other investments ..........       1,123.2        1,228.2
Goodwill and intangible assets, net .................................         906.4          596.5
Other assets ........................................................       2,756.8        2,713.7
                                                                          ---------      ---------
Total Assets ........................................................     $56,781.0      $51,111.3
                                                                          =========      =========
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
   Commercial paper .................................................     $ 3,963.0      $ 4,210.9
   Variable-rate senior unsecured notes .............................      11,473.1       11,545.0
   Fixed-rate senior unsecured notes ................................      22,197.0       21,715.1
   Non-recourse, secured borrowings -- education lending ............       4,638.9             --
   Preferred capital securities .....................................         253.3          253.8
                                                                          ---------      ---------
Total debt ..........................................................      42,525.3       37,724.8
Credit balances of factoring clients ................................       4,269.8        3,847.3
Accrued liabilities and payables ....................................       3,619.1        3,443.7
                                                                          ---------      ---------
Total Liabilities ...................................................      50,414.2       45,015.8
                                                                          ---------      ---------
Commitments and Contingencies (Note10)
Minority interest ...................................................          48.8           40.4
Preferred capital securities
Stockholders' Equity:
   Preferred stock: $0.01 par value, 100,000,000 authorized;
     none issued ....................................................            --             --
   Common stock: $0.01 par value, 600,000,000 authorized;
     Issued: 212,119,700 and 212,112,203 ............................           2.1            2.1
     Outstanding: 210,771,309 and 210,440,170
   Paid-in capital, net of deferred compensation of $68.6
     and $39.3 ......................................................      10,654.5       10,674.3
   Accumulated deficit ..............................................      (4,316.5)      (4,499.1)
   Accumulated other comprehensive income / (loss) ..................          31.2          (58.4)
Less: treasury stock, 1,348,391 and 1,672,033 shares, at cost .......         (53.3)         (63.8)
                                                                          ---------      ---------
Total Stockholders' Equity ..........................................       6,318.0        6,055.1
                                                                          ---------      ---------
Total Liabilities and Stockholders' Equity ..........................     $56,781.0      $51,111.3
                                                                          =========      =========


                 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
                                                                March 31,
                                                         ----------------------
                                                           2005         2004
                                                         ---------    ---------
Finance income ........................................  $ 1,022.0    $   896.9
Interest expense ......................................      394.2        298.0
                                                         ---------    ---------
Net finance income ....................................      627.8        598.9
Depreciation on operating lease equipment .............      237.6        235.8
                                                         ---------    ---------
Net finance margin ....................................      390.2        363.1
Provision for credit losses ...........................       45.3         85.6
                                                         ---------    ---------
Net finance margin after provision for credit losses ..      344.9        277.5
Other revenue .........................................      239.4        230.4
Net gain on venture capital investments ...............       10.8          0.7
                                                         ---------    ---------
Operating margin ......................................      595.1        508.6
                                                         ---------    ---------
Salaries and general operating expenses ...............      261.0        240.0
Gain on redemption of debt ............................         --         41.8
                                                         ---------    ---------
Income before provision for income taxes ..............      334.1        310.4
Provision for income taxes ............................     (122.8)      (121.1)
Minority interest, after tax ..........................       (0.9)          --
                                                         ---------    ---------
Net income ............................................  $   210.4    $   189.3
                                                         =========    =========
Earnings per share
Basic earnings per share ..............................  $    1.00    $    0.89
Diluted earnings per share ............................  $    0.98    $    0.88
Number of shares -- basic (thousands) .................    210,656      211,839
Number of shares -- diluted (thousands) ...............    215,090      215,809
Dividends per common share ............................  $    0.13    $    0.13

                 See Notes to Consolidated Financial Statements


                                       2


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                                  Accumulated
                                                                                                     Other           Total
                                           Common     Paid-in      Treasury       Accumulated    Comprehensive   Stockholders
                                            Stock     Capital        Stock          Deficit      Income/(Loss)      Equity
                                           ------    ---------     --------       -----------    -------------   ------------
                                                                                                 
December 31, 2004 ...................       $2.1     $10,674.3      $(63.8)        $(4,499.1)       $(58.4)        $6,055.1
Net income ..........................                                                  210.4                          210.4
Foreign currency translation
   adjustments ......................                                                                 42.6             42.6
Change in fair values of
   derivatives qualifying as cash
   flow hedges ......................                                                                 47.4             47.4
Unrealized loss on equity and
   securitization investments, net ..                                                                 (0.8)            (0.8)
Minimum pension liability
   adjustment .......................                                                                  0.4              0.4
                                                                                                                   --------
Total comprehensive income ..........                                                                                 300.0
                                                                                                                   --------
Cash dividends ......................                                                  (27.8)                         (27.8)
Restricted common stock grants
   amortization .....................                      9.7                                                          9.7
Treasury stock purchased, at cost ...                                (59.3)                                           (59.3)
Exercise of stock option awards .....                    (29.3)       68.8                                             39.5
Employee stock purchase plan
   participation ....................                     (0.2)        1.0                                              0.8
                                            ----     ---------      ------         ---------        ------         --------
March 31, 2005 ......................       $2.1     $10,654.5      $(53.3)        $(4,316.5)       $ 31.2         $6,318.0
                                            ====     =========      ======         =========        ======         ========


                 See Notes to Consolidated Financial Statements.


                                       3


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                         Quarters Ended
                                                                            March 31,
                                                                    ------------------------
                                                                       2005           2004
                                                                    ---------      ---------
                                                                             
Cash Flows From Operations
Net income ....................................................     $   210.4      $   189.3
Adjustments to reconcile net income to net cash flows
   from operations:
   Depreciation and amortization ..............................         248.3          248.2
   Provision for deferred federal income taxes ................          90.0           95.4
   Provision for credit losses ................................          45.3           85.6
   Gains on equipment, receivable and investment sales ........         (66.6)         (62.5)
   Gain on debt redemption ....................................            --          (41.8)
   Net proceeds from finance receivables held for sale ........         372.5          273.4
   (Increase) decrease in other assets ........................         (48.5)         303.1
   Increase (decrease) in accrued liabilities and payables ....         131.1         (346.6)
   Other ......................................................         (46.5)         (26.0)
                                                                    ---------      ---------
Net cash flows provided by operations .........................         936.0          718.1
                                                                    ---------      ---------

Cash Flows From Investing Activities
Loans extended ................................................     (12,603.0)     (11,743.3)
Collections on loans ..........................................      11,665.3       10,532.9
Proceeds from asset and receivable sales ......................         900.3          798.9
Purchase of finance receivable portfolios .....................        (902.9)        (595.1)
Net increase in short-term factoring receivables ..............        (319.6)        (400.8)
Purchases of assets to be leased ..............................        (326.2)        (268.7)
Acquisitions, net of cash acquired ............................        (152.6)            --
Intangible assets acquired ....................................         (29.0)            --
Other .........................................................          95.5           (1.1)
                                                                    ---------      ---------
Net cash flows (used for) investing activities ................      (1,672.2)      (1,677.2)
                                                                    ---------      ---------

Cash Flows From Financing Activities
Proceeds from the issuance of variable and fixed-rate notes ...      (3,067.0)      (3,011.5)
Repayments of variable and fixed-rate notes ...................       3,675.4        2,804.2
Net (decrease) increase in commercial paper ...................        (247.9)         646.3
Net loans extended -- pledged in conjunction with
   secured borrowings .........................................        (167.9)            --
Net repayments of non-recourse leveraged lease debt ...........           8.6          (61.1)
Cash dividends paid ...........................................         (27.8)         (28.0)
Other .........................................................          (9.3)          (8.0)
                                                                    ---------      ---------

Net cash flows provided by financing activities ...............         164.1          341.9
                                                                    ---------      ---------
Net (decrease) in cash and cash equivalents ...................        (572.1)        (617.2)
Cash and cash equivalents, beginning of period ................       2,210.2        1,973.7
                                                                    ---------      ---------
Cash and cash equivalents, end of period ......................     $ 1,638.1      $ 1,356.5
                                                                    =========      =========

Supplementary Cash Flow Disclosure
Interest paid .................................................     $   367.9      $   287.5
Federal, foreign, state and local income taxes paid, net ......     $    21.7      $    24.7


                 See Notes to Consolidated Financial Statements.


                                       4


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

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  consumers and companies in a wide
variety of industries, offering vendor, equipment,  commercial,  factoring, home
lending,  educational lending 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, 2004.  Financial  statements
in this Form 10-Q have not been  audited by the  independent  registered  public
accounting  firm  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.

Education Lending Acquisition

      In February 2005, CIT acquired  Education  Lending Group,  Inc.  (EDLG), a
specialty  finance  company  principally  engaged in providing  education  loans
(primarily  U.S.  government  guaranteed),  products  and  services to students,
parents,  schools and alumni  associations.  The  shareholders  of EDLG received
$19.05 per share or  approximately  $383 million in cash.  The  acquisition  was
accounted  for  under  the  purchase  method,   with  the  acquired  assets  and
liabilities  recorded at their estimated fair values as of the February 17, 2005
acquisition  date. The assets acquired  included  approximately  $4.4 billion of
finance  receivables and $287 million of goodwill and intangible assets. The net
income impact of the EDLG  acquisition for the period of CIT's ownership  during
the quarter ended March 31, 2005 was immaterial.

      This business is largely funded with  "Education Loan Backed Notes," which
are accounted for under SFAS No. 140  "Accounting for Transfers and Servicing of
Financial  Assets and  Extinguishments  of Liabilities." As EDLG retains certain
call features with respect to these borrowings, the transactions do not meet the
SFAS 140 requirements for sales treatment and are therefore  recorded as secured
borrowings  and are  reflected in the  Consolidated  Balance Sheet as "Education
lending receivables  pledged" and "Non-recourse,  secured borrowings - education
lending."  Certain cash  balances,  included in cash and cash  equivalents,  are
restricted in conjunction with these borrowings.

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
                                                                March 31,
                                                            ------------------
                                                             2005        2004
                                                            ------      ------
Net income as reported ..................................   $210.4      $189.3
Stock-based compensation expense --
  fair value method, after tax ..........................     (5.1)       (5.1)
                                                            ------      ------
Pro forma net income ....................................   $205.3      $184.2
                                                            ======      ======
Basic earnings per share as reported ....................   $ 1.00      $ 0.89
Basic earnings per share pro forma ......................   $ 0.97      $ 0.87
Diluted earnings per share as reported ..................   $ 0.98      $ 0.88
Diluted earnings per share pro forma ....................   $ 0.95      $ 0.85


                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

      For the quarters ended March 31, 2005 and 2004,  net income  includes $6.1
million and $4.0 million of after-tax  compensation  cost related to  restricted
stock awards.

Recent Accounting Pronouncements

      On January 1, 2005,  the Company  adopted  Statement of Position No. 03-3,
"Accounting for Certain Loans or Debt  Securities  Acquired in a Transfer" ("SOP
03-3").  SOP 03-3  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.  The
implementation of SOP 03-3 did not have a material financial statement impact.

      In December 2004, the FASB issued a revision to SFAS No. 123, "Share-Based
Payment" ("FAS 123R"). FAS 123R requires the recognition of compensation expense
for all stock-based  compensation  plans as of the beginning of the first annual
reporting  period that begins after June 15, 2005.  The current  accounting  for
employee  stock  options  is  most  impacted  by this  new  standard,  as  costs
associated with restricted stock awards are already recognized in net income and
amounts  associated  with employee  stock  purchase  plans are not  significant.
Similar to the proforma amounts  disclosed  historically,  the compensation cost
relating to options  will be based upon the  grant-date  fair value of the award
and will be recognized over the vesting period.  The financial  statement impact
of adopting FAS 123R is not expected to differ  materially from proforma amounts
previously disclosed.

      In  December  2004,  the FASB issued  FASB Staff  Position  No. FAS 109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American Jobs Creation Act of 2004" ("FSP  109-2").  Given
the lack of clarification  of certain  provisions and the timing of the Act, FSP
109-2  allows for time  beyond the year ended  December  31, 2004 (the period of
enactment)  to  evaluate  the  effect  of the Act on plans for  reinvestment  or
repatriation of foreign  earnings for purposes of applying income tax accounting
under SFAS No. 109.  The  implementation  of FSP 109-2 is not expected to have a
material  financial  statement  impact on the  Company,  as there are no present
plans to repatriate foreign earnings.

      In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial  Instruments with  Characteristics of both Liabilities and Equity." 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  16.9
million shares and 16.1 million shares for the quarters ended March 31, 2005 and
2004, 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):



                                           Quarter Ended March 31, 2005               Quarter Ended March 31, 2004
                                     ---------------------------------------     ---------------------------------------
                                       Income         Shares       Per Share       Income         Shares      Per Share
                                     (Numerator)   (Denominator)     Amount      (Numerator)   (Denominator)    Amount
                                     -----------   -------------   ---------     -----------   -------------   ---------
                                                                                               
Basic EPS:
   Income available to
     common stockholders ..........     $210.4        210,656        $1.00          $189.3        211,839        $0.89
Effect of Dilutive Securities:
   Restricted shares ..............         --          1,308                           --            540
   Stock options ..................         --          3,126                           --          3,430
                                        ------        -------                       ------        -------
Diluted EPS .......................     $210.4        215,090        $0.98          $189.3        215,809        $0.88
                                        ======        =======                       ======        =======


Note 3 -- Business Segment Information

      The selected financial  information by business segment presented below is
based upon the  allocation  of most  corporate  expenses.  For the quarter ended
March 31,  2005,  capital is  allocated  to the  segments by applying  different
leverage  ratios to each  business  unit  using  market and risk  criteria.  The
capital allocations reflect the relative risk of individual asset classes within
segments and range from  approximately 2% of managed assets for U.S.  government
guaranteed loans to approximately  15% of managed assets for longer-term  assets
such as aerospace and rail.  Prior period balances have been adjusted to conform
to current period presentation. ($ in millions)



                              Specialty    Specialty                                              Total     Corporate
                              Finance -    Finance -     Commercial    Equipment     Capital     Business      and
                             Commercial     Consumer      Finance       Finance      Finance     Segments     Other     Consolidated
                             ----------     --------     ----------    ---------     -------     --------   ----------  ------------
                                                                                                 
At and for the Quarter
Ended March 31, 2005
Operating margin ........    $   206.7     $    51.2     $   167.0     $    56.7    $   71.2    $   552.8     $42.3      $   595.1
Income taxes ............         39.2          10.4          43.8          12.7        14.8        120.9       1.9          122.8
Net income (loss) .......         75.1          16.3          73.6          20.3        33.0        218.3      (7.9)         210.4
Total financing and
  leasing assets ........     10,922.5      10,338.1      13,406.2       6,625.0     9,786.9     51,078.7        --       51,078.7
Total managed assets ....     14,792.7      11,469.6      13,406.2       9,339.9     9,786.9     58,795.3        --       58,795.3
At and for the Quarter
Ended March 31, 2004
Operating margin ........    $   195.7     $    30.4     $   153.6     $    48.3    $   55.7    $   483.7     $24.9      $   508.6
Income taxes ............         39.0           5.1          39.4          10.4        12.1        106.0      15.1          121.1
Net income ..............         68.8           8.0          66.6          15.6        25.1        184.1       5.2          189.3
Total financing and
  leasing assets ........      9,583.0       3,465.1      11,652.7       6,871.7     9,449.1     41,021.6        --       41,021.6
Total managed assets ....     13,945.6       5,117.0      11,652.7       9,924.2     9,449.1     50,088.6        --       50,088.6



                                       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):



                                                         March 31, 2005           December 31, 2004
                                                      --------------------      --------------------
                                                                                   
Geographic
North America:
West ............................................     $10,073.2      19.7%      $ 8,595.3      19.0%
Northeast .......................................       9,823.2      19.3%        8,463.4      18.7%
Midwest .........................................       8,365.2      16.4%        6,907.0      15.3%
Southeast .......................................       7,370.1      14.4%        6,283.3      14.0%
Southwest .......................................       5,325.2      10.4%        4,848.3      10.7%
Canada ..........................................       2,510.4       4.9%        2,483.4       5.5%
                                                      ---------     -----       ---------     -----
Total North America .............................      43,467.3      85.1%       37,580.7      83.2%
Other foreign ...................................       7,611.4      14.9%        7,580.2      16.8%
                                                      ---------     -----       ---------     -----
Total ...........................................     $51,078.7     100.0%      $45,160.9     100.0%
                                                      =========     =====       =========     =====
Industry
Manufacturing(1) ................................     $ 7,522.2      14.7%      $ 6,932.0      15.4%
Retail(2) .......................................       6,669.9      13.1%        5,859.4      13.0%
Consumer based lending -- home lending ..........       5,598.7      11.0%        5,069.8      11.2%
Aerospace -- commercial and regional ............       5,536.5      10.8%        5,512.4      12.2%
Consumer based lending -- education lending .....       4,435.9       8.7%             --        --
Transportation(3) ...............................       2,911.6       5.7%        2,969.6       6.6%
Service industries ..............................       2,751.2       5.4%        2,854.5       6.3%
Consumer based lending -- non-real estate(4) ....       2,362.9       4.6%        2,480.1       5.5%
Wholesaling .....................................       1,813.9       3.5%        1,727.5       3.8%
Construction equipment ..........................       1,680.1       3.3%        1,603.1       3.5%
Communications(5) ...............................       1,190.5       2.3%        1,292.1       2.9%
Automotive Services .............................       1,164.6       2.3%        1,196.3       2.6%
Other (no industry greater than 3.0%)(6) ........       7,440.7      14.6%        7,664.1      17.0%
                                                      ---------     -----       ---------     -----
Total ...........................................     $51,078.7     100.0%      $45,160.9     100.0%
                                                      =========     =====       =========     =====


--------------------------------------------------------------------------------
(1)   Includes  manufacturers  of apparel  (3.0%),  followed by food and kindred
      products,   transportation   equipment,   chemical  and  allied  products,
      textiles,  rubber and plastics,  industrial  machinery and equipment,  and
      other industries.

(2)   Includes retailers of apparel (5.7%) and general merchandise (3.6%).

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

(4)   Includes  receivables from consumers in the Specialty Finance - commercial
      segment for products in various  industries  such as computers and related
      equipment and the remaining manufactured housing portfolio.

(5)   Includes  $293.5 million and $335.2 million of equipment  financed for the
      telecommunications  industry  at March 31,  2005 and  December  31,  2004,
      respectively, but excludes telecommunications equipment financed for other
      industries.

(6)   Includes  financing and leasing assets in the energy,  power and utilities
      sectors,  which  totaled  $1.0  billion,  or 2.1% of total  financing  and
      leasing  assets at March 31,  2005.  This  amount  includes  approximately
      $703.4  million in project  financing  and $263.4  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):

                                                         March 31,  December 31,
                                                           2005        2004
                                                         ---------  ------------
Retained interests in commercial loans:
   Retained subordinated securities ..................   $  372.0    $  446.2
   Interest-only strips ..............................      306.8       292.4
   Cash reserve accounts .............................      300.4       323.4
                                                         --------    --------
   Total retained interests in commercial loans ......      979.2     1,062.0
                                                         --------    --------
Retained interests in consumer loans:(1)
   Retained subordinated securities ..................       76.9        76.6
   Interest-only strips ..............................       14.2        17.0
                                                         --------    --------
   Total retained interests in consumer loans ........       91.1        93.6
                                                         --------    --------
Total retained interests in securitizations ..........    1,070.3     1,155.6
Aerospace equipment trust certificates and other(2) ..       52.9        72.6
                                                         --------    --------
   Total .............................................   $1,123.2    $1,228.2
                                                         ========    ========

--------------------------------------------------------------------------------
(1)   Comprised of amounts related to home lending receivables securitized.

(2)   At December 31, 2004 other  includes a $4.7 million  investment  in common
      stock received as part of a loan work-out of an aerospace account.

Note 6 -- Accumulated Other Comprehensive Income / (Loss)

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



                                                                             March 31,    December 31,
                                                                               2005           2004
                                                                             ---------    ------------
                                                                                       
Changes in fair values of derivatives qualifying as cash flow hedges ....     $20.3          $(27.1)
Foreign currency translation adjustments ................................       5.4           (37.2)
Minimum pension liability adjustments ...................................      (2.3)           (2.7)
Unrealized gain on equity and securitization investments ................       7.8             8.6
                                                                              -----          ------
Total accumulated other comprehensive income (loss) .....................     $31.2          $(58.4)
                                                                              =====          ======


      The changes in fair values of  derivatives  qualifying as cash flow hedges
corresponded  to higher  market  interest  rates  during the  quarter,  as these
derivatives  effectively  convert an equivalent  amount of  variable-rate  debt,
including  commercial  paper,  to  fixed  rates  of  interest.  See  Note  7 for
additional information.

      Total comprehensive  income for the quarters ended March 31, 2005 and 2004
was $300.0 million and $134.5 million.

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.  Derivatives are utilized to hedge exposures,
and not for 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.


                                       9


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

      The components of the adjustment to Accumulated Other Comprehensive Income
for  derivatives  qualifying as hedges of future cash flows are presented in the
following table ($ in millions).



                                                                          Fair Value                          Total
                                                                        Adjustments of       Income        Unrealized
                                                                          Derivatives      Tax Effects     Gain (Loss)
                                                                        --------------     -----------     ----------
                                                                                                    
Balance at December 31, 2004 -- unrealized loss ....................        $(41.3)          $ 14.2          $(27.1)
Changes in fair values of derivatives qualifying
  as cash flow hedges ..............................................          77.7            (30.3)           47.4
                                                                            ------           ------          ------
Balance at March 31, 2005 -- unrealized gain .......................        $ 36.4           $(16.1)         $ 20.3
                                                                            ======           ======          ======


      The  unrealized  gain as of March 31,  2005,  presented  in the  preceding
table,   primarily   reflects  our  use  of  interest   rate  swaps  to  convert
variable-rate  debt to fixed-rate debt,  followed by increasing  market interest
rates. Assuming no change in interest rates,  approximately $5.0 million, net of
tax, of Accumulated Other Comprehensive Income is expected to be reclassified to
earnings over the next twelve months as contractual  cash payments are made. The
Accumulated Other Comprehensive  Income (along with the corresponding swap asset
or  liability)  will be  adjusted  as  market  interest  rates  change  over the
remaining life of the swaps.

      The  ineffective  amounts,  due to  changes in the fair value of cash flow
hedges,  are  recorded as either an increase or decrease to interest  expense as
presented in the following table ($ in millions).

                                                              Increase/Decrease
                                           Ineffectiveness   to Interest Expense
                                           ---------------   -------------------
For the quarter ended March 31, 2005 ...         $1.4             Increase
For the quarter ended March 31, 2004 ...         $0.3             Decrease

      CIT also utilizes  interest rate swaps 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 these 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.

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



                                                           March 31,     December 31,
                                                             2005           2004
                                                          ---------      ------------
                                                                                
                                                                                         Effectively converts the interest rate on
Floating to fixed-rate swaps -- cash flow hedges ....     $ 3,292.1        $ 3,533.6     an equivalent amount of commercial
                                                                                         paper, variable-rate notes and selected
                                                                                         assets to a fixed rate.

                                                                                         Effectively converts the interest rate on
Fixed to floating-rate swaps -- fair value hedges ...       6,880.3          7,642.6     an equivalent amount of fixed-rate notes
                                                          ---------        ---------     and selected assets to a variable rate.
Total interest rate swaps............................     $10,172.4        $11,176.2
                                                          =========        =========


      In  addition  to the  swaps  in  the  table  above,  in  conjunction  with
securitizations,  at March 31, 2005, CIT has $2.1 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  $2.1  billion in notional  amount at March 31, 2005 to
insulate the related interest rate risk.

      CIT  also  utilizes  foreign  currency   exchange  forward  contracts  and
cross-currency swaps 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 hedged item) to the hedged item (for fair value  hedges) along with
the transaction gains and losses on the underlying hedged items.


                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

      During  2005 and 2004,  CIT  entered  into credit  default  swaps,  with a
combined  notional value of $118.0 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 fair value  adjustment  for the quarter
ended  March 31, 2005  amounted  to a $1.2  million  pretax  loss.  CIT also has
certain  cross-currency  swaps  (with  a  combined  notional  principal  of $256
million) and an interest rate swap (basis swap  denominated in U.S. dollars with
notional  principal of $935 million) that was acquired in the education  lending
acquisition.  These instruments economically hedge exposures, but do not qualify
for hedge  accounting.  These  derivatives are recorded at fair value, with both
realized  and  unrealized  gains or  losses  recorded  in other  revenue  in the
consolidated statement of income.

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.  The joint venture  agreement  provides Dell with 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 has the
right to  purchase  a  minimum  percentage  of DFS's  finance  receivables  on a
declining scale through January 2010.

      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 March 31, 2005 and
December  31,  2004,  financing  and leasing  assets  related to the DFS program
included in the CIT  Consolidated  Balance Sheet (but excluding  certain related
International  receivables  originated  directly by CIT) were approximately $2.2
billion and $2.0 billion, and securitized assets included in managed assets were
approximately  $2.2 billion and $2.5 billion,  respectively.  In addition to the
owned and securitized assets acquired from DFS, CIT's investment in and loans to
the joint venture were  approximately $217 million and $267 million at March 31,
2005 and December 31, 2004.

      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 limited 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 both March 31,
2005 and December 31, 2004, financing and leasing assets were approximately $1.1
billion and securitized assets included in managed assets were $0.1 billion.  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
$18 million and $16 million at March 31, 2005 and December  31,  2004.  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.  At
March 31, 2005 and December 31, 2004, CIT's investment in and loans to the joint
venture were approximately $218 million and $191 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 a 1999  acquisition,  and others were
subsequently  entered into in the normal  course of business.  At both March 31,
2005 and December 31, 2004, other assets included  approximately  $19 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,  banking and
investment banking services in the normal course of business.

Note 9 -- Postretirement and Other Benefit Plans

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

                                         For the Quarters
                                          Ended March 31,
                                         ----------------
                                         2005        2004
                                         ----        ----
Retirement Plans
Service cost .......................     $5.0        $4.5
Interest cost ......................      4.3         3.9
Expected return on plan assets .....     (4.8)       (4.1)
Amortization of net loss ...........      0.7         0.7
                                         ----        ----
Net periodic benefit cost ..........     $5.2        $5.0
                                         ====        ====

Postretirement Plans
Service cost .......................     $0.6        $0.5
Interest cost ......................      0.8         0.8
Amortization of net (gain) loss ....      0.2         0.3
                                         ----        ----
Net periodic benefit cost ..........     $1.6        $1.6
                                         ====        ====

Note 10 -- Commitments and Contingencies

      The   accompanying   table   summarizes   the   contractual   amounts   of
credit-related   commitments  and  purchase  and  funding  commitments.   ($  in
millions).



                                                             March 31, 2005
                                                 --------------------------------------
                                                     Due to Expire                          December 31,
                                                 ----------------------                         2004
                                                  During        2006           Total           Total
                                                   2005      and beyond     Outstanding     Outstanding
                                                 --------    ----------     -----------     ------------
                                                                                  
Credit Related Commitments
Financing and leasing assets ...............     $1,180.6     $7,850.1        $9,030.7        $8,428.3
Letters of credit and acceptances:
  Standby letters of credit ................        559.6         36.7           596.3           618.3
  Other letters of credit ..................        539.4          0.5           539.9           588.3
  Acceptances ..............................         20.3           --            20.3            16.4
Guarantees .................................         82.8         12.2            95.0           133.1
Purchase and Funding Commitments
Aerospace purchase commitments .............        774.0      1,254.0         2,028.0         2,168.0
Other manufacturer purchase commitments ....        470.2           --           470.2           397.0
Sale-leaseback payments ....................          8.8        464.5           473.3           495.4
Venture capital fund commitments ...........          0.5         36.1            36.6            79.8


      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.


                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

      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 March 31,  2005,  there were no  outstanding  liabilities  relating  to these
credit-related  commitments or guarantees,  as amounts are generally  billed and
collected on a monthly basis.

      CIT has entered into aerospace commitments to purchase commercial aircraft
from both  Airbus  Industrie  and The Boeing  Company.  The  commitment  amounts
detailed in the table are based on appraised  values,  actual  amounts will vary
based upon market  factors at the time of delivery.  The  remaining  units to be
purchased  are 41, with 15 to be completed  in 2005.  Lease  commitments  are in
place for twelve of the fifteen units to be delivered in 2005.  The order amount
excludes CIT's options to purchase additional aircraft.

      Outstanding  commitments to purchase  equipment to be leased to customers,
other than the aircraft  detailed  above,  relates  primarily to rail equipment.
Additionally, CIT is party to railcar sale-leaseback transactions under which it
is  obligated  to pay a remaining  total of $473.3  million,  approximately  $31
million per year through 2010 and declining  thereafter  through 2024,  which is
more than offset by CIT's  re-lease of the assets,  contingent on its 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.

Note 11 -- Legal Proceedings

      On  September  9,  2004,  Exquisite  Caterers  v.  Popular  Leasing et al.
("Exquisite  Caterers"),  a putative national 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 now
pending in the Superior Court of New Jersey, Monmouth County. 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, Illinois, New York, 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 other financial institutions.

      On July 14, 2004, the U.S.  Bankruptcy  Court ordered the  liquidation for
NorVergence  under Chapter 7 of the Bankruptcy Code.  Thereafter,  the Attorneys
General  of several  states  commenced  investigations  of  NorVergence  and the
financial  institutions,  including CIT, that purchased  NorVergence Leases. CIT
entered into settlement  negotiations with those Attorneys General.  CIT reached
separate  settlements with the New York and New Jersey Attorneys General.  Under
those  settlements,  lessees in those states will have an opportunity to resolve
all claims by and against CIT by paying a percentage of the remaining balance on
their lease.  Negotiations with other Attorneys General are continuing.  CIT has
also been  asked by the  Federal  Trade  Commission  to  produce  documents  for
transactions related to NorVergence.  In addition, on February 15, 2005, CIT was
served  with a subpoena  seeking the  production  of  documents  in a grand jury
proceeding being conducted by the U.S. Attorney for the Southern District of New
York in connection with an investigation of transactions related to NorVergence.
CIT is in the process of complying with these information requests.

      In addition,  there are various proceedings against CIT, which have arisen
in the  ordinary  course of  business.  While the  outcomes  of the  NorVergence
related  litigation and the 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.


                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

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 restructuring activities during 2005 ($ in millions):



                                             Severance                  Facilities
                                       ---------------------      ----------------------
                                       Number of                  Number of                   Total
                                       Employees     Reserve      Facilities     Reserve     Reserves
                                       ---------     -------      ----------     -------     --------
                                                                                
Balance at December 31, 2004 ...          129         $12.2           15           $5.7        $17.9
2005 additions .................           --            --           --            2.5          2.5
2005 utilization ...............          (20)         (3.9)          (1)          (0.7)        (4.6)
                                          ---         -----           --           ----        -----
Balance at March 31, 2005 ......          109         $ 8.3           14           $7.5        $15.8
                                          ===         =====           ==           ====        =====


      The beginning  severance reserves relate primarily to the 2004 acquisition
of a Western European vendor finance and leasing  business,  and include amounts
payable  within  the year  after the  acquisition  to  individuals  who chose to
receive  payments on a periodic  basis.  Severance and facilities  restructuring
liabilities were established under purchase  accounting in conjunction with fair
value  adjustments to acquired assets and liabilities.  The additions during the
quarter  ended  March 31, 2005  correspond  to  facility  exit plan  refinements
relating to the acquired Western  European vendor finance and leasing  business,
and were similarly  recorded as fair value adjustments to purchased  liabilities
(additions to goodwill). The facility reserves relate primarily to shortfalls in
sublease  transactions  and will be utilized  over the  remaining  lease  terms,
generally 6 years.

Note 13 -- Goodwill and Intangible Assets, Net

      Goodwill and  intangible  assets totaled $906.4 million and $596.5 million
at March 31, 2005 and December 31, 2004.  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 periodically for impairment.

      The most recent  goodwill  impairment  analysis was  performed  during the
fourth quarter of 2004,  which  indicated that the fair value of goodwill was in
excess of the carrying value.

      The  following  table  summarizes  the  goodwill  balance by segment ($ in
millions):



                                                          Specialty     Specialty
                                                          Finance -      Finance -     Commercial
                                                          Commercial     Consumer       Finance          Total
                                                          ----------    ----------     ----------       ------
                                                                                            
Balance at December 31, 2004 ......................         $62.3         $   --         $370.4         $432.7
Additions, foreign currency translation, other ....           0.7          257.6             --          258.3
                                                            -----         ------         ------         ------
Balance at March 31, 2005 .........................         $63.0         $257.6         $370.4         $691.0
                                                            =====         ======         ======         ======


      The  increase in goodwill  during the  quarter  was  primarily  due to the
education lending acquisition in Specialty Finance -- consumer. 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 net intangible  asset balances by
segment ($ in millions):



                                                          Specialty     Specialty
                                                          Finance -      Finance -     Commercial
                                                          Commercial     Consumer       Finance          Total
                                                          ----------    ----------     ----------       ------
                                                                                            
Balance at December 31, 2004 ......................         $68.0         $  --          $ 95.8         $163.8
Additions, foreign currency translation, other ....          (2.8)         29.0            30.0           56.2
Amortization ......................................          (2.4)           --            (2.2)          (4.6)
                                                            -----         -----          ------         ------
Balance at March 31, 2005 .........................         $62.8         $29.0          $123.6         $215.4
                                                            =====         =====          ======         ======



                                       14


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)

      The increase was primarily related to the education lending acquisition in
Specialty Finance - consumer and a factoring  acquisition in Commercial Finance.
Other  intangible  assets are being  amortized  over their  corresponding  lives
ranging from five to twenty  years in relation to the related cash flows,  where
applicable.  Amortization  expense totaled $4.6 million and $2.2 million for the
quarters ended March 31, 2005 and 2004.  Accumulated  amortization totaled $28.3
million and $23.7 million at March 31, 2005 and December 31, 2004. The projected
amortization for the years ended December 31, 2005 through December 31, 2009 is:
$20.8 million for 2005;  $20.3 million for 2006;  $17.0 million for 2007;  $17.1
million for 2008 and $17.3 million for 2009.

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
             --------------                  ----------    -----------     --------     ------------     ------------     ---------
                                                                                                        
March 31, 2005
ASSETS
Net finance receivables ...............      $ 1,078.0       $3,434.1      $1,759.7       $34,290.3       $      --       $40,562.1
Operating lease equipment, net ........             --          517.0         126.8         7,669.3              --         8,313.1
Finance receivables held for sale .....             --          117.4          69.6         1,294.3              --         1,481.3
Cash and cash equivalents .............          826.5          667.3          73.6            70.7              --         1,638.1
Other assets ..........................       10,068.0           91.4         292.5           652.5        (6,318.0)        4,786.4
                                             ---------       --------      --------       ---------       ---------       ---------
  Total Assets ........................      $11,972.5       $4,827.2      $2,322.2       $43,977.1       $(6,318.0)      $56,781.0
                                             =========       ========      ========       =========       =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ..................................      $35,876.6       $  459.2      $1,224.0       $ 4,965.5       $      --       $42,525.3
Credit balances of factoring clients ..             --             --            --         4,269.8              --         4,269.8
Accrued liabilities and payables ......      (30,222.1)       3,800.1        (451.2)       30,492.3              --         3,619.1
                                             ---------       --------      --------       ---------       ---------       ---------
  Total Liabilities ...................        5,654.5        4,259.3         772.8        39,727.6              --        50,414.2
Minority interest .....................                            --            --            48.8              --            48.8
Total Stockholders' Equity ............        6,318.0          567.9       1,549.4         4,200.7        (6,318.0)        6,318.0
                                             ---------       --------      --------       ---------       ---------       ---------
  Total Liabilities and
  Stockholders' Equity ................      $11,972.5       $4,827.2      $2,322.2       $43,977.1       $(6,318.0)      $56,781.0
                                             =========       ========      ========       =========       =========       =========

December 31, 2004
ASSETS
Net finance receivables ...............      $ 1,121.1       $3,129.8      $1,682.7       $28,497.4       $      --       $34,431.0
Operating lease equipment, net ........             --          517.9         130.8         7,642.2              --         8,290.9
Finance receivables held for sale .....             --          122.4          72.0         1,446.4              --         1,640.8
Cash and cash equivalents .............        1,311.4          670.8         127.5           100.5              --         2,210.2
Other assets ..........................        9,536.8         (278.9)        316.2         1,019.4        (6,055.1)        4,538.4
                                             ---------       --------      --------       ---------       ---------       ---------
  Total Assets ........................      $11,969.3       $4,162.0      $2,329.2       $38,705.9       $(6,055.1)      $51,111.3
                                             =========       ========      ========       =========       =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ..................................      $34,699.1       $  487.8      $1,383.8       $ 1,154.1       $      --       $37,724.8
Credit balances of factoring clients ..             --             --            --         3,847.3              --         3,847.3
Accrued liabilities and payables ......      (28,784.9)       3,184.5        (591.3)       29,635.4              --         3,443.7
                                             ---------       --------      --------       ---------       ---------       ---------
  Total Liabilities ...................        5,914.2        3,672.3         792.5        34,636.8              --        45,015.8
Minority interest .....................                            --            --            40.4              --            40.4
Total Stockholders' Equity ............        6,055.1          489.7       1,536.7         4,028.7        (6,055.1)        6,055.1
                                             ---------       --------      --------       ---------       ---------       ---------
  Total Liabilities and
  Stockholders' Equity ................      $11,969.3       $4,162.0      $2,329.2       $38,705.9       $(6,055.1)      $51,111.3
                                             =========       ========      ========       =========       =========       =========



                                       15


                         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
          --------------------                   ----------    -----------    --------    ------------    ------------    --------
                                                                                                        
Three Months Ended March 31, 2005
Finance income ............................       $  5.5         $162.9        $ 55.7        $797.9         $    --       $1,022.0
Interest expense ..........................        (22.4)          41.6           3.6         371.4              --          394.2
                                                  ------         ------        ------        ------         -------       --------
Net finance income ........................         27.9          121.3          52.1         426.5              --          627.8
Depreciation on operating
  lease equipment .........................           --           66.5          11.0         160.1              --          237.6
                                                  ------         ------        ------        ------         -------       --------
Net finance margin ........................         27.9           54.8          41.1         266.4              --          390.2
Provision for credit losses ...............          1.8           11.1           2.1          30.3              --           45.3
                                                  ------         ------        ------        ------         -------       --------
Net finance margin, after provision
  for credit losses .......................         26.1           43.7          39.0         236.1              --          344.9
Equity in net income of subsidiaries ......        224.4             --            --            --          (224.4)            --
Other revenue .............................          4.5           33.3          21.4         180.2              --          239.4
Net gain on venture capital investments               --             --            --          10.8              --           10.8
                                                  ------         ------        ------        ------         -------       --------
Operating margin ..........................        255.0           77.0          60.4         427.1          (224.4)         595.1
Operating expenses ........................         52.1           26.6          18.5         163.8              --          261.0
                                                  ------         ------        ------        ------         -------       --------
Income (loss) before provision for
  income taxes ............................        202.9           50.4          41.9         263.3          (224.4)         334.1
Benefit (Provision) for income taxes ......          7.5          (18.9)        (15.4)        (96.0)             --         (122.8)
Minority interest, after tax ..............           --             --            --          (0.9)             --           (0.9)
                                                  ------         ------        ------        ------         -------       --------
Net income ................................       $210.4         $ 31.5        $ 26.5        $166.4         $(224.4)      $  210.4
                                                  ======         ======        ======        ======         =======       ========

Three Months Ended March 31, 2004
Finance income ............................       $  9.5         $184.4        $ 47.6        $655.4         $    --       $  896.9
Interest expense ..........................        (22.9)          54.1           3.9         262.9              --          298.0
                                                  ------         ------        ------        ------         -------       --------
Net finance income ........................         32.4          130.3          43.7         392.5              --          598.9
Depreciation on operating
  lease equipment .........................           --           84.6          11.1         140.1              --          235.8
                                                  ------         ------        ------        ------         -------       --------
Net finance margin ........................         32.4           45.7          32.6         252.4              --          363.1
Provision for credit losses ...............          4.2           10.7           2.6          68.1              --           85.6
                                                  ------         ------        ------        ------         -------       --------
Net finance margin, after provision
  for credit losses .......................         28.2           35.0          30.0         184.3              --          277.5
Equity in net income of subsidiaries ......        155.6             --            --            --          (155.6)            --
Other revenue .............................          0.6           31.3          32.6         165.9              --          230.4
Net gain on venture capital investments               --             --            --           0.7              --            0.7
                                                  ------         ------        ------        ------         -------       --------
Operating margin ..........................        184.4           66.3          62.6         350.9          (155.6)         508.6
Operating expenses ........................         18.6           36.7          23.2         161.5              --          240.0
Gain on redemption of debt ................         41.8             --            --            --              --           41.8
                                                  ------         ------        ------        ------         -------       --------
Income (loss) before provision for
  income taxes ............................        207.6           29.6          39.4         189.4          (155.6)         310.4
Provision for income taxes ................        (18.3)         (11.5)        (15.4)        (75.9)             --         (121.1)
                                                  ------         ------        ------        ------         -------       --------
Net income ................................       $189.3         $ 18.1        $ 24.0        $113.5         $(155.6)      $  189.3
                                                  ======         ======        ======        ======         =======       ========


                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited) (Continued)



                                                                              CIT
              CONSOLIDATING                       CIT           Capita      Holdings        Other
         STATEMENT OF CASH FLOWS               Group Inc.    Corporation      LLC        Subsidiaries    Eliminations       Total
         -----------------------               ----------    -----------    --------     ------------    ------------     ---------
                                                                                                        
Three Months Ended March 31, 2005
Cash Flows From Operating Activities:
Net cash flows provided by
  (used for) operations ...................    $ 2,648.2       $(294.3)     $ 280.8       $(1,698.7)      $      --       $   936.0
                                               ---------       -------      -------       ---------       ---------       ---------
Cash Flows From Investing Activities:
Net (decrease) increase in financing and
  leasing assets ..........................         42.4        (359.2)       (78.3)       (1,372.6)             --       (1,767.7)
Decrease in inter-company loans
  and investments .........................     (4,325.2)           --           --              --         4,325.2              --
Other .....................................           --            --           --            95.5              --            95.5
                                               ---------       -------      -------       ---------       ---------       ---------
Net cash flows (used for) provided by
  investing activities ....................     (4,282.8)       (359.2)       (78.3)       (1,277.1)        4,325.2        (1,672.2)
                                               ---------       -------      -------       ---------       ---------       ---------
Cash Flows From Financing Activities:
Net increase (decrease) in debt ...........      1,177.5         (28.6)      (159.8)         (620.0)             --           369.1
Net loans extended-pledged ................           --            --           --          (167.9)             --          (167.9)
Inter-company financing ...................           --         678.6        (96.6)        3,743.2        (4,325.2)             --
Cash dividends paid .......................        (27.8)           --           --              --              --           (27.8)
Other .....................................           --            --           --            (9.3)             --            (9.3)
                                               ---------       -------      -------       ---------       ---------       ---------
Net cash flows provided by
  (used for) financing activities .........      1,149.7         650.0       (256.4)        2,946.0        (4,325.2)          164.1
                                               ---------       -------      -------       ---------       ---------       ---------
Net (decrease) in cash and
  cash equivalents ........................       (484.9)         (3.5)       (53.9)          (29.8)             --          (572.1)
Cash and cash equivalents,
  beginning of period .....................      1,311.4         670.8        127.5           100.5              --         2,210.2
                                               ---------       -------      -------       ---------       ---------       ---------
Cash and cash equivalents,
  end of period ...........................    $   826.5       $ 667.3      $  73.6       $    70.7       $      --       $ 1,638.1
                                               =========       =======      =======       =========       =========       =========

Three Months Ended March 31, 2004
Cash Flows From Operating Activities:
Net cash flows provided by
  (used for) operations ...................    $    65.0       $ (83.3)     $(141.1)      $   877.5       $      --       $   718.1
                                               ---------       -------      -------       ---------       ---------       ---------
Cash Flows From Investing Activities:
Net (decrease) increase in financing and
  leasing assets ..........................        374.0         154.4         18.1        (2,222.6)             --        (1,676.1)
Decrease in inter-company loans
  and investments .........................     (2,508.4)           --           --              --         2,508.4              --
Other .....................................           --            --           --            (1.1)             --            (1.1)
                                               ---------       -------      -------       ---------       ---------       ---------
Net cash flows (used for) provided by
  investing activities ....................     (2,134.4)        154.4         18.1        (2,223.7)        2,508.4        (1,677.2)
                                               ---------       -------      -------       ---------       ---------       ---------
Cash Flows From Financing Activities:
Net increase (decrease) in debt ...........      1,222.7        (467.2)        25.7          (403.3)             --           377.9
Inter-company financing ...................           --         458.1        126.1         1,924.2        (2,508.4)             --
Cash dividends paid .......................           --            --           --           (28.0)             --           (28.0)
Other .....................................           --            --           --            (8.0)             --            (8.0)
                                               ---------       -------      -------       ---------       ---------       ---------
Net cash flows provided by
  (used for) financing activities .........      1,222.7          (9.1)       151.8         1,484.9        (2,508.4)          341.9
                                               ---------       -------      -------       ---------       ---------       ---------
Net increase (decrease) in cash and
  cash equivalents ........................       (846.7)         62.0         28.8           138.7              --          (617.2)
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 ...........................    $   633.2       $ 472.6      $ 256.3       $    (5.6)      $      --       $ 1,356.5
                                               =========       =======      =======       =========       =========       =========


                                       17


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations
        and
Item 3. Quantitative and Qualitative Disclosure about Market Risk

      CIT  Group  Inc.,  a  Delaware  corporation,  is a global  commercial  and
consumer  finance  company that was founded in 1908. CIT provides  financing and
leasing  capital for consumers  and  companies in a wide variety of  industries,
offering vendor, equipment,  commercial,  factoring,  home lending,  educational
lending and structured financing products.

      Refer to the  Company's  Annual  Report  on Form  10-K for the year  ended
December  31,  2004 for a  glossary  of key terms  used in our  business  and an
overview  of  profitability  drivers  and related  metrics.

      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.

Profitability and Asset Growth

      Net income for the quarter  ended March 31,  2005 was $210.4  million,  up
from $189.3 million in the first quarter of 2004. Prior year net income included
a $25.5 million after tax gain on early debt  redemption.  The improved  results
reflected lower  charge-offs,  strong non-spread  revenues and a lower effective
tax rate.

      Profitability measurements for the respective periods are presented in the
table below:

                                                                 Quarters Ended
                                                                    March 31,
                                                                 --------------
                                                                 2005     2004
                                                                 -----    -----
Net income per diluted share .................................   $0.98    $0.88
Net income as a percentage of average earning assets (AEA) ...    1.91%    2.05%
Return on average tangible equity ............................    15.3%    15.1%
Return on average equity .....................................    13.6%    13.8%

--------------------------------------------------------------------------------
For the quarter ended March 31, 2004, net income per diluted  share,  net income
as a percentage of AEA, return on average  tangible equity and return on average
equity  excluding the gain on redemption of debt, were $0.76,  1.78%,  13.1% and
11.9%, respectively.

      Managed  assets were $58.8  billion at March 31, 2005,  up 10.0% and 17.4%
from last  quarter and last year.  The increase  for the quarter  included  $4.4
billion in receivables  from the  acquisition of Education  Lending Group,  $864
million from a factoring  purchase and continued  home lending  program  growth.
These increases were in part offset by the sale of approximately $400 million in
non-strategic assets.

Results by Business Segment

      The  tables  that  follow  summarize  selected  financial  information  by
business segment.  During the quarter,  we began measuring  segment  performance
using risk-adjusted capital, which allocates capital to the segments by applying
different  leverage ratios to each business using market and risk criteria.  The
capital allocations reflect the relative risk of individual asset classes within
the  segments  and  range  from  approximately  2% of  managed  assets  for U.S.
government guaranteed education loans to approximately 15% of managed assets for
longer-term  assets  such as  aerospace  and rail.  The 2004  results  have been
conformed to the current presentation. ($ in millions)



                                                                           Quarters Ended March 31,
                                                -----------------------------------------------------------------------------
                                                                2005                                     2004
                                                ------------------------------------     ------------------------------------
                                                                         Return on                                Return on
                                                 Net        Return     Risk-Adjusted        Net      Return     Risk-Adjusted
                                                Income      on AEA        Capital         Income     on AEA        Capital
                                                ------      ------     -------------      ------     ------     -------------
                                                                                                  
Specialty Finance -- commercial ..........      $ 75.1       2.70%         21.7%          $ 68.8      2.82%         21.6%
Specialty Finance -- consumer ............        16.3       0.85%         12.9%             8.0      1.10%         11.5%
                                                ------                                    ------
   Total Specialty Finance ...............        91.4       1.94%         19.2%            76.8      2.43%         19.7%
                                                ------                                    ------
Commercial Finance .......................        73.6       3.40%         24.0%            66.6      3.33%         22.8%
Equipment Finance ........................        20.3       1.23%          8.7%            15.6      0.91%          6.3%
Capital Finance ..........................        33.0       1.35%          9.6%            25.1      1.11%          7.8%
                                                ------                                    ------
   Total Commercial Finance ..............       126.9       2.03%         14.4%           107.3      1.79%         12.5%
                                                ------                                    ------
 Corporate, including certain charges ....        (7.9)     (0.08)%          --              5.2      0.04%           --
                                                ------                                    ------
   Total .................................      $210.4       1.91%         15.3%          $189.3      2.05%         15.1%
                                                ======                                    ======



                                       18


      Results by segment were as follows:

      o     Specialty  Finance -- commercial  reflected  higher  earnings in the
            international, small / mid-ticket leasing and small business lending
            units.  These  improvements  were  partially  offset by lower  major
            vendor earnings.

      o     Specialty  Finance -- consumer  reported strong home lending results
            due  to  a  higher  earnings  assets  base  and  lower  charge-offs.
            Education lending was essentially  break-even after costs of funding
            for the period of CIT's ownership.

      o     Commercial Finance earnings benefited from continued high returns in
            both  the  factoring  and  asset-based   lending  (Business  Credit)
            businesses.  The  earnings  improvement  from  the  prior  year  was
            particularly  strong in the Business Credit unit,  reflecting higher
            risk-adjusted   margins  and   non-spread   revenue,   as  factoring
            commissions  were  down  modestly  from  last  year.  The  factoring
            acquisition  closed  on March 31 and did not  impact  first  quarter
            earnings.

      o     Equipment   Finance   returns,   while  still   below   management's
            expectations,  improved from 2004,  reflecting strong improvement in
            the level of charge-offs.

      o     Capital Finance returns rebounded from lower prior year results. The
            2005 improvement  reflects  stronger lease rentals in both aerospace
            and rail, as well as lower charge-offs.

      Corporate included amounts as shown in the table below (after tax):

                                                       Quarters Ended March 31,
                                                       ------------------------
                                                          2005         2004
                                                         ------       ------
Unallocated expenses ..............................      $(13.6)      $(16.5)
Gain on debt redemption ...........................          --         25.5
Venture capital operating income / (losses)(1) ....         5.7         (3.8)
                                                         ------       ------
   Total ..........................................      $ (7.9)      $  5.2
                                                         ======       ======

--------------------------------------------------------------------------------
(1)   Venture  capital   operating   income  /  (losses)  include  realized  and
      unrealized gains and losses related to venture capital investments as well
      as  interest  costs and other  operating  expenses  associated  with these
      portfolios.

Net Finance Margin

      A table  summarizing  the  components  of net finance  margin is set forth
below ($ in millions):

                                                     Quarters Ended March 31,
                                                     ------------------------
                                                        2005           2004
                                                     ---------      ---------
Finance income -- loans and capital leases .....     $   664.0      $   556.6
Rental income on operating leases(1) ...........         358.0          340.3
Interest expense ...............................         394.2          298.0
                                                     ---------      ---------
   Net finance income ..........................         627.8          598.9
Depreciation on operating lease equipment(2) ...         237.6          235.8
                                                     ---------      ---------
   Net finance margin ..........................     $   390.2      $   363.1
                                                     =========      =========
Average Earnings Asset ("AEA") .................     $44,084.6      $36,865.1
                                                     =========      =========
As a % of AEA:
Finance income -- loans and capital leases .....          6.02%          6.04%
Rental income on operating leases ..............          3.25%          3.69%
Interest expense ...............................          3.57%          3.23%
                                                     ---------      ---------
   Net finance income ..........................          5.70%          6.50%
Depreciation on operating lease equipment ......          2.16%          2.56%
                                                     ---------      ---------
   Net finance margin ..........................          3.54%          3.94%
                                                     =========      =========
As a % of AOL:
Rental income on operating leases ..............         17.33%         17.93%
Depreciation on operating lease equipment ......         11.50%         12.42%
                                                     ---------      ---------
   Net operating lease margin ..................          5.83%          5.51%
                                                     =========      =========
Average Operating Lease Equipment ("AOL") ......     $ 8,264.1      $ 7,590.0
                                                     =========      =========

--------------------------------------------------------------------------------
(1)   Reduced by certain rail maintenance costs of $7.9 million and $6.0 million
      in 2005 and 2004

(2)   Reduced by certain  aerospace  maintenance  costs of $3.8 million and $1.3
      million in 2005 and 2004



                                       19


      Analysis of net finance margin is as follows:

      o     Finance income  increased in amount from 2004,  but was  essentially
            flat as a percentage of AEA, as the benefit of variable-rate  assets
            repricing was offset by the blending of the lower-yielding education
            lending  receivables  into the portfolio and an interest charge that
            reduced 2005 income. The education lending acquisition, though owned
            by  CIT  for  only  half  the  quarter,   dampened  2005  margin  by
            approximately  13 basis  points,  given  the  lower  margin of these
            low-risk,  U.S. government guaranteed loans. The interest charge was
            a 12 basis point  ($13.1  million),  one-time  reduction in interest
            previously  accrued  in a  Specialty  Finance  -  commercial  vendor
            program.  This amount related to third-party  servicing errors which
            began in 2003.

      o     Interest  expense  increased  from 2004,  reflecting the higher 2005
            interest rate environment,  longer-term debt issuances and a greater
            proportion of fixed-rate debt in the portfolio.

      o     The decline in net finance  margin as a  percentage  of AEA reflects
            the  above  factors  as  well  as  a  pricing  environment  that  is
            competitive in the lending businesses,  particularly in the Business
            Credit  unit and in  Equipment  Finance.  Lease  margin  trends were
            favorable as discussed below.

      o     Both rental income and depreciation expense declined as a percentage
            of AOL from 2004,  reflecting  the  continued  asset mix change from
            shorter-term to longer-lived  assets.  These longer-lived  assets in
            Capital Finance have lower rental rates as a percentage of the asset
            base than small to mid-ticket  leasing  assets in Specialty  Finance
            and Equipment Finance.

      o     Operating   lease  margin   improved  32  basis  points  from  2004,
            reflecting  improved  aerospace and rail pricing in Capital Finance.
            See "Concentrations -- Operating Leases" for additional  information
            regarding our operating lease assets.

      During the first quarter of 2005, we  reclassified  certain  aerospace and
rail  maintenance  costs from operating  expense to lease margin to align public
reporting  with our  internal  business  measures.  The amounts are  specific to
individual assets.  These costs include amounts that are reimbursed through rail
lease payments and  expenditures  to place aircraft with new lessors,  including
improvements and configuration  changes. The impact was a reduction to margin of
$11.7 million  (0.11% and 0.57% as a percentage of AEA and AOL) and $7.3 million
(0.08% and 0.38%) for 2005 and 2004.  Prior period  balances have been conformed
to the current presentation.

      We regularly  monitor and simulate our degree of interest rate sensitivity
by  measuring  the  repricing  characteristics  of  interest-sensitive   assets,
liabilities,  and derivatives. The Capital Committee reviews the results of this
modeling  periodically.  The interest rate  sensitivity  modeling  techniques we
employ  include the creation of  prospective  twelve month  "baseline" and "rate
shocked" net interest income simulations.

      At the date that  interest rate  sensitivity  is modeled,  "baseline"  net
interest income is derived  considering the current level of  interest-sensitive
assets,  the  current  level  of  interest-sensitive   liabilities  and  related
maturities,  and the current level of  derivatives.  The  "baseline"  simulation
assumes that, over the next successive twelve months,  market interest rates (as
of the date of simulation) are held constant and that no new loans or leases are
extended. Once the "baseline" net interest income is calculated, market interest
rates, which were previously held constant, are raised instantaneously 100 basis
points across the entire yield curve,  and a "rate  shocked"  simulation is run.
Interest rate sensitivity is then measured as the difference  between calculated
"baseline" and "rate shocked" net interest income.

      An immediate  hypothetical  100 basis point increase in the yield curve on
April 1, 2005 would reduce net income by an estimated $17 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.  A 100 basis point  increase in the
yield curve on April 1, 2004 would have reduced net income by an  estimated  $15
million after tax, while a corresponding  decrease in the yield curve would have
increased net income by a like amount.  Although  management  believes that this
measure  provides an  estimate of our  interest  rate  sensitivity,  it does not
account for  potential  changes in the credit  quality,  size,  composition  and
prepayment  characteristics of the balance sheet and other business developments
that could affect net income. Accordingly, no assurance can be given that actual
results  would  not  differ  materially  from  the  estimated  outcomes  of  our
simulations.  Further,  such simulations do not represent  management's  current
view of future market interest rate movements.


                                       20


      A comparative  analysis of the weighted average principal  outstanding and
interest rates on our debt before and after the effect of interest rate swaps is
shown in the following table ($ in millions):



                                                     Before Swaps            After Swaps
                                                  ------------------      ------------------
                                                                            
Quarter Ended March 31, 2005
Commercial paper, variable-rate senior
   notes and bank credit facilities .........     $15,328.3     2.81%     $19,609.4     3.23%
Fixed-rate senior and subordinated notes ....      24,310.4     4.93%      20,029.3     4.67%
                                                  ---------               ---------
Composite ...................................     $39,638.7     4.11%     $39,638.7     3.96%
                                                  =========               =========
Quarter Ended March 31, 2004
Commercial paper, variable-rate senior
   notes and bank credit facilities .........     $13,704.2     1.56%     $17,823.7     2.26%
Fixed-rate senior and subordinated notes ....      18,948.1     5.70%      14,828.6     5.34%
                                                  ---------               ---------
Composite ...................................     $32,652.3     3.96%     $32,652.3     3.66%
                                                  =========               =========


      The  weighted  average  interest  rates  before  swaps do not  necessarily
reflect the interest  expense that would have been incurred over the life of the
borrowings  had the  interest  rate risk been  managed  without  the use of such
swaps.

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
                                                            March 31,
                                                       ------------------
                                                        2005        2004
                                                       ------      ------
Net finance margin ...............................     $390.2      $363.1
Provision for credit losses ......................       45.3        85.6
                                                       ------      ------
Net finance margin after provision for credit
  losses (risk adjusted margin) ..................     $344.9      $277.5
                                                       ======      ======
As a % of AEA:
Net finance margin ...............................       3.54%       3.94%
Provision for credit losses ......................       0.41%       0.93%
                                                       ------      ------
Net finance margin after provision for credit
  losses (risk adjusted margin) ..................       3.13%       3.01%
                                                       ======      ======

      Risk-adjusted  margin  improved from 2004 as lower  charge-offs  more than
offset the previously-discussed decline in net finance margin. Charge-off trends
are discussed further in "Credit Metrics".

Other Revenue

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

                                                          Quarters Ended
                                                             March 31,
                                                        ------------------
                                                         2005        2004
                                                        ------      ------
Fees and other income .............................     $150.2      $126.7
Factoring commissions .............................       54.8        55.0
Gains on sales of leasing equipment ...............       22.6        27.3
Gains on securitizations ..........................       11.8        21.4
                                                        ------      ------
   Total other revenue ............................     $239.4      $230.4
                                                        ======      ======
Other revenue as a percentage of AEA ..............       2.17%       2.50%
                                                        ======      ======
Other revenue as a percentage of total revenue ....       18.8%       20.4%
                                                        ======      ======


                                       21


      We continue to emphasize growth and  diversification  of other revenues to
improve our overall profitability.

      o     Fees and other income include securitization-related  servicing fees
            and accretion,  syndication fees,  miscellaneous fees and gains from
            asset sales.  Securitization-related fees were essentially flat with
            2004,  as lower  servicing  fees  corresponding  to the  decline  in
            securitized  assets  were  offset  by  reduced  impairment  charges,
            reflecting  improved loss and  prepayment  experience  in 2005.  The
            increase  in other fees and income from 2004 was  broad-based,  with
            the  strongest  improvement  in the Specialty  Finance  --commercial
            segment and the Business Credit unit of Commercial Finance.

      o     Factoring  commissions,  though flat in amount,  reflected  slightly
            lower factoring rates (as a percentage of factoring volume).

      o     Gains on sales of equipment  declined  from 2004,  reflecting  lower
            gains in Capital Finance.

      o     Securitization  gains  decreased in 2005, due to both a lower volume
            of receivables  securitized and the mix of assets  securitized.  The
            volume decline included a $288 million drop in Specialty  Finance --
            commercial assets sold.

      The   following   table   presents   information    regarding   gains   on
securitizations ($ in millions):

                                                         Quarters Ended
                                                            March 31,
                                                     ----------------------
                                                       2005          2004
                                                     --------      --------
Total volume securitized .......................     $  929.0      $1,236.4
Gains ..........................................     $   11.8      $   21.4
Gains as a percentage of volume securitized ....         1.27%         1.73%
Gains as a percentage of pre-tax income ........          3.5%          6.9%
Securitized assets .............................     $7,716.6      $9,067.0
Retained interest in securitized assets ........     $1,070.2      $1,297.2

Reserve for Credit Losses

      The  changes  to  the  reserve  for  credit  losses,   including   related
provisions, are presented in the following table ($ in millions):



                                                                                     Quarters Ended
                                                                                        March 31,
                                                                                   ------------------
                                                                                    2005        2004
                                                                                   ------      ------
                                                                                         
Balance beginning of period ..................................................     $617.2      $643.7
                                                                                   ------      ------
Provision for credit losses -- finance receivables ...........................       45.3        85.6
Reserves relating to asset purchases and other ...............................        7.0         6.7
                                                                                   ------      ------
   Additions to reserve for credit losses, net ...............................       52.3        92.3
                                                                                   ------      ------
Net credit losses
   Specialty Finance -- commercial ...........................................       19.4        28.5
   Specialty Finance -- consumer .............................................       11.0        10.2
   Commercial Finance ........................................................       11.4        26.4
   Equipment Finance .........................................................        6.9        26.3
   Capital Finance ...........................................................        0.4         7.9
                                                                                   ------      ------
   Total net credit losses ...................................................       49.1        99.3
                                                                                   ------      ------
Balance end of period ........................................................     $620.4      $636.7
                                                                                   ======      ======
Reserve for credit losses as a percentage of finance receivables .............       1.51%       1.98%
                                                                                   ======      ======
Reserve for credit losses as a percentage of past due
   receivables (60 days or more)(1) ..........................................       85.8%      104.5%
                                                                                   ======      ======
Reserve for credit losses as a percentage of non-performing assets(1)(2) .....      117.4%       95.4%
                                                                                   ======      ======


--------------------------------------------------------------------------------
(1)   The reserve for credit losses as a percentage of past due  receivables and
      non-performing  accounts,   excluding   telecommunications  and  Argentine
      reserves  and account  balances,  were 89.9% and 88.3% at March 31,  2004,
      respectively.

(2)   At March 31, 2005, the reserve to non-performing asset percentage exceeded
      the reserve to delinquency  percentage  primarily due to the fact that the
      education  lending  portfolio has no  non-performing  assets, as education
      lending past due receivables are not classified as  non-performing  assets
      to the extent such loans are subject to the U.S. government guarantee.


                                       22


      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):



                                   March 31, 2005        December 31, 2004       March 31, 2004
                                 -----------------      -----------------      -----------------
                                                                         
Finance receivables .......      $597.2      1.46%      $594.0      1.71%      $531.4      1.68%
Telecommunications (1) ....        23.2      7.90%        23.2      6.92%        92.8     18.56%
Argentina (2) .............          --        --           --        --         12.5     69.83%
                                 ------                 ------                 ------
Total .....................      $620.4      1.51%      $617.2      1.76%      $636.7      1.98%
                                 ======                 ======                 ======


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

(2)   Percentage of finance receivables in Argentina.

      The reserve for credit losses,  while up in amount from December 31, 2004,
declined as a percentage of finance  receivables  primarily due to the impact of
the education lending acquisition. Excluding this acquisition, the total reserve
for credit  losses  was 1.68% of  finance  receivables  at March 31,  2005.  The
decline in both  amount and  percentage  from last March  resulted  from  credit
quality  improvements  across  portfolios,   including   telecommunication   and
Argentine assets.

      Effective  January  1, 2005,  we adopted  Statement  of  Position  03 - 3,
"Accounting for Certain Loans or Debt  Securities  Acquired in a Transfer." As a
result,  approximately  $5.0 million of reserves  associated  with the education
lending  portfolio are included as a component of finance  receivables  at March
31, 2005.  Given the U.S.  government  guarantee of these loans,  the associated
reserve levels are significantly lower than our other asset classes.

      The reserve for credit losses is determined based on three key components:
(1) specific  reserves for  collateral  and cash flow  dependent  loans that 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 economic environment and other factors.

      The  reserve  included  specific  reserves,   excluding  telecommunication
accounts,  relating to impaired loans of $26.7 million, $42.4 million, and $50.2
million at March 31, 2005,  December 31, 2004 and March 31, 2004. The portion of
the reserve related to inherent  estimated loss and estimation risk reflects 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.

Credit Metrics

Net Charge-offs

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

                                                      Quarters Ended
                                             -------------------------------
                                             March 31, 2005   March 31, 2004
                                             --------------   --------------
                                               $        %       $        %
                                             -----    ----    -----    ----
   Specialty Finance -- commercial ......    $19.4    0.87%   $28.5    1.43%
   Specialty Finance -- consumer ........     11.0    0.59%    10.2    1.47%
                                             -----            -----
      Total Specialty Finance Group .....     30.4    0.74%    38.7    1.44%
                                             -----            -----
   Commercial Finance ...................     11.4    0.37%    26.4    0.91%
   Equipment Finance ....................      6.9    0.46%    26.3    1.67%
   Capital Finance ......................      0.4    0.06%     7.9    1.16%
                                             -----            -----
      Total Commercial Finance Group ....     18.7    0.35%    60.6    1.17%
                                             -----            -----
      Total .............................    $49.1    0.52%   $99.3    1.26%
                                             =====            =====


                                       23


      The improvement from 2004 was broad-based  across segments.  Excluding the
impact of the education  lending  acquisition,  total net charge-offs were $49.1
million  or 0.55% of  finance  receivables  at March 31,  2005.  The prior  year
included $26.0 million (7.16% of related finance receivables) of net charge-offs
related to telecommunication and liquidating portfolios. Net charge-offs for the
quarter  ended  March 31,  2004 on the  "core"  portfolios  were  $99.3  million
(1.26%).  For the quarter ended March 31, 2005, there were no  telecommunication
charge-offs  and  charge-offs   related  to  liquidating   portfolios  were  not
significant. Additional analysis by segment follows:

      o     Specialty Finance -- commercial  charge-offs  declined from 2004 due
            to  improved  credit in the  vendor  programs  and in  international
            operations.

      o     Specialty Finance -- consumer home lending charge-offs,  while up in
            amount,  were down as a percentage  of average  finance  receivables
            from the prior year,  reflecting  portfolio growth,  improved credit
            performance and the addition of the student lending assets.

      o     Commercial   Finance   charge-off   improvement   was  driven  by  a
            significant  decline  in  Business  Credit  charge-offs.   Factoring
            charge-offs were modestly above the prior year.

      o     Equipment  Finance  charge-off  improvement  continued  in the first
            quarter of 2005, as current period  charge-offs,  both in amount and
            percentage,  were  roughly one third of the 2004  levels  (excluding
            liquidating portfolios).

      o     Capital Finance charge-offs were below 2004 due to a project finance
            write-off in the prior year.

      Net  charge-offs on a managed basis,  including  securitized  receivables,
both in amount and as a percentage of average managed receivables,  are shown in
the following table ($ in millions):

                                                   Quarters Ended
                                           ----------------------------------
                                           March 31, 2005      March 31, 2004
                                           --------------      --------------
Specialty Finance -- commercial .....      $29.7    0.92%      $ 40.0   1.29%
Specialty Finance -- consumer .......       16.5    0.76%        14.7   1.29%
                                           -----               ------
  Total Specialty Finance Group .....       46.2    0.86%        54.7   1.29%
                                           -----               ------
Commercial Finance ..................       11.4    0.37%        26.4   0.91%
Equipment Finance ...................       12.4    0.57%        41.6   1.78%
Capital Finance .....................        0.4    0.06%         7.9   1.16%
                                           -----               ------
  Total Commercial Finance Group ....       24.2    0.41%        75.9   1.28%
                                           -----               ------
  Total .............................      $70.4    0.62%      $130.6   1.29%
                                           =====               ======

      The previously  discussed  trends in owned portfolio  charge-offs were the
primary cause of fluctuations in charge-offs on a managed basis.

Past Due Loans 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):

                                           March 31, 2005    December 31, 2004
                                           --------------    -----------------
Past due accounts:                         
   Specialty Finance -- commercial .....   $278.5   3.15%     $283.3    3.22%
   Specialty Finance -- consumer .......    239.8   2.40%      116.4    2.27%
                                           ------             ------
     Total Specialty Finance Group .....    518.3   2.75%      399.7    2.87%
                                           ------             ------
   Commercial Finance ..................    124.5   0.93%      124.7    1.06%
   Equipment Finance ...................     52.9   0.87%       50.1    0.79%
   Capital Finance .....................     27.4   0.97%       33.5    1.13%
                                           ------             ------
     Total Commercial Finance Group ....    204.8   0.92%      208.3    0.99%
                                           ------             ------
     Total .............................   $723.1   1.76%     $608.0    1.73%
                                           ======             ======

                                       24


                                           March 31, 2005    December 31, 2004
                                           --------------    -----------------
Non-performing accounts:
   Specialty Finance -- commercial ....    $172.2   1.95%     $165.9    1.88%
   Specialty Finance -- consumer ......     125.0   1.25%      119.3    2.32%
                                           ------             ------
     Total Specialty Finance Group ....     297.2   1.58%      285.2    2.05%
                                           ------             ------
   Commercial Finance .................     110.0   0.82%      112.1    0.95%
   Equipment Finance(1) ...............     102.2   1.67%      131.2    2.06%
   Capital Finance ....................      18.9   0.67%       11.1    0.38%
                                           ------             ------
     Total Commercial Finance Group ...     231.1   1.03%      254.4    1.21%
                                           ------             ------
     Total ............................    $528.3   1.28%     $539.6    1.54%
                                           ======             ======
Non-accrual loans .....................    $464.0             $458.4
Repossessed assets ....................      64.3               81.2
                                           ------             ------
     Total non-performing accounts ....    $528.3             $539.6
                                           ======             ======

--------------------------------------------------------------------------------
(1)   Equipment  Finance  non-performing  assets include  accounts that are less
      than sixty days past due.

      Delinquency  levels  increased  during the  quarter  primarily  due to the
education lending acquisition,  as excluding these assets,  delinquency was $611
million  (1.66%)  at March  31,  2005.  Although  delinquency  is higher in this
portfolio,  this  metric is not  indicative  of  ultimate  loss,  given the U.S.
government guarantee of these loans. Additional analysis follows:

      o     Specialty   Finance  --  commercial   delinquency   was  essentially
            unchanged  from the prior  quarter,  as a modest  increase  in small
            business lending was offset by a decline in major vendor past dues.

      o     Specialty  Finance  --  consumer  delinquency   excluding  education
            lending  receivables was $127 million  (2.24%),  versus $116 million
            (2.27%) last quarter, reflecting the continued home lending growth.

      o     Commercial  Finance  past due  amounts  were flat in amount with the
            fourth  quarter of 2004,  but down in  percentage  due to  factoring
            growth.

      o     Equipment Finance and Capital Finance delinquencies  remained at the
            relative low year end 2004 levels.

      Similarly,  non-performing  assets remained at the low fourth quarter 2004
levels,  and the  percentage  trends  were  impacted  by the  education  lending
acquisition, which had no non-performing accounts at March 31, 2005. The greater
improvement  in  Equipment  Finance   non-performing   assets  (in  relation  to
delinquency) reflected a decline in repossessed corporate / business aircraft.

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

                                           March 31, 2005    December 31, 2004
                                           --------------    -----------------
Managed past due accounts:
   Specialty Finance -- commercial .....   $371.0   2.70%     $402.1    2.82%
   Specialty Finance -- consumer .......    343.7   3.00%      227.8    3.45%
                                           ------             ------
     Total Specialty Finance Group .....    714.7   2.83%      629.9    3.02%
                                           ------             ------
   Commercial Finance ..................    124.5   0.93%      124.7    1.06%
   Equipment Finance ...................     81.6   0.92%       90.3    0.96%
   Capital Finance .....................     27.4   0.97%       33.5    1.13%
                                           ------             ------
     Total Commercial Finance Group ....    233.5   0.93%      248.5    1.03%
                                           ------             ------
     Total .............................   $948.2   1.88%     $878.4    1.95%
                                           ======             ======

      The trends in the table above  largely  reflect the  previously  discussed
fluctuations in the owned portfolios.

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):


                                       25




                                                                                  Quarters Ended
                                                                                     March 31,
                                                                            -------------------------
                                                                               2005           2004
                                                                            ---------       ---------
                                                                                      
Salaries and employee benefits .......................................      $   166.3       $   145.4
Other general operating expenses .....................................           94.7            94.6
                                                                            ---------       ---------
Salaries and general operating expenses ..............................      $   261.0       $   240.0
                                                                            =========       =========
Efficiency ratio(1) ..................................................           40.8%           40.4%
Salaries and general operating expenses as a percentage of AMA(2) ....           2.01%           2.08%
Average Managed Assets ...............................................      $51,954.7       $46,104.0


--------------------------------------------------------------------------------
(1)   Efficiency ratio is the ratio of salaries and general  operating  expenses
      to 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  ended March 31,
2005  increased  from  2004 due to  incremental  salaries  and  other  operating
expenses related to recent acquisitions, as well as higher incentive-based costs
(driven  primarily  by higher  restricted  stock  awards),  consistent  with the
improved  volume,  fees  and  profitability.  Excluding  the  education  lending
acquisition, operating expenses were $254.0 million and the efficiency ratio was
40.1% for the quarter ended March 31, 2005.

      Personnel totaled approximately 6,130 at March 31, 2005, versus 5,860 last
quarter and 5,795 last year. The increase  during the quarter was largely due to
the education lending acquisition.

      Improvement in the efficiency  ratio remains one of  management's  primary
goals for 2005 and several  initiatives are underway to reduce costs,  including
system consolidations and process efficiency improvements.  We have the capacity
to  grow  assets  without   commensurate   expense  increases,   and  we  expect
compliance-related expenses to decline from 2004. We anticipate reinvesting some
of these savings in sales and growth initiatives.

      During the first quarter of 2005, we  reclassified  certain  aerospace and
rail  maintenance  costs ($11.7 million and $7.3 million for 2005 and 2004) from
operating  expense to lease margin to align public  reporting  with our internal
business  measure.  Prior  period  balances  have been  conformed to the current
presentation.

Income Taxes

      The  effective  tax rate  differs  from the U.S.  Federal  tax rate of 35%
primarily  due to state and local income taxes,  the domestic and  international
geographic  distribution  of taxable  income and  corresponding  foreign  income
taxes, as well as differences between book and tax treatment of certain items.

      The  effective  tax rate was 36.8% and 39.0% for the quarters  ended March
31, 2005 and 2004.  The  reduction in the 2005  effective tax rate was primarily
due  to  increased  profitability  in  lower-taxed   international   operations,
including the placement of certain  aerospace  assets in Ireland.  The increased
profitability from the international  businesses resulted from our initiative to
grow our international  profitability via improved platform  efficiency  coupled
with asset growth. In addition, certain provisions of the American Jobs Creation
Act of 2004 provide favorable  treatment for certain aircraft leasing operations
conducted  offshore.  During the quarter,  we  initiated  actions to transfer 15
commercial jets to, and place future scheduled aircraft  deliveries in, Ireland.
We anticipate  transferring  approximately 20 to 30 additional  aerospace assets
during  the  remainder  of  the  year.  These  initiatives,  as  well  as  other
opportunities  that we are evaluating,  could result in an effective tax rate of
36% or lower for the year 2005.

      At  March  31,  2005,  CIT  had  U.S.  federal  net  operating  losses  of
approximately $2.0 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 2005.  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  federal
losses.  Accordingly,  we do not believe a valuation  allowance is required with
respect to these federal net operating  losses.  As of March 31, 2005,  based on
management's  assessment  as to  realizability,  the net deferred tax  liability
includes a valuation  allowance of approximately  $7.4 million relating to state
net operating losses.


                                       26


      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 tax years that may in the future be subject to  examination.  Management
periodically  evaluates  the adequacy of our related tax  reserves,  taking into
account our open tax return positions, tax assessments received, tax law changes
and  third  party  indemnifications.  We  believe  that  our  tax  reserves  are
appropriate.  The  final  determination  of tax  audits  could  affect  our  tax
reserves.

      See Item 4. Controls and Procedures for a discussion of internal  controls
relating to income taxes.

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):



                                                                March 31,     December 31,  Percentage
                                                                  2005           2004         Change
                                                                ---------     ------------  ----------
                                                                                      
Specialty Finance -- commercial Segment
   Finance receivables ...................................      $ 8,838.0      $ 8,805.7       0.4%
   Operating lease equipment, net ........................        1,030.9        1,078.7      (4.4)%
   Finance receivables held for sale .....................        1,053.6        1,288.4      (18.2)%
                                                                ---------      ---------
      Owned assets .......................................       10,922.5       11,172.8      (2.2)%
   Finance receivables securitized and managed by CIT ....        3,870.2        4,165.5      (7.1)%
                                                                ---------      ---------
   Managed assets ........................................       14,792.7       15,338.3      (3.6)%
                                                                ---------      ---------
Specialty Finance -- consumer Segment
   Finance receivables -- home lending ...................        5,423.5        4,896.8      10.8%
   Finance receivables -- education lending ..............        4,322.9             --       N/A
   Finance receivables -- other ..........................          255.8          236.0       8.4%
   Finance receivables held for sale .....................          335.9          241.7      39.0%
                                                                ---------      ---------
      Owned assets .......................................       10,338.1        5,374.5      92.4%
   Home lending receivables securitized
      and managed by CIT .................................        1,131.5        1,228.7      (7.9)%
                                                                ---------      ---------
   Managed assets ........................................       11,469.6        6,603.2      73.7%
                                                                ---------      ---------
Commercial Finance Segment
   Commercial Services
     Finance receivables .................................        7,184.9        6,204.1      15.8%
   Business Credit
     Finance receivables .................................        6,221.3        5,576.3      11.6%
                                                                ---------      ---------
      Owned assets .......................................       13,406.2       11,780.4      13.8%
                                                                ---------      ---------
Equipment Finance Segment
   Finance receivables ...................................        6,105.1        6,373.1      (4.2)%
   Operating lease equipment, net ........................          428.1          440.6      (2.8)%
   Finance receivables held for sale .....................           91.8          110.7      (17.1)%
                                                                ---------      ---------
      Owned assets .......................................        6,625.0        6,924.4      (4.3)%
   Finance receivables securitized and managed by CIT ....        2,714.9        2,915.5      (6.9)%
                                                                ---------      ---------
   Managed assets ........................................        9,339.9        9,839.9      (5.1)%
                                                                ---------      ---------
Capital Finance Segment
   Finance receivables ...................................        2,831.0        2,956.2      (4.2)%
   Operating lease equipment, net ........................        6,854.1        6,771.6       1.2%
                                                                ---------      ---------
      Owned assets .......................................        9,685.1        9,727.8      (0.4)%
                                                                ---------      ---------
   Other -- Equity Investments ...........................          101.8          181.0      (43.8)%
                                                                ---------      ---------
Totals
   Finance receivables ...................................      $41,182.5      $35,048.2      17.5%
   Operating lease equipment, net ........................        8,313.1        8,290.9       0.3%
   Finance receivables held for sale .....................        1,481.3        1,640.8      (9.7)%
                                                                ---------      ---------
   Financing and leasing assets excluding
      equity investments .................................       50,976.9       44,979.9      13.3%
   Equity investments (included in other assets) .........          101.8          181.0      (43.8)%
                                                                ---------      ---------
      Owned assets .......................................       51,078.7       45,160.9      13.1%
   Finance receivables securitized and managed by CIT ....        7,716.6        8,309.7      (7.1)%
                                                                ---------      ---------
      Managed assets .....................................      $58,795.3      $53,470.6      10.0%
                                                                =========      =========



                                       27


      The quarterly activity includes the following:

      o     Specialty Finance -- commercial  declined due to a sale of over $300
            million   of   liquidating    manufactured    housing   assets   and
            securitization of assets.

      o     Specialty Finance -- consumer  increased  reflecting the acquisition
            of EDLG and the continued strength in the home equity lending market
            where  originations  of $577  million and  purchases of $546 million
            were  partially  offset by sales of $251 million to balance  certain
            portfolio demographics and risk characteristics.

      o     Commercial   Finance   increased,   reflecting   the   purchase   of
            substantially  all of the factoring  assets of  Receivables  Capital
            Management,  a division of SunTrust.  The acquired gross receivables
            approximate  $864 million with acquired net assets of  approximately
            $238 million  (net of credit  balances of  factoring  clients).  The
            increase in Business  Credit  (asset  based  lending)  reflects  the
            transfer  of  approximately   $400  million  of  sports  and  gaming
            portfolio  assets from Equipment  Finance on top of a strong quarter
            of new business originations.

      o     Equipment  Finance was up slightly  excluding the asset  transfer on
            lower first quarter volume (from the fourth quarter of 2004),  which
            is typical of business seasonality for this segment.

      o     Capital  Finance funded three new aircraft  during the quarter,  but
            this  asset  growth  was  offset by a high  rate of risk  management
            related syndication activity.

Business Volumes

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

                                                       Quarters Ended
                                                          March 31,
                                                   ----------------------
                                                     2005          2004
                                                   --------      --------
Specialty Finance -- commercial .............      $2,337.5      $2,518.0
Specialty Finance -- consumer ...............       1,362.5       1,057.9
Commercial Finance (excluding factoring) ....         678.6         556.2
Equipment Finance ...........................         988.0         922.1
Capital Finance .............................         334.1         162.6
                                                   --------      --------
   Total new business volume ................      $5,700.7      $5,216.8
                                                   ========      ========

      o     Specialty  Finance -- commercial lower volumes were primarily in the
            vendor business.

      o     Specialty  Finance  --  consumer  volume  increase  included  strong
            origination volume and bulk receivable acquisitions in home lending.
            The current  balance  also  includes  $170.7  million of volume from
            EDLG.

      o     Commercial  Finance's  asset based  lending  activity  posted strong
            volumes,  which increased asset levels in Business Credit,  as noted
            above.

      o     Equipment  Finance  volume is seasonally  weak in the first quarter,
            but did improve 7% from last year.

      o     Capital Finance  year-over-year volume increase reflected additional
            aircraft funding as well as several structured transactions.

Non-strategic Business Lines

      The  remaining   non-strategic  business  lines  totaled  $286.8  million,
consisting   primarily  of  manufactured   housing  ($249.1  million),   certain
owner-operator trucking receivables and franchise finance.

      In  addition,  we have $101.8  million  remaining  in our venture  capital
portfolio at March 31, 2005,  down from $181.0  million at December 31, 2004, as
we closed approximately $75 million in private equity fund sales pursuant to the
fourth  quarter 2004  agreement to sell the majority of the private  equity fund
portfolio.  The amount  remaining at March 31, 2005  consists of private  equity
funds ($77.1 million) and direct investments ($24.7 million).  We had previously
ceased making new investments  beyond our existing  commitments,  and during the
second quarter of 2004, we sold a significant  portion of the direct  investment
portfolio. We expect to close the sale of the majority


                                       28


of the remaining  private  equity funds in 2005,  which would leave us with less
than  $30  million  in total  venture  capital  investments  to  liquidate  on a
systematic, longer-term basis. We may consider additional opportunities for more
rapid liquidation of non-strategic assets to the extent available. These actions
are consistent with our ongoing initiative to re-deploy capital in higher return
businesses.

Concentrations

Ten Largest Accounts

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented  4.8% of our total  financing  and leasing  assets at March 31, 2005
(the  largest  account  being less than 1.0%),  compared to 5.3% at December 31,
2004. The decline is due to the addition of the education lending receivables.

Operating Leases

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

                                           March 31,     December 31,
                                             2005           2004
                                           ---------     ------------
Capital Finance -- Aerospace .........     $4,512.2       $4,461.0
Capital Finance -- Rail and Other ....      2,341.9        2,310.6
Specialty Finance ....................      1,030.9        1,078.7
Equipment Finance ....................        428.1          440.6
                                           --------       --------
   Total .............................     $8,313.1       $8,290.9
                                           ========       ========

      The  increases  in  the  Capital  Finance  aerospace  portfolio  reflected
deliveries of three new commercial aircraft, partially offset by the disposition
of seven aircraft.

      Management  strives to maximize the  profitability  of the lease equipment
portfolio by balancing equipment utilization levels with market rental rates and
lease terms.  Equipment not subject to lease  agreements  totaled $111.5 million
and $118.3  million  at March 31,  2005 and  December  31,  2004,  respectively.
Weakness in the commercial  airline industry could adversely impact  prospective
rental and utilization rates.

Leveraged Leases

      The major  components  of net  investments  in leveraged  leases  include:
commercial aerospace  transactions,  including  tax-optimized  leveraged leases,
which  generally  have increased risk of loss in default for lessors in relation
to conventional lease structures due to additional  leverage and the third party
lender priority recourse to the equipment in these transactions, project finance
transactions, primarily in the power and utility sectors, and rail transactions.
The balances are as follows ($ in millions):

                                                    March 31,     December 31,
                                                      2005           2004
                                                    ---------     ------------
Commercial aerospace -- non-tax optimized ....      $  337.2       $  336.6
Commercial aerospace -- tax optimized ........         218.0          221.0
Project finance ..............................         342.8          334.9
Rail .........................................         237.7          233.9
Other ........................................         121.2          115.4
                                                    --------       --------
  Total leveraged lease transactions .........      $1,256.9       $1,241.8
                                                    ========       ========
As a percentage of finance receivables .......           3.1%           3.5%
                                                    ========       ========

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 are
among our largest alliances.  The agreements with Dell grants Dell the option to
purchase CIT's 30% interest in Dell Financial  Services L.P. ("DFS") in February
2008 and  extends  CIT's  right  to  purchase  a  percentage  of  DFS's  finance
receivables  through January 2010. 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.


                                       29


      Our  financing and leasing  assets  include  amounts  related to the Dell,
Snap-on and Avaya joint  venture  programs.  These amounts  include  receivables
originated  directly by CIT as well as receivables  purchased from joint venture
entities. The asset balances for these programs are as follows ($ in millions):



                                                                    March 31,    December 31,
                                                                      2005           2004
                                                                    ---------    ------------
Owned Financing and Leasing Assets
                                                                            
Dell.............................................................   $3,651.4      $3,389.4
Snap-on..........................................................    1,081.4       1,114.7
Avaya............................................................      567.0         620.7
Securitized Financing and Leasing Assets
Dell.............................................................   $2,288.4      $2,489.2
Snap-on..........................................................       61.4          64.8
Avaya............................................................      582.8         599.6
Dell International Financing and Leasing Assets Included above
Dell -- owned....................................................   $1,492.9      $1,408.7
Dell -- securitized..............................................       49.9           5.1


      Returns relating to the joint venture relationships (i.e., net income as a
percentage of average  managed assets) for 2005 were somewhat in excess of CIT's
consolidated returns. 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 Lending Portfolio

      The  Specialty  Finance -- consumer  home lending  portfolio  totaled $5.6
billion (owned) and $6.7 billion (managed) at March 31, 2005, representing 11.0%
and 11.4% of owned and managed assets, respectively. Selected statistics for our
managed home lending portfolio are as follows:

      o     92% first mortgages.

      o     Average loan size of approximately $103.9 thousand.

      o     Top 5 state concentrations  (California,  Texas, Florida,  Ohio, and
            Pennsylvania) represented an aggregate 44% of the managed portfolio.

      o     54% fixed-rate with an average  loan-to-value  of 76% and an average
            FICO score of 636.

      o     Delinquencies (sixty days or more) were 3.41% and 3.59% at March 31,
            2005 and December 31, 2004.

      o     Charge-offs  were 0.95% and 1.27% for the  quarters  ended March 31,
            2005 and 2004.

Education Lending Portfolio

      The Specialty Finance -- consumer education lending portfolio totaled $4.4
billion  at March  31,  2005,  representing  8.7% of owned  and 7.5% of  managed
assets.  Selected statistics for our education lending portfolio as of March 31,
2005 are as follows:

Finance receivables by product type
Consolidation loans .........................................      $3,997.9
Other U.S. Government guaranteed loans ......................         424.6
Private (non-guaranteed) loans and other ....................          13.4
                                                                   --------
   Total ....................................................      $4,435.9
                                                                   ========

      o     Delinquencies  (sixty  days or more) were $112.6  million,  2.60% of
            finance receivables.

      o     Top 5 state  concentrations  (California,  New  York,  Pennsylvania,
            Texas, and Ohio) represented an aggregate 36% of the portfolio.


                                       30


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.

                                                        March 31,  December 31,
                                                          2005         2004
                                                        ---------  ------------
State
California .....................................         10.6%         10.3%
Texas ..........................................          7.4%          7.8%
New York .......................................          6.8%          6.8%
All other states ...............................         55.4%         52.8%
                                                         ----          ----
      Total U.S. ...............................         80.2%         77.7%
                                                         ====          ====
Country
Canada .........................................          4.9%          5.5%
England ........................................          3.6%          3.9%
France .........................................          1.1%          1.4%
Australia ......................................          1.1%          1.3%
China ..........................................          1.1%          1.3%
Germany ........................................          1.0%          1.2%
Mexico .........................................          1.0%          1.1%
All other countries ............................          6.0%          6.6%
                                                         ----          ----
      Total Outside U.S. .......................         19.8%         22.3%
                                                         ====          ====


                                       31


Industry Composition

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

Aerospace

      Our commercial  and regional  aerospace  portfolios  reside in the Capital
Finance segment.

      The commercial  aircraft all comply with Stage III noise regulations.  The
following table summarizes the composition of the commercial aerospace portfolio
($ in millions):

                                       March 31, 2005        December 31, 2004
                                     -------------------    --------------------
                                        Net                    Net
                                     Investment   Number    Investment    Number
                                     ----------   ------    ----------    ------
By Region:
   Europe ......................      $2,150.5       70      $2,160.0       72
   North America ...............       1,114.6       62       1,057.7       66
   Asia Pacific ................       1,257.1       48       1,242.4       46
   Latin America ...............         598.7       24         611.3       25
   Africa / Middle East ........          65.6        4          54.2        3
                                      --------      ---      --------      ---
Total ..........................      $5,186.5      208      $5,125.6      212
                                      ========      ===      ========      ===
By Manufacturer:
   Boeing ......................      $2,572.5      128      $2,558.8      133
   Airbus ......................       2,559.2       71       2,536.9       70
   Other .......................          54.8        9          29.9        9
                                      --------      ---      --------      ---
Total ..........................      $5,186.5      208      $5,125.6      212
                                      ========      ===      ========      ===
By Body Type (1):
   Narrow body .................      $3,956.5      164      $3,894.9      168
   Intermediate ................         828.2       18         842.7       18
   Wide body ...................         347.0       17         358.1       17
   Other .......................          54.8        9          29.9        9
                                      --------      ---      --------      ---
Total ..........................      $5,186.5      208      $5,125.6      212
                                      ========      ===      ========      ===
By Product:
   Operating lease .............      $4,394.2      162      $4,324.6      167
   Leverage lease (other) ......         337.2       12         336.6       12
   Leverage lease
     (tax optimized) ...........         218.0        9         221.0        9
   Capital lease ...............         132.7        6         137.4        6
   Loan ........................         104.4       19         106.0       18
                                      --------      ---      --------      ---
Total ..........................      $5,186.5      208      $5,125.6      212
                                      ========      ===      ========      ===
Other Data:
Off-lease aircraft .............             1                     2
Number of accounts .............            94                    92
Weighted average age
  of fleet (years) .............             7                     6
Largest customer net
  investment ...................      $  284.5              $  286.4

----------
(1)   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 $1,067.2 million at
March 31,  2005.  All top five are to carriers  outside of the U.S.  The largest
exposure to a U.S. carrier at March 31, 2005 was $163.0 million. 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 levels.

      The regional aircraft  portfolio at March 31, 2005 consisted of 121 planes
and a net investment of $292.0  million.  The carriers are primarily  located in
North  America  and  Europe.  Operating  leases  account  for  about  40% of the
portfolio, with the remainder capital leases or loans. At December 31, 2004, the
portfolio consisted of 121 planes with a net investment of $302.6 million.


                                       32


      Commercial airline equipment  utilization was high at March 31, 2005, with
only one aircraft  off-lease (book value of $7.1 million) which demonstrates our
ability to place  aircraft.  Despite some recent  improvement  in rental  rates,
current  placements  remain 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 March 31, 2005, there
were 7  aircraft  off-lease  with a total  book  value  of  approximately  $18.4
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 should 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

      See  table  in  "Risk  Management"  section  for  additional   information
regarding   commitments  to  purchase  additional  aircraft.   See  Note  10  --
Commitments and Contingencies for additional  information  regarding commitments
to  purchase  additional  aircraft.  See Note 4 --  Concentrations  for  further
discussion on concentrations.

Risk Management

      Our risk management process is described in more detail in our 2004 Annual
Report on Form 10-K. Our processes  remained  substantially the same as outlined
in our 2004 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     Margin at Risk (MAR), which measures the impact of changing interest
            rates upon interest  income over the subsequent  twelve months.  See
            Net  Finance  Margin  section  for  discussion  and  results of this
            simulation.

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

      The  following  table  summarizes  the  composition  of our interest  rate
sensitive assets and liabilities before and after swaps:

                                          Before Swaps          After Swaps
                                       -----------------     -----------------
                                       Fixed    Floating     Fixed    Floating
                                       rate       rate       rate       rate
                                       -----    --------     -----    --------
            March 31, 2005
Assets ............................     47%        53%        47%        53%
Liabilities .......................     53%        47%        40%        60%

           December 31, 2004
Assets ............................     55%        45%        55%        45%
Liabilities .......................     60%        40%        46%        54%


                                       33


      Total  interest  sensitive  assets were $47.2 billion and $41.7 billion at
March 31, 2005 and December 31, 2004. Total interest sensitive  liabilities were
$41.5  billion and $35.9  billion at March 31, 2005 and December  31, 2004.  The
addition  of the  education  lending  receivables  and  related  debt during the
quarter  increased the  proportions of  floating-rate  assets and liabilities at
March 31, 2005, as compared to December 31, 2004.

Foreign  Exchange  Risk  Management  -- To the  extent  local  foreign  currency
borrowings  are not raised,  CIT  utilizes  foreign  currency  exchange  forward
contracts to hedge or mitigate  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. Translation gains and losses of the underlying foreign net investment, as
well as  offsetting  derivative  gains and  losses  on  designated  hedges,  are
reflected in other comprehensive  income in the Consolidated  Balance Sheet. CIT
also 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 hedged
item) to the hedged  item (for fair  value  hedges)  along with the  transaction
gains and losses on the underlying hedged items.

Liquidity Risk Management and Capital  Resources -- 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.  Additionally,  we target our debt  issuance  strategy  to achieve a
maturity  pattern  designed to reduce  refinancing  risk.  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  $4.0  billion at March 31,  2005,
compared with $4.2 billion at December 31, 2004. Our targeted U.S.  program size
remains at $5.0  billion with modest  programs  aggregating  approximately  $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 in multi-year  facilities.  In
addition,  we have a separate 364-day unsecured committed line of credit of $154
million, which supports the Australian commercial paper program.

      We maintain  registration  statements  with the  Securities  and  Exchange
Commission  ("SEC") covering debt securities that we may sell in the future.  At
March 31, 2005, our registration statements had $9.2 billion of registered,  but
unissued,  securities  available,  under which we may issue debt  securities and
other  capital  market  securities.  Term-debt  issued  during 2005 totaled $3.5
billion:  $1.3 billion in  variable-rate  medium-term  notes and $2.2 billion in
fixed-rate  notes.  Included  with the fixed  rate notes are  issuances  under a
retail  note  program  in which  we offer  fixed-rate  senior,  unsecured  notes
utilizing numerous  broker-dealers for placement to retail accounts.  During the
quarter,  we issued $0.1 billion under this program having maturities of between
2 and 10 years.

      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 lending receivables and trade accounts
receivable.  While  these  are  predominately  in the  U.S.,  we  also  maintain
facilities  for  Canadian  domiciled  assets.  As of  March  31,  2005,  we  had
approximately  $4.8  billion  of  availability  in  our  committed  asset-backed
facilities and $5.6 billion of registered,  but unissued,  securities  available
under  public  shelf  registration   statements  relating  to  our  asset-backed
securitization  program. In addition,  we also maintain facilities in connection
with our education lending assets; a term shelf with an undrawn capacity of $1.0
billion and an available committed asset-backed facility of $0.4 billion.

      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.


                                       34


      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.

                                                         March 31,  December 31,
Liquidity Measurement                   Current Target     2005         2004
---------------------                   --------------   ---------  ------------
Commercial paper to total debt.........  Maximum of 15%       9%        11%
Short-term debt to total debt..........  Maximum of 45%      24%        31%
Bank lines to commercial paper......... Minimum of 100%     154%       150%
Aggregate alternate liquidity to
   short-term debt*....................  Minimum of 75%     117%       108%

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

      Our credit  ratings are an  important  factor in meeting our  earnings and
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

      The credit ratings stated above 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 minimum net worth requirement of $4.0 billion.

      The following tables  summarize  significant  contractual  obligations and
projected cash  receipts,  and  contractual  commitments at March 31, 2005 ($ in
millions):



                                                                        Payments and Collections by Period(3)
                                                    ------------------------------------------------------------------------------
                                                                  Remaining
                                                      Total         2005          2006          2007          2008         2009+
                                                    ---------     ---------     ---------     ---------     ---------    ---------
                                                                                                       
Commercial paper ................................   $ 3,963.0     $ 3,963.0     $      --     $      --     $      --    $      --
Variable-rate senior unsecured notes ............    11,473.1       1,786.9       5,228.5       3,181.1         239.1      1,037.5
Fixed-rate senior unsecured notes ...............    22,197.0       3,313.9       2,701.4       3,881.2       1,753.2     10,547.3
Non-recourse, secured borrowings ................     4,638.9       1,011.2          --            --            11.9      3,615.8
Preferred capital security ......................       253.3           1.2           1.7           0.4          --          250.0
Lease rental expense ............................       170.8          45.3          41.8          33.9          28.4         21.4
                                                    ---------     ---------     ---------     ---------     ---------    ---------
   Total contractual obligations ................    42,696.1      10,121.5       7,973.4       7,096.6       2,032.6     15,472.0
                                                    ---------     ---------     ---------     ---------     ---------    ---------
Finance receivables (1) .........................    41,182.5      11,609.7       5,163.7       3,972.1       2,789.0     17,648.0
Operating lease rental income ...................     3,078.3         846.6         821.4         513.1         341.0        556.2
Finance receivables held for sale (2) ...........     1,481.3       1,481.3            --            --            --           --
Cash -- current balance .........................     1,638.1       1,638.1            --            --            --           --
Retained interest in securitizations
   and other investments ........................     1,123.2         510.1         341.8         123.5          72.8         75.0
                                                    ---------     ---------     ---------     ---------     ---------    ---------
   Total projected cash receipts ................    48,503.4      16,085.8       6,326.9       4,608.7       3,202.8     18,279.2
                                                    ---------     ---------     ---------     ---------     ---------    ---------
Net projected cash inflow (outflow) .............   $ 5,807.3     $ 5,964.3     $(1,646.5)    $(2,487.9)    $ 1,170.2    $ 2,807.2
                                                    =========     =========     =========     =========     =========    =========


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

(2)   Based  upon  management's  intent  to sell  rather  than  the  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.


                                       35




                                                                       Commitment Expiration by Period
                                                   ---------------------------------------------------------------------
                                                                Remaining
                                                     Total        2005        2006        2007        2008        2009+
                                                   ---------    --------    --------    --------    --------    --------
                                                                                              
Credit extensions .............................    $ 9,030.7    $1,180.6    $  972.4    $  863.8    $1,068.4    $4,945.5
Aircraft purchases ............................      2,028.0       774.0       910.0       344.0          --          --
Letters of credit .............................      1,136.2     1,099.0        36.8         0.1         0.3          --
Sale-leaseback payments .......................        473.3         8.8        31.0        31.0        31.0       371.5
Manufacturer purchase commitments .............        470.2       470.2          --          --          --          --
Venture capital commitments ...................         36.6         0.5          --          --         2.9        33.2
Guarantees ....................................         95.0        82.8          --          --        10.5         1.7
Acceptances ...................................         20.3        20.3          --          --          --          --
                                                   ---------    --------    --------    --------    --------    --------
   Total contractual commitments ..............    $13,290.3    $3,636.2    $1,950.2    $1,238.9    $1,113.1    $5,351.9
                                                   =========    ========    ========    ========    ========    ========


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 was  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.

      As  discussed  in "Net  Finance  Margin" we  recorded a charge  during the
quarter ended March 31, 2005 relating to third-party  servicing  errors.  During
the  quarter  ended  March  31,  2005,  and  subsequent  to  March  31,  2005 in
conjunction  with the preparation of the financial  statements,  we received and
reviewed the servicer's internal control  enhancements and remediation plan. The
servicer's  remediation  plan includes  improved  reconciliation  procedures and
additional  systems  change  controls.  We also  initiated  enhancements  to our
analytical  review  controls with respect to  information  provided to us by the
servicer.

      See Item 4. Controls and Procedures for further discussion.

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 table summarizes data relating
to our securitization balance and activity ($ in millions):

                                                        March 31,   December 31,
                                                          2005         2004
                                                        --------    -----------
Securitized Assets:
   Specialty Finance -- commercial .................    $3,870.2     $4,165.5
   Specialty Finance -- home lending ...............     1,131.5      1,228.7
   Equipment Finance ...............................     2,714.9      2,915.5
                                                        --------     --------
      Total securitized assets .....................    $7,716.6     $8,309.7
                                                        ========     ========
   Securitized assets as a % of managed assets .....        13.1%        15.5%
                                                        ========     ========


                                                            Quarters Ended
                                                              March  31,
                                                        ---------------------
                                                           2005        2004
                                                        --------     --------
Volume Securitized:
   Specialty Finance -- commercial .................      $675.1     $  963.3
   Equipment Finance ...............................       253.9        273.1
                                                          ------     --------
      Total volume securitized .....................      $929.0     $1,236.4
                                                          ======     ========


                                       36


      Under our typical asset-backed securitization, we sell a "pool" of secured
loans or leases to a special-purpose entity ("SPE"), typically a trust. 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." 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. Accordingly,  CIT has
no legal  obligations  to repay the  securities in the event of a default by the
SPE. CIT retains the servicing rights 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. Assets  securitized are shown in our managed assets and our capitalization
ratios on a managed basis.

      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.

      Our  retained  interests  had a carrying  value at March 31,  2005 of $1.1
billion.  Retained  interests are subject to credit and  prepayment  risk. As of
March  31,  2005,  approximately  50% of  our  outstanding  securitization  pool
balances are in conduit structures.  These assets are subject to the same credit
granting  and  monitoring  processes  which are  described  in the "Credit  Risk
Management" section.

      The key assumptions  used in measuring the retained  interests at the date
of securitization for transactions completed during 2005 were as follows:

                                                          Commercial Equipment
                                                        -----------------------
                                                        Specialty     Equipment
                                                         Finance       Finance
                                                        ---------     ---------
Weighted average prepayment speed ...............          46.8%        12.0%
Weighted average expected credit losses .........          0.52%        0.71%
Weighted average discount rate ..................          7.62%        9.00%
Weighted average life (in years) ................          1.31         2.12


      The key assumptions used in measuring the fair value of retained interests
in securitized assets at March 31, 2005 were as follows:

                                Commercial Equipment  Home Lending
                                --------------------      and       Recreational
                                Specialty  Equipment  Manufactured    Vehicles
                                 Finance    Finance     Housing       and Boat
                                 -------    -------     -------       --------
Weighted average
  prepayment speed ...........    32.1%      11.6%        25.9%         21.5%
Weighted average
  expected credit losses .....    1.06%      1.22%        1.49%         1.55%
Weighted average
  discount rate ..............    7.87%      9.49%       13.09%        15.00%
Weighted average
  life (in years) ............    1.10       1.40         3.12          2.69

      The education  lending  business,  which was acquired in February 2005, is
funded largely with  securitization  structures  that do not meet the accounting
requirements  for sales  treatment,  and are therefore  accounted for as secured
borrowings.  Accordingly,  the  receivables  and  related  debt are "on  balance
sheet," and there are no gains on sale or retained  interests in securitizations
related to these transactions.  See disclosure in Item 1. Consolidated Financial
Statements, Note 1 -- Summary of Significant Accounting Policies.


                                       37


Joint Venture Activities

      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.  Consolidated  Financial  Statements,  Note 8 --  Certain
Relationships and Related Transactions.

Capitalization

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

                                                   March 31,       December 31,
                                                     2005              2004
                                                   ---------       -----------
Commercial paper and term debt ...............     $42,272.0        $37,471.0
                                                   ---------        ---------
Preferred capital securities .................         253.3            253.8
Stockholders' equity (1) .....................       6,290.0          6,073.7
Goodwill and other intangible assets .........        (906.4)          (596.5)
                                                   ---------        ---------
   Total tangible stockholders' equity
     and preferred capital securities ........       5,636.9          5,731.0
                                                   ---------        ---------
Total tangible capitalization ................     $47,908.9        $43,202.0
                                                   =========        =========
Tangible stockholders' equity (1)
   and preferred capital
   securities to managed assets ..............          9.59%           10.72%

--------------------------------------------------------------------------------
(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."

      The  EDLG  acquisition  and  factoring  purchase  increased  goodwill  and
acquired intangibles by approximately $317 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.  Preferred capital  securities are
included in tangible  equity in our leverage  ratios.  See  "Non-GAAP  Financial
Measurements" for additional information.

      See "Liquidity  Risk  Management and Capital  Resources" 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 Intangible Assets

      o     Income Tax Reserves and Deferred Income Taxes

      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 2004 Annual Report on Form 10-K.


                                       38


Statistical Data

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

                                                            Quarters Ended
                                                               March 31,
                                                       ------------------------
                                                          2005           2004
                                                       ----------    ----------
Finance income .....................................        9.27%         9.73%
Interest expense ...................................        3.57%         3.23%
                                                       ---------     ---------
Net finance income .................................        5.70%         6.50%
Depreciation on operating lease equipment ..........        2.16%         2.56%
                                                       ---------     ---------
Net finance margin .................................        3.54%         3.94%
Provision for credit losses ........................        0.41%         0.93%
                                                       ---------     ---------
Net finance margin after provision for credit losses        3.13%         3.01%
Other revenue ......................................        2.17%         2.50%
Gain (loss) on venture capital investments .........        0.10%         0.01%
                                                       ---------     ---------
Operating margin ...................................        5.40%         5.52%
Salaries and general operating expenses ............        2.37%         2.60%
Gain on redemption of debt .........................          --          0.45%
                                                       ---------     ---------
Income before provision for income taxes ...........        3.03%         3.37%
Provision for income taxes .........................       (1.11)%       (1.32)%
Minority interest, after tax .......................       (0.01)%          --
                                                       ---------     ---------
  Net income .......................................        1.91%         2.05%
                                                       =========     =========
Average Earning Assets .............................   $44,084.6     $36,865.1
                                                       =========     =========

Non-GAAP Financial Measurements

      The U.S.  Securities and Exchange Commission ("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 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.


                                       39


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

                                                       March 31,    December 31,
                                                         2005          2004
                                                      ---------      ---------
Managed assets(1):
Finance receivables (including
  pledged education lending receivables) .........    $41,182.5      $35,048.2
Operating lease equipment, net ...................      8,313.1        8,290.9
Finance receivables held for sale ................      1,481.3        1,640.8
Equity and venture capital investments
  (included in other assets) .....................        101.8          181.0
                                                      ---------      ---------
Total financing and leasing portfolio assets .....     51,078.7       45,160.9
Securitized assets ...............................      7,716.6        8,309.7
                                                      ---------      ---------
  Managed assets .................................    $58,795.3      $53,470.6
                                                      =========      =========
Earning assets (2):
Total financing and leasing portfolio assets .....    $51,078.7      $45,160.9
Credit balances of factoring clients .............     (4,269.8)      (3,847.3)
                                                      ---------      ---------
  Earning assets .................................    $46,808.9      $41,313.6
                                                      =========      =========
Tangible equity(3):
  Total equity ...................................    $ 6,318.0      $ 6,055.1
Other comprehensive (income) loss
  relating to derivative financial instruments ...        (20.3)          27.1
Unrealized gain on securitization investments ....         (7.7)          (8.5)
Goodwill and intangible assets ...................       (906.4)        (596.5)
                                                      ---------      ---------
Tangible common equity ...........................      5,383.6        5,477.2
Preferred capital securities .....................        253.3          253.8
                                                      ---------      ---------
  Tangible equity ................................    $ 5,636.9      $ 5,731.0
                                                      =========      =========
Debt, net of overnight deposits(4):
Total debt .......................................    $42,525.3      $37,724.8
Overnight deposits ...............................     (1,006.3)      (1,507.3)
Preferred capital securities .....................       (253.3)        (253.8)
                                                      ---------      ---------
  Debt, net of overnight deposits ................    $41,265.7      $35,963.7
                                                      =========      =========
Earnings per share, excluding certain items(5)
GAAP earnings per share ..........................    $    0.98      $    0.95
Loss on accelerated liquidations
  -- manufactured housing ........................         --             0.04
(Gain)/loss on accelerated liquidations
  -- venture capital investments .................        (0.03)          0.04
Reduction of specific credit loss reserves .......         --            (0.12)
                                                      ---------      ---------
  Adjusted earnings per share ....................    $    0.95      $    0.91
                                                      =========      =========

--------------------------------------------------------------------------------
(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.

(3)   Tangible equity is utilized in leverage ratios. 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 diluted EPS related to the items listed are shown  separately,  as the
      items are not indicative of our on-going operations.

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,"  "target" 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


                                       40


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 ability to remediate the material  weakness in internal controls
            related to income taxes,

      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     demographic 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.


                                       41


Item 4. Controls and Procedures

      As previously  disclosed,  management  has  determined  that the lack of a
control to reconcile the difference between the tax basis and book basis of each
component  of the  Company's  balance  sheet  with the  deferred  tax  asset and
liability  accounts  constitutes a material  weakness.  Management has performed
alternative  analyses and  reconciliations  of the income tax balance  sheet and
income  statement  accounts  and based  thereon  believes  that the  income  tax
provision is appropriate and that the remediation  will not result in a material
adjustment to the Company's reported balance sheet or net income.

      In  connection  with the June 2001  acquisition  by Tyco,  our  income tax
compliance, reporting and planning function was transferred to Tyco. This caused
a lapse in maintaining,  developing and  implementing  changes to various income
tax financial  reporting  processes that are currently  required.  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 U.S.  Federal income tax
returns,  and  implementing  processes  and controls  with respect to income tax
reporting and compliance.  We continued to develop the processes and controls to
complete an analysis of our income tax asset and liability  accounts,  including
the refinement of, and reconciliation to transactional  level detail of, book to
tax  differences.  During the quarter  ended March 31, 2005,  we  completed  the
transactional-level  reconciliations  of book to tax  differences for several of
our  business  units,  which  in  turn  validated  our  current  methodology  in
connection with remediating the material weakness.

      As of the end of the  period  covered  by this  report,  we have not fully
remediated the material  weakness in the Company's  internal control over income
tax deferred assets and liabilities but anticipate a resolution during 2005.

      Other than the changes discussed above,  there have been no changes to the
Company's  internal  controls over  financial  reporting that occurred since the
beginning of the Company's first quarter of 2005 that have materially  affected,
or are reasonably likely to materially  affect,  the Company's  internal control
over financial reporting.


                                       42


                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

NorVergence Related Litigation

      On  September  9,  2004,  Exquisite  Caterers  v.  Popular  Leasing et al.
("Exquisite  Caterers"),  a putative national 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 now
pending in the Superior Court of New Jersey, Monmouth County. 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,  Illinois, New York 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 other financial institutions.

      On July 14, 2004, the U.S.  Bankruptcy  Court ordered the  liquidation for
NorVergence  under Chapter 7 of the Bankruptcy Code.  Thereafter,  the Attorneys
General  of several  states  commenced  investigations  of  NorVergence  and the
financial  institutions,  including CIT, that purchased  NorVergence Leases. CIT
entered into settlement  negotiations with those Attorneys General.  CIT reached
separate  settlements with the New York and New Jersey Attorneys General.  Under
those  settlements,  lessees in those states will have an opportunity to resolve
all claims by and against CIT by paying a percentage of the remaining balance on
their lease.  Negotiations with other Attorneys General are continuing.  CIT has
also been  asked by the  Federal  Trade  Commission  to  produce  documents  for
transactions related to NorVergence.  In addition, on February 15, 2005, CIT was
served  with a subpoena  seeking the  production  of  documents  in a grand jury
proceeding being conducted by the U.S. Attorney for the Southern District of New
York in connection with an investigation of transactions related to NorVergence.
CIT is in the process of complying with these information requests.

Other Litigation

      In addition,  there are various legal proceedings  against CIT, which have
arisen in the ordinary course of business. While the outcomes of the NorVergence
related  litigation and the 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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

      The following  table details the  repurchase  activity of CIT common stock
during the March 31, 2005 quarter:



                                                                             Total Number of       Maximum Number
                                             Total           Average        Shares Purchased      of Shares that May
                                           Number of          Price        as Part of Publicly    Yet be Purchased
                                             Shares           Paid           Announced Plans       Under the Plans
                                           Purchased        Per Share          or Programs           or Programs
                                           ---------        ---------          -----------           -----------
                                                                                           
Balance at December 31, 2004..........     1,672,033          $38.17                                   2,381,000
                                          ----------
   January 1 - 31, 2005...............       400,000          $42.32              400,000              1,981,000
   February 1 - 28, 2005..............       390,000          $41.13              390,000              1,591,000
   March 1 - 31, 2005.................       660,000          $39.83              660,000                931,000
                                          ----------
   Total Purchases....................     1,450,000
                                          ----------
Reissuances(1)........................    (1,773,642)
                                          ----------
Balance at March 31, 2005.............     1,348,391
                                          ==========


--------------------------------------------------------------------------------
(1)   Includes the issuance of common  stock held in treasury  upon  exercise of
      stock options, payment of employee stock purchase plan obligations and the
      vesting of restricted stock.


                                       43


      On April 18,  2005,  our Board of  Directors  approved an expanded  common
stock  repurchase  program to acquire up to an additional five million shares of
our outstanding common stock. These are in addition to the shares remaining from
a previously approved program.  The repurchased common stock is held as treasury
shares and may be used for the  issuance of shares  under CIT's  employee  stock
purchase plans and for general corporate  purposes.  The program  authorizes the
Company to purchase  shares over a two-year  period  beginning  April 19,  2005.
Acquisitions  under the share repurchase program will be made on the open market
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 3. DEFAULT UPON SENIOR SECURITIES

      None

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None

ITEM 5. OTHER INFORMATION

      None

ITEM 6. EXHIBITS

      (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).

            4.2   Indenture  dated as of October 29, 2004 between CIT Group Inc.
                  and J.P.  Morgan Trust Company,  National  Association for the
                  issuance of senior debt securities  (Incorporated by reference
                  to  Exhibit  4.4 to Form  S-3/A  filed by CIT on  October  28,
                  2004).

            4.3   Certain  instruments  defining  the rights of holders of CIT's
                  long-term  debt,  none of which  authorize  a total  amount of
                  indebtedness in excess of 10% of the total amounts outstanding
                  of CIT and its  subsidiaries on a consolidated  basis have not
                  been filed as exhibits.  CIT agrees to furnish a copy of these
                  agreements to the Commission upon request.

            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.


                                       44


                                   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

May 6, 2005


                                       45