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                                 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 June 30, 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 July 29, 2005,  there were  201,708,815  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 Statement of Stockholders' Equity (Unaudited) ..     3
           Consolidated Statements of Cash Flows (Unaudited) ...........     4
           Notes to Consolidated Financial Statements (Unaudited) ......   5-20
Item 2.    Management's Discussion and Analysis of Financial 
           Condition and Results of Operations 
           and
Item 3.    Quantitative and Qualitative Disclosure about Market Risk ...   21-45
Item 4.    Controls and Procedures .....................................    46

                           Part II--Other Information:

Item 1.    Legal Proceedings ...........................................    47
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds .    47
Item 3.    Default Upon Senior Securities ..............................    48
Item 4.    Submission of Matters to a Vote of Security Holders .........    48
Item 5.    Other Information ...........................................    49
Item 6.    Exhibits ....................................................    49

Signatures .............................................................    50



                          PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                         June 30,      December 31,
                                                                           2005            2004
                                                                         --------      -----------
                                     ASSETS

                                                                                        
Financing and leasing assets:
   Finance receivables .............................................     $36,338.4      $35,048.2
   Education lending receivables pledged ...........................       4,170.9           --
   Reserve for credit losses .......................................        (622.3)        (617.2)
                                                                         ---------      ---------
   Net finance receivables .........................................      39,887.0       34,431.0
   Operating lease equipment, net ..................................       8,642.9        8,290.9
   Finance receivables held for sale ...............................       1,435.9        1,640.8
Cash and cash equivalents, including $309.3 and $0.0 restricted ....       2,231.7        2,210.2
Retained interest in securitizations and other investments .........       1,122.0        1,228.2
Goodwill and intangible assets, net ................................         903.1          596.5
Other assets .......................................................       3,084.1        2,713.7
                                                                         ---------      ---------
Total Assets .......................................................     $57,306.7      $51,111.3
                                                                         =========      =========
                                                                                     
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:                                                                                
                                                                                     
   Commercial paper ................................................     $ 3,253.4      $ 4,210.9
   Variable-rate senior unsecured notes ............................      13,556.0       11,545.0
   Fixed-rate senior unsecured notes ...............................      22,457.4       21,715.1
   Non-recourse, secured borrowings -- education lending ...........       3,938.8             --
   Preferred capital securities ....................................         252.9          253.8
                                                                         ---------      ---------
Total debt .........................................................      43,458.5       37,724.8
Credit balances of factoring clients ...............................       3,649.2        3,847.3
Accrued liabilities and payables ...................................       3,748.5        3,443.7
                                                                         ---------      ---------
   Total Liabilities ...............................................      50,856.2       45,015.8
Commitments and Contingencies (Note 10)                                              
Minority interest ..................................................          49.3           40.4
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: 212,256,253 and 212,112,203 ...........................           2.1            2.1
     Outstanding: 210,047,448 and 210,440,170                                        
   Paid-in capital, net of deferred compensation of $55.2                            
     and $39.3 .....................................................      10,648.1       10,674.3
   Accumulated deficit .............................................      (4,129.9)      (4,499.1)
   Accumulated other comprehensive loss ............................         (29.6)         (58.4)
Less: treasury stock, 2,208,805 and 1,672,033 shares, at cost ......         (89.5)         (63.8)
                                                                         ---------      ---------
   Total Stockholders' Equity ......................................       6,401.2        6,055.1
                                                                         ---------      ---------
Total Liabilities and Stockholders' Equity .........................     $57,306.7      $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         Six Months Ended
                                                                    June 30,                June 30,
                                                              --------------------    --------------------
                                                                2005        2004        2005        2004
                                                              --------    --------    --------    --------
                                                                                           
Finance income ..........................................     $1,106.7    $  908.9    $2,128.7    $1,805.8
Interest expense ........................................        466.7       300.0       860.9       598.0
                                                              --------    --------    --------    --------
Net finance income ......................................        640.0       608.9     1,267.8     1,207.8
Depreciation on operating lease equipment ...............        241.2       237.9       478.8       473.7
                                                              --------    --------    --------    --------
Net finance margin ......................................        398.8       371.0       789.0       734.1
Provision for credit losses .............................         47.2        65.7        92.5       151.3
                                                              --------    --------    --------    --------
Net finance margin after provision for credit losses ....        351.6       305.3       696.5       582.8
Other revenue ...........................................        278.9       233.5       518.3       463.9
Net gain on venture capital investments .................          1.3         3.0        12.1         3.7
                                                              --------    --------    --------    --------
Operating margin ........................................        631.8       541.8     1,226.9     1,050.4
Salaries and general operating expenses .................        271.8       252.4       532.8       492.4
Provision for restructuring .............................         25.2          --        25.2          --
Gain on redemption of debt ..............................           --          --          --        41.8
                                                              --------    --------    --------    --------
Income before provision for income taxes ................        334.8       289.4       668.9       599.8
Provision for income taxes ..............................       (113.0)     (112.8)     (235.8)     (233.9)
Minority interest, after tax ............................         (1.1)         --        (2.0)         --
                                                              --------    --------    --------    --------
Net income ..............................................     $  220.7    $  176.6    $  431.1    $  365.9
                                                              ========    ========    ========    ========
Earnings per share

Basic earnings per share ................................     $   1.05    $   0.83    $   2.05    $   1.73
Diluted earnings per share ..............................     $   1.03    $   0.82    $   2.01    $   1.70
Number of shares -- basic (thousands) ...................      210,506     211,532     210,581     211,685
Number of shares -- diluted (thousands) .................      214,699     215,359     214,894     215,584
Dividends per common share ..............................     $   0.16    $   0.13    $   0.29    $   0.26


                 See Notes to Consolidated Financial Statements.


                                       2


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                  Accumulated                 
                                                                 Accumulated        Other                         Total
                                         Common      Paid-in     (Deficit)/      Comprehensive     Treasury    Stockholders'
                                          Stock      Capital      Earnings       (Loss)/Income       Stock        Equity
                                         ------     ---------    -----------     -------------     --------    -------------
                                                                                                   
December 31, 2004 ...................     $2.1      $10,674.3     $(4,499.1)        $(58.4)        $ (63.8)      $6,055.1
Net income ..........................                                 431.1                                         431.1
Foreign currency translation                                                                                  
   adjustments ......................                                                 21.5                           21.5
Change in fair values of                                                                                      
   derivatives qualifying as cash                                                                             
   flow hedges ......................                                                 (2.4)                          (2.4)
Unrealized gain on equity and                                                                                 
   securitization investments, net ..                                                  9.3                            9.3
Minimum pension liability                                                                                     
   adjustment .......................                                                  0.4                            0.4
                                                                                                                 --------
Total comprehensive income ..........                                                                               459.9
                                                                                                                 --------
Cash dividends ......................                                 (61.9)                                        (61.9)
Restricted common stock grants                                                                                
   amortization .....................                    23.1                                                        23.1
Treasury stock purchased, at cost ...                                                               (141.9)        (141.9)
Exercise of stock option awards .....                   (48.9)                                       114.0           65.1
Employee stock purchase plan                                                                                  
   participation ....................                    (0.4)                                         2.2            1.8
                                          ----      ---------     ---------         ------         -------       --------
June 30, 2005 .......................     $2.1      $10,648.1     $(4,129.9)        $(29.6)        $ (89.5)      $6,401.2
                                          ====      =========     =========         ======         =======       ========


                 See Notes to Consolidated Financial Statements.


                                       3


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                          Six Months Ended
                                                                              June 30,
                                                                      ------------------------
                                                                         2005          2004
                                                                      ----------    ----------
                                                                                     
Cash Flows From Operations
Net income (loss) ...............................................     $    431.1    $    365.9
Adjustments to reconcile net income (loss) to net cash flows
   from operations:
   Depreciation and amortization ................................          499.9         490.7
   Provision for deferred federal income taxes ..................          182.1         151.3
   Provision for credit losses ..................................           92.5         175.2
   Gains on equipment, receivable and investment sales ..........         (164.3)       (115.7)
   Gain on debt redemption ......................................           --           (41.8)
   Decrease (increase) in finance receivables held for sale .....          278.8        (523.9)
   (Increase) decrease in other assets ..........................          (41.6)        228.3
   Increase (decrease) in accrued liabilities and payables ......          276.5        (223.4)
   Other ........................................................          (79.7)        (57.8)
                                                                      ----------    ----------
Net cash flows provided by operations ...........................        1,475.3         448.8
                                                                      ----------    ----------

Cash Flows From Investing Activities
Loans extended ..................................................      (26,792.6)    (24,551.1)
Collections on loans ............................................       24,869.2      22,739.1
Proceeds from asset and receivable sales ........................        3,056.5       2,072.0
Purchase of finance receivable portfolios .......................       (2,095.0)     (1,373.5)
Purchases of assets to be leased ................................         (985.1)       (548.7)
Net decrease in short-term factoring receivables ................         (165.9)        (88.9)
Acquisitions, net of cash acquired ..............................         (152.6)         --
Goodwill and intangibles assets acquired ........................          (60.0)         --
Other ...........................................................          167.2          51.1
                                                                      ----------    ----------
Net cash flows (used for) investing activities ..................       (2,158.3)     (1,700.0)
                                                                      ----------    ----------

Cash Flows From Financing Activities

Proceeds from the issuance of variable and fixed-rate notes .....        7,656.4       6,628.1
Repayments of variable and fixed-rate notes .....................       (5,626.4)     (5,374.3)
Net decrease in commercial paper ................................         (957.6)         (3.5)
Net loans extended -- pledged in conjunction with
   secured borrowings ...........................................         (270.3)         --
Cash dividends paid .............................................          (61.9)        (55.9)
Net repayments of non-recourse leveraged lease debt .............           16.2        (103.3)
Other ...........................................................          (51.9)        (35.9)
                                                                      ----------    ----------

Net cash flows provided by financing activities .................          704.5       1,055.2
                                                                      ----------    ----------
Net increase (decrease) in cash and cash equivalents ............           21.5        (196.0)
Cash and cash equivalents, beginning of period ..................        2,210.2       1,973.7
                                                                      ----------    ----------
Cash and cash equivalents, end of period ........................     $  2,231.7    $  1,777.7
                                                                      ==========    ==========

Supplementary Cash Flow Disclosure
Interest paid ...................................................     $    759.4    $    642.3
Federal, foreign, state and local income taxes paid, net ........     $     48.3    $     45.1


                 See Notes to Consolidated Financial Statements.


                                       4


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited)

Note 1 -- Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  is
a global  commercial and consumer  finance company that was founded in 1908. CIT
provides  financing  and leasing  capital for  consumers and companies in a wide
variety of industries, offering vendor, equipment,  commercial,  factoring, home
lending,  educational  lending  and  structured  financing  products  as well as
rendering management advisory services. 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.  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."  The assets related to
these  borrowings are owned by a special  purpose entity that is consolidated in
the CIT financial  statements,  and the creditors of that special purpose entity
have  received  ownership  and / or security  interests  in the assets.  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 proforma  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):


                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                             Quarters Ended        Six Months Ended
                                                                                 June 30,               June 30,
                                                                            ------------------     ------------------
                                                                            2005        2004        2005        2004
                                                                          --------    --------    --------    --------
                                                                                                      
Net income as reported ..............................................      $220.7      $176.6      $431.1      $365.9
Stock-based compensation expense -- fair value                                                                
method, after tax ...................................................        (4.8)       (5.4)       (9.9)      (10.5)
                                                                           ------      ------      ------      ------
Proforma net income .................................................      $215.9      $171.2      $421.2      $355.4
                                                                           ======      ======      ======      ======

                                                                              Quarters Ended       Six Months Ended
                                                                                 June 30,               June 30,
                                                                            ------------------     ------------------
                                                                             2005       2004        2005       2004
                                                                           -------    --------    --------    -------
                                                                                                     
Basic earnings per share as reported ................................       $1.05       $0.83       $2.05      $1.73
Basic earnings per share proforma ...................................       $1.03       $0.81       $2.00      $1.68
Diluted earnings per share as reported ..............................       $1.03       $0.82       $2.01      $1.70
Diluted earnings per share proforma .................................       $1.01       $0.79       $1.96      $1.65


      For the quarters  ended June 30, 2005 and 2004,  net income  includes $8.0
million and $3.4 million of after-tax  compensation  cost related to  restricted
stock awards,  while the year to date costs were $14.1 million and $7.4 million,
respectively.

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 


                                       6


                         CIT GROUP INC. AND SUBSIDIARIES

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

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  16.1  million  shares and 16.7  million  shares for the
quarters  ended June 30, 2005 and 2004, and 16.5 million shares and 16.4 million
shares for the six months ended June 30, 2005 and 2004, respectively.

      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 are in thousands):



                                                          Quarter Ended June 30, 2005              Quarter Ended June 30, 2004
                                                     ------------------------------------     -------------------------------------
                                                       Income        Shares     Per Share      Income          Shares     Per Share
                                                     (Numerator)  (Denominator)   Amount      (Numerator)  (Denominator)   Amount
                                                     -----------  ------------- ---------     ------------ -------------  ---------
                                                                                                            
Basic EPS:                         
  Income available to common stockholders .......       $220.7       210,506     $1.05          $176.6        211,532       $0.83
Effect of Dilutive Securities:                                                                                        
  Restricted shares .............................                        890                                      758 
  Performance shares ............................                        644                                       -- 
  Stock options .................................                      2,659                                    3,069 
                                                        ------       -------                    ------        -------
Diluted EPS .....................................       $220.7       214,699     $1.03          $176.6        215,359       $0.82
                                                        ======       =======                    ======        =======


                                                        Six Months Ended June 30, 2005            Six Months Ended June 30, 2004
                                                     ------------------------------------     -------------------------------------
                                                                                                            
Basic EPS:
  Income available to common stockholders .......       $431.1       210,581     $2.05          $365.9        211,685       $1.73
Effect of Dilutive Securities: 
  Restricted shares .............................                        883                                      649
  Performance shares ............................                        537                                       --
  Stock options .................................                      2,893                                    3,250
                                                        ------       -------                    ------        -------
Diluted EPS .....................................       $431.1       214,894     $2.01          $365.9        215,584       $1.70
                                                        ======       =======                    ======        =======


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 2005 periods,
capital is allocated to the segments by applying  different  leverage  ratios to
each business unit using market  capitalization  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.

      During the second  quarter of 2005,  segment  reporting  was  modified  in
conjunction with certain business restructuring  initiatives.  First, the former
Commercial  Finance  segment  has been  divided  into two  segments,  Commercial
Services  (factoring)  and Corporate  Finance.  Corporate  Finance  includes the
former Business Credit (asset based lending),  Power, Energy and Infrastructure,
which  was  transferred  from  Capital  Finance,   and  Healthcare,   which  was
transferred from Equipment Finance.  Prior period balances have been adjusted to
conform to current  period  presentation,  except for the transfer of Healthcare
assets and related income data ($ in millions):


                                       7


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                Specialty    Specialty                                                      Corporate
                                 Finance-    Finance-  Commercial  Corporate  Equipment  Capital     Total      and
                                commercial   consumer   Services    Finance    Finance   Finance   Segments    Other  Consolidated
                                ----------   --------   --------    -------    -------   -------   --------    -----  ------------
                                                                                                   
Quarter Ended                           
June 30, 2005                           

Operating margin ............   $   222.2   $    60.6   $   97.3   $  100.6   $   72.6  $   59.4   $   612.7  $ 19.1    $   631.8
Income taxes ................        51.2        10.1       26.2       26.4       20.6       3.6       138.1   (25.1)       113.0
Net income (loss)  ..........        79.1        16.1       42.6       43.4       34.2      38.9       254.3   (33.6)       220.7
                                                                                                                        
Quarter Ended                                                                                                           
June 30, 2004                                                                                                          
                                                                                                                        
Operating margin ............   $   187.5   $    39.8   $   92.6   $  110.0   $   53.6  $   33.2   $   516.7  $ 25.1    $   541.8
Income taxes ................        33.8         8.4       25.9       31.8       11.7       3.8       115.4    (2.6)       112.8
Net income (loss)  ..........        65.6        14.2       40.0       48.3       19.3      13.2       200.6   (24.0)       176.6
                                                                                                                        
At or for the Six                                                                                                       
Months Ended                                                                                                            
June 30, 2005                                                                                                           
                                                                                                                        
Operating margin ............   $   428.9   $   111.8   $  185.9   $  196.1   $  128.2  $  114.6   $ 1,165.5  $ 61.4    $ 1,226.9
Income taxes ................        90.4        20.5       48.4       51.3       34.1      14.3       259.0   (23.2)       235.8
Net income (loss)  ..........       154.2        32.4       79.9       85.1       55.5      65.5       472.6   (41.5)       431.1
Total financing and                                                                                                     
  leasing assets ............    10,727.9    10,899.0    6,417.2    8,104.2    4,636.2   9,835.2    50,619.7    --       50,619.7
Total managed                                                                                                           
  assets ....................    14,525.1    11,926.6    6,417.2    8,158.2    7,217.3   9,835.2    58,079.6    --       58,079.6
                                                                                                                        
At or for the Six                                                                                                       
Months Ended                                                                                                            
June 30, 2004                                                                                                           
                                                                                                                        
Operating margin ............   $   382.7   $    70.3   $  179.2   $  182.9   $  102.0  $   82.6   $   999.7  $ 50.7    $ 1,050.4
Income taxes ................        72.0        14.1       49.2       51.1       21.5      15.3       223.2    10.7        233.9
Net income (loss)  ..........       134.5        21.7       76.3       78.2       35.4      35.7       381.8   (15.9)       365.9
Total financing and                                                                                                     
  leasing assets ............    10,322.2     3,756.5    5,808.6    6,335.2    6,847.5   8,383.5    41,453.5    --       41,453.5
Total managed                                                                                                           
  assets ....................    14,330.4     5,244.4    5,808.6    6,335.2    9,752.4   8,383.5    49,854.5    --       49,854.5


                                       8


                         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):



                                                                      June 30, 2005         December 31, 2004
                                                                      -------------         -----------------
                                                                                             
Geographic
North America:
West...........................................................   $10,023.3     19.8%     $ 8,595.3    19.0%
Northeast......................................................     9,373.7     18.5%       8,463.4    18.7%
Midwest........................................................     8,297.7     16.4%       6,907.0    15.3%
Southeast......................................................     7,270.3     14.4%       6,283.3    14.0%
Southwest......................................................     5,114.9     10.1%       4,848.3    10.7%
Canada.........................................................     2,583.9      5.1%       2,483.4     5.5%
                                                                  ---------    -----      ---------   ----- 
   Total North America.........................................    42,663.8     84.3%      37,580.7    83.2%
Other foreign..................................................     7,955.9     15.7%       7,580.2    16.8%
                                                                  ---------    -----      ---------   ----- 
Total..........................................................   $50,619.7    100.0%     $45,160.9   100.0%
                                                                  =========    =====      =========   ===== 

Industry
Manufacturing(1)...............................................   $ 7,156.5     14.1%     $ 6,932.0    15.4%
Consumer based lending -- home lending..........................    6,285.0     12.4%       5,069.8    11.2%
Commercial airlines (including regional airlines)..............     6,063.9     12.0%       5,512.4    12.2%
Retail(2)......................................................     5,993.6     11.8%       5,859.4    13.0%
Consumer based lending -- education lending.....................    4,291.5      8.5%            --      --
Service industries.............................................     2,865.0      5.7%       2,854.5     6.3%
Transportation(3)..............................................     2,430.9      4.8%       2,969.6     6.6%
Consumer based lending -- non-real estate(4)....................    2,325.7      4.6%       2,480.1     5.5%
Wholesaling....................................................     1,901.1      3.8%       1,727.5     3.8%
Construction equipment.........................................     1,603.5      3.2%       1,603.1     3.5%
Communications(5)..............................................     1,255.7      2.5%       1,292.1     2.9%
Healthcare services............................................     1,134.5      2.2%         992.5     2.2%
Other (no industry greater than 3.0%)(6).......................     7,312.8     14.4%       7,867.9    17.4%
                                                                  ---------    -----      ---------   ----- 
Total..........................................................   $50,619.7    100.0%     $45,160.9   100.0%
                                                                  =========    =====      =========   ===== 


--------------------------------------------------------------------------------
(1)   Includes  manufacturers  of apparel  (2.9%),  followed by food and kindred
      products,   textiles,   transportation  equipment,   chemical  and  allied
      products,  rubber and plastics,  industrial  machinery and equipment,  and
      other industries.

(2)   Includes retailers of apparel (4.8%) and general merchandise (3.8%).

(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  $278.9 million and $335.2 million of equipment  financed for the
      telecommunications  industry  at June 30,  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  $1.1  billion,  or 2.1% of total  financing  and
      leasing assets at June 30, 2005. This amount includes approximately $740.8
      million in project financing and $262.5 million in rail cars on lease.


                                       9


                         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):



                                                                                  June 30,      December 31,
                                                                                    2005            2004
                                                                                  --------        --------
                                                                                                 
Commercial:

   Retained subordinated securities............................................   $  413.1        $  446.2
   Interest-only strips........................................................      324.2           292.4
   Cash reserve accounts.......................................................      271.3           323.4
                                                                                  --------        --------
   Total retained interests in commercial loans................................    1,008.6         1,062.0
                                                                                  --------        --------
Consumer:(1)

   Retained subordinated securities............................................       68.6            76.6
   Interest-only strips........................................................        8.8            17.0
   Cash reserve accounts.......................................................         --              --
                                                                                  --------        --------
   Total retained interests in consumer loans..................................       77.4            93.6
                                                                                  --------        --------
Total retained interests in securitizations....................................    1,086.0         1,155.6
Aerospace equipment trust certificates and other(2)............................       36.0            72.6
                                                                                  --------        --------
   Total.......................................................................   $1,122.0        $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 (Loss) / Income

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



                                                                                   June 30,      December 31,
                                                                                     2005            2004
                                                                                   -------       ------------ 
                                                                                                  
Changes in fair values of derivatives qualifying as cash flow hedges...........     $(29.5)         $(27.1)
Foreign currency translation adjustments.......................................      (15.7)          (37.2)
Minimum pension liability adjustments..........................................       (2.3)           (2.7)
Unrealized gain on equity and securitization investments.......................       17.9             8.6
                                                                                    ------          ------ 
Total accumulated other comprehensive loss.....................................     $(29.6)         $(58.4)
                                                                                    ======          ====== 


      The changes in fair values of  derivatives  qualifying as cash flow hedges
related to varations  in 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 June 30, 2005 and 2004
was $159.9 million and $254.9 million and for the six months ended June 30, 2005
and 2004 was $459.9 million and $389.4 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 derivatives closely match the related
terms of the underlying hedged items.


                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

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

      CIT  utilizes  interest  rate  swaps  to  convert  variable-rate  interest
underlying forecasted issuances of commercial paper, specific variable-rate debt
instruments,  and,  in limited  instances,  variable-rate  assets to  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.  Amounts related to hedges to
the extent ineffective are recorded in interest expense.

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



                                                                        Fair Value                       Total
                                                                        Adjustments    Income Tax      Unrealized
                                                                      of Derivatives     Effects          Loss
                                                                      --------------   ----------      ----------
                                                                                                  
Balance at December 31, 2004 -- unrealized loss....................        $(41.3)        $14.2         $(27.1)
Changes in values of derivatives qualifying as cash flow hedges...           (3.9)          1.5           (2.4)
                                                                           ------         -----         ------ 
Balance at June 30, 2005 -- unrealized loss........................        $(45.2)        $15.7         $(29.5)
                                                                           ======         =====         ====== 


      The  unrealized  loss for the six  months  ended  and as of June 30,  2005
primarily  reflects  our use of  interest  rate  swaps  to  effectively  convert
variable-rate  debt to  fixed-rate  debt followed by increased  market  interest
rates. The Accumulated  Other  Comprehensive  Loss (along with the corresponding
swap asset or liability)  will be adjusted as market  interest rates change over
the  remaining  life  of the  swaps.  Assuming  no  change  in  interest  rates,
approximately $7.2 million,  net of tax, of the Accumulated Other  Comprehensive
Loss as of June 30,  2005 is expected to be  reclassified  to earnings  over the
next twelve months as contractual cash payments are made.

      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 to
                                                                            Ineffectiveness    Interest Expense
                                                                            ---------------  --------------------
                                                                                                 
Quarter ended June 30, 2005...............................................       $0.4              Decrease
Quarter ended June 30, 2004...............................................       $0.4              Decrease
Six months ended June 30, 2005............................................       $1.0              Increase
Six months ended June 30, 2004............................................       $0.7              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 item ($ in millions):



                                                        June 30,   December 31,
                                                          2005         2004
                                                       ---------   ----------- 
                                                                            
                                                                                    Effectively converts the interest rate on
Floating to fixed-rate swaps -- cash flow hedges ...   $ 4,399.1    $ 3,533.6       an equivalent amount of commercial
                                                                                    paper, variable-rate notes and selected
                                                                                    assets to a fixed rate.
                                                       
Fixed to floating-rate swaps -- fair value hedges ..     7,781.4      7,642.6       Effectively converts the interest rate on
                                                       ---------    ---------       an equivalent amount of fixed-rate notes
Total interest rate swaps...........................   $12,180.5    $11,176.2       and selected assets to a variable rate.
                                                       =========    =========                                              



                                       11


                         CIT GROUP INC. AND SUBSIDIARIES

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

      In  addition  to the  swaps  in  the  table  above,  in  conjunction  with
securitizations,  at June 30, 2005,  CIT has $2.4 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  $2.4  billion in  notional  amount at June 30, 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  accumulated  other
comprehensive loss 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
accumulated other comprehensive loss (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.

      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 and
six months  ended June 30,  2005  amounted to a $1.3  million  and $5.5  million
pretax gain. CIT also has certain cross-currency swaps (with a combined notional
principal of $238 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 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 June 30, 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 $2.3 billion and $2.5 billion,  respectively.  CIT's investment in
the form of equity and loans to the joint venture was approximately $233 million
and $267 million at June 30, 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 was recently extended until January 2009. 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
June  30,  2005 and  December  31,  2004,  financing  and  leasing  assets  were
approximately  $1.1 billion and  


                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

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

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 $12 million and
$16 million at June 30, 2005 and December 31, 2004.

      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 June
30, 2005 and  December  31,  2004,  CIT's  investment  in and loans to the joint
venture were approximately $257 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 June 30, 2005 and
December  31,  2004,  other assets  included  approximately  $17 million and $19
million  of  investments   in   non-consolidated   entities   relating  to  such
transactions that are accounted for under the equity or cost methods.

      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):



                                                                                  Quarters                    Six Months
                                                                                Ended June 30,               Ended June 30,
                                                                                --------------               --------------
                                                                              2005        2004           2005            2004
                                                                              ----        ----           ----            ----
                                                                                                              
Retirement Plans

Service cost .........................................................        $4.9         $4.4          $ 9.9          $ 8.9
Interest cost ........................................................         4.3          3.9            8.6            7.8
Expected return on plan assets .......................................        (4.8)        (4.0)          (9.6)          (8.1)
Amortization of net loss .............................................         0.7          0.7            1.4            1.4
                                                                              ----         ----          -----          -----
Net periodic benefit cost ............................................         5.1          5.0           10.3           10.0
Loss due to settlements and curtailments .............................         0.5           --            0.5             --
Cost for special termination benefits ................................         2.3           --            2.3             --
                                                                              ----         ----          -----          -----
Net amount recognized ................................................        $7.9         $5.0          $13.1          $10.0
                                                                              ====         ====          =====          =====
Postretirement Plans

Service cost .........................................................        $0.5         $0.4          $ 1.1          $ 0.9
Interest cost ........................................................         0.8          0.9            1.6            1.7
Amortization of net loss .............................................         0.3          0.2            0.5            0.5
                                                                              ----         ----          -----          -----
Net periodic benefit cost ............................................        $1.6         $1.5          $ 3.2          $ 3.1
                                                                              ====         ====          =====          =====



      CIT contributed $6.5 million to its pension plans for the six months ended
June 30, 2005, and currently  expects to fund  approximately  an additional  $15
million during the second half of 2005.


                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

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

Note 10 -- Commitments and Contingencies

      Financing and leasing asset  commitments,  referred to as loan commitments
or  lines  of  credit,  are  agreements  to lend  to  customers  subject  to the
customers'  compliance with  contractual  obligations.  The  accompanying  table
summarizes  these and other  credit-related  commitments as well as purchase and
funding commitments ($ in millions):



                                                                         June 30, 2005 
                                                            -------------------------------------
                                                                Due to Expire                        December 31
                                                            ---------------------                        2004
                                                             Within         After        Total          Total
                                                            One Year      One Year    Outstanding    Outstanding
                                                            --------      --------    -----------    -----------
                                                                                               
Financing Commitments

Financing and leasing commitments.......................    $1,725.2      $7,611.9      $9,337.1      $8,428.3
Letters of credit and acceptances:
  Standby letters of credit.............................       499.0          43.3         542.3         618.3
  Other letters of credit...............................       657.9           0.4         658.3         588.3
  Acceptances...........................................        27.3            --          27.3          16.4
Guarantees..............................................       144.2          12.1         156.3         133.1

Purchase and Funding Commitments

Aerospace purchase commitments..........................       794.0         766.0       1,560.0       2,168.0
Other equipment purchase commitments....................       593.1            --         593.1         397.0
Sale-leaseback payments.................................        10.0         462.4         472.4         495.4
Venture capital fund investment commitments.............          --            --            --          79.8


      In addition to the amounts  shown in the table above,  unused,  cancelable
lines of credit to consumers in connection  with a third-party  vendor  program,
which may be used to finance additional  technology product purchases,  amounted
to  approximately  $13.1  billion and $9.8 billion at June 30, 2005 and December
31, 2004.  These  uncommitted  vendor-related  lines of credit can be reduced or
canceled by CIT at any time without  notice.  Our  experience  does not indicate
that customers will exercise their entire  available line of credit at any point
in time.

      In the  normal  course of  meeting  the needs of its  customers,  CIT also
enters into commitments to provide financing,  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
forms of credit support from the customer.

      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 from
the client. As of June 30, 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  Industries  and The Boeing  Company.  The  commitment  amounts
detailed in the preceding table are based on estimated values, as actual amounts
will vary  based  upon  market  factors  at the time of  delivery.  Pursuant  to
existing contractual commitments,  34 aircraft remain to be purchased (18 within
the next twelve months). Lease commitments are in place for ten of the remaining
aircraft to be delivered over the next twelve months.  The order amount excludes
CIT's options to purchase additional aircraft.

      Outstanding  commitments to purchase  equipment to be leased to customers,
other than aircraft, 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 $472.4 million,  approximately $31 million per year through
2010 and


                                       14


                         CIT GROUP INC. AND SUBSIDIARIES

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

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 Inc., et al. v. Popular Leasing
Inc., et al. ("Exquisite Caterers"), a putative national class action, was filed
against 13 financial  institutions,  including CIT, which 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 has alleged 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,  were filed by  NorVergence  customers  against CIT and other  financial
institutions.  On June 16,  2005,  the Court in  Exquisite  Caterers  denied the
plaintiffs'  motion  for  class  certification.  Plaintiffs  filed a motion  for
reconsideration  of the Court's  denial.  Thereafter,  the putative class action
suits in Florida  and New York and one of the  putative  class  action  suits in
Illinois were dismissed as to CIT,  leaving pending  putative class action suits
in Illinois and Texas.

      On July 14, 2004,  the U.S.  Bankruptcy  Court ordered the  liquidation of
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
has entered  into  settlement  agreements  with all of those  Attorneys  General
except for California and Texas. Under those  settlements,  lessees will have an
opportunity  to resolve all claims by and against CIT by paying a percentage  of
the remaining balance on their lease. CIT has also produced documents related to
NorVergence at the request of the Federal Trade Commission  ("FTC").  No further
action by the FTC against CIT is expected.  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 has produced documents in response to that subpoena.

      In addition,  there are various proceedings that have been brought against
CIT 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.

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  of
facilities, as well as 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..............................        172          20.9           --          2.5         23.4
2005 utilization............................       (140)         (8.4)          (5)        (1.0)        (9.4)
                                                   ----         -----           --        -----        -----
Balance at June 30, 2005....................        161         $24.7           10        $ 7.2        $31.9
                                                   ====         =====           ==        =====        =====




                                       15


                         CIT GROUP INC. AND SUBSIDIARIES

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

      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 2005
are largely  employee  termination  benefits  related to the  realignment of the
Commercial  Finance  Group  business  segments and other  business  streamlining
activities  ($20.3  million,  which was  recorded  as a  component  of the $25.2
million restructuring charge within Corporate and Other). The 2005 addition also
included  facility  exit  plan  refinements  relating  to the  acquired  Western
European vendor finance and leasing business,  which were recorded as fair value
adjustments  to purchased  liabilities / adjustments  to goodwill.  The employee
termination  benefits  accrued  during the second  quarter  will largely be paid
during the quarter  ending  September  30, 2005.  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 $903.1 million and $596.5 million
at June 30, 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  and  intangible  asset  impairment   analyses
indicated that the fair values of goodwill and intangible  assets were in excess
of the carrying values.

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



                                                      Specialty    Specialty
                                                      Finance -    Finance -    Commercial    Corporate
                                                      commercial   consumer      Services      Finance      Total
                                                      ----------   --------      --------      -------      -----
                                                                                               
Balance at December 31, 2004.........................    $62.3      $   --         $261.6       $108.8     $432.7
Additions, foreign currency translation, other.......      1.9       257.2           (0.1)          --      259.0
                                                         -----      ------         ------       ------     ------
Balance at June 30, 2005.............................    $64.2      $257.2         $261.5       $108.8     $691.7
                                                         =====      ======         ======       ======     ======


      The  increase  in  goodwill  during the period  was  primarily  due to the
education lending acquisition in Specialty Finance -- consumer.

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



                                                             Specialty     Specialty
                                                             Finance -     Finance -   Commercial
                                                             commercial    consumer     Services       Total
                                                             ----------    --------     --------       -----
                                                                                              
Balance at December 31, 2004...............................     $68.0        $  --        $ 95.8       $163.8
Additions, foreign currency translation, other.............      (1.9)        29.4          30.3         57.8
Amortization...............................................      (5.0)        (0.2)         (5.0)       (10.2)
                                                                -----        -----        ------       ------
Balance at June 30, 2005...................................     $61.1        $29.2        $121.1       $211.4
                                                                =====        =====        ======       ======


      The increase was primarily related to the education lending acquisition in
Specialty Finance -- consumer and a factoring acquisition in Commercial Services
during the first quarter of 2005.  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 $5.5
million and $10.2  million  for the  quarter and six months  ended June 30, 2005
versus $2.3  million and $4.5  million for the  respective  prior year  periods.


                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

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

Accumulated  amortization  totaled  $33.9  million and $23.7 million at June 30,
2005 and December  31,  2004.  The  projected  amortization  for the years ended
December 31, 2005 through  December 31, 2009 is: $21.1  million for 2005;  $20.8
million  for 2006;  $17.5  million  for 2007;  $17.6  million for 2008 and $17.8
million for 2009.

      During the quarter ended June 30, 2005,  segment reporting was modified in
conjunction with various business  realignments.  The December 31, 2004 balances
have been conformed to the current presentation.  See Note 3 -- Business Segment
Information for additional information.

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
             --------------                        ----------  -----------     ---------    -----------    ------------  ----------
                                                                                                             
June 30, 2005

ASSETS
Net finance receivables ....................       $  1,051.2    $3,592.4      $1,891.7       $33,351.7     $      --    $39,887.0
Operating lease equipment, net .............               --       526.1         134.8         7,982.0            --      8,642.9
Finance receivables held for sale ..........               --       124.3          54.9         1,256.7            --      1,435.9
Cash and cash equivalents ..................            876.7       676.0         267.2           411.8            --      2,231.7
Other assets ...............................          9,595.9        60.6          16.4         1,837.5      (6,401.2)     5,109.2
                                                   ----------    --------      --------       ---------     ---------    ---------
  Total Assets .............................       $ 11,523.8    $4,979.4      $2,365.0       $44,839.7     $(6,401.2)   $57,306.7
                                                   ==========    ========      ========       =========     =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt .......................................       $ 33,480.5    $  150.1      $3,873.4       $ 5,954.5     $      --    $43,458.5
Credit balances of factoring clients .......               --          --            --         3,649.2            --      3,649.2
Accrued liabilities and payables ...........        (28,357.9)    4,243.5      (3,341.7)       31,204.6            --      3,748.5
                                                   ----------    --------      --------       ---------     ---------    ---------
  Total Liabilities ........................          5,122.6     4,393.6         531.7        40,808.3            --     50,856.2
Minority interest ..........................                           --            --            49.3            --         49.3
Total Stockholders' Equity .................          6,401.2       585.8       1,833.3         3,982.1      (6,401.2)     6,401.2
                                                   ----------    --------      --------       ---------     ---------    ---------
  Total Liabilities and
  Stockholders' Equity .....................       $ 11,523.8    $4,979.4      $2,365.0       $44,839.7     $(6,401.2)   $57,306.7
                                                   ==========    ========      ========       =========     =========    =========

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



                                       17


                         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
          --------------------                     ----------  -----------     ---------    -----------    ------------  ----------
                                                                                                             
Six Months Ended June 30, 2005

Finance income .............................       $  23.2       $ 330.9         $112.7       $1,661.9       $    --      $2,128.7
Interest expense ...........................         (31.2)         82.1           40.4          769.6            --         860.9
                                                   -------       -------         ------       --------       -------      --------
Net finance income .........................          54.4         248.8           72.3          892.3            --       1,267.8
Depreciation on operating                                                                                                
  lease equipment ..........................            --         133.6           22.0          323.2            --         478.8
                                                   -------       -------         ------       --------       -------      --------
Net finance margin .........................          54.4         115.2           50.3          569.1            --         789.0
Provision for credit losses ................          (4.8)         22.6            5.8           68.9            --          92.5
                                                   -------       -------         ------       --------       -------      --------
Net finance margin, after provision                                                                                      
  for credit losses ........................          59.2          92.6           44.5          500.2            --         696.5
Equity in net income of subsidiaries .......         454.0            --             --             --        (454.0)           --
Other revenue ..............................          (9.5)         68.4           82.9          376.5            --         518.3
Net gain on venture capital investments ....            --            --             --           12.1            --          12.1
                                                   -------       -------         ------       --------       -------      --------
Operating margin ...........................         503.7         161.0          127.4          888.8        (454.0)      1,226.9
Operating expenses .........................          84.9         104.7           51.6          291.6            --         532.8
Provision for restructuring ................            --            --             --           25.2            --          25.2
                                                   -------       -------         ------       --------       -------      --------
Income (loss) before provision for                                                                                       
  income taxes .............................         418.8          56.3           75.8          572.0        (454.0)        668.9
Benefit (provision) for income taxes .......          12.3         (20.7)         (27.9)        (199.5)           --        (235.8)
Minority interest, after tax ...............            --            --             --           (2.0)           --          (2.0)
                                                   -------       -------         ------       --------       -------      --------
Net income .................................       $ 431.1       $  35.6         $ 47.9       $  370.5       $(454.0)     $  431.1
                                                   =======       =======         ======       ========       =======      ========

Six Months Ended June 30, 2004                                                                                           

Finance income .............................       $  15.5       $ 359.6         $ 93.7       $1,337.0       $    --      $1,805.8
Interest expense ...........................         (43.5)        105.6            7.5          528.4            --         598.0
                                                   -------       -------         ------       --------       -------      --------
Net finance income .........................          59.0         254.0           86.2          808.6            --       1,207.8
Depreciation on operating                                                                                                
  lease equipment ..........................            --         161.4           21.4          290.9            --         473.7
                                                   -------       -------         ------       --------       -------      --------
Net finance margin .........................          59.0          92.6           64.8          517.7            --         734.1
Provision for credit losses ................           7.7          25.5            5.2          112.9            --         151.3
                                                   -------       -------         ------       --------       -------      --------
Net finance margin, after provision                                                                                      
  for credit losses ........................          51.3          67.1           59.6          404.8            --         582.8
Equity in net income of subsidiaries .......         341.2            --             --             --        (341.2)           --
Other revenue ..............................          (2.2)         77.0           50.6          338.5            --         463.9
Net gain on venture capital investments ....            --            --             --            3.7            --           3.7
                                                   -------       -------         ------       --------       -------      --------
Operating margin ...........................         390.3         144.1          110.2          747.0        (341.2)      1,050.4
Operating expenses .........................          56.7          71.7           50.9          313.1            --         492.4
Gain on redemption of debt .................          41.8            --             --             --            --          41.8
                                                   -------       -------         ------       --------       -------      --------
Income (loss) before provision for                                                                                       
  income taxes .............................         375.4          72.4           59.3          433.9        (341.2)        599.8
Provision for income taxes .................          (9.5)        (28.2)         (23.1)        (173.1)           --        (233.9)
                                                   -------       -------         ------       --------       -------      --------
Net income .................................       $ 365.9       $  44.2         $ 36.2       $  260.8       $(341.2)     $  365.9
                                                   =======       =======         ======       ========       =======      ========



                                       18


                         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
         --------------------=--                   ----------  -----------     ---------    ------------   ------------  ----------
                                                                                                             
Six Months Ended June 30, 2005

Cash Flows From Operating Activities:

Net cash flows provided
  by (used for) operations .................       $ 6,099.6     $(267.5)      $  633.9       $(4,990.7)    $      --    $ 1,475.3
                                                   ---------     -------       --------       ---------     ---------    ---------

Cash Flows From Investing Activities:                                         

Net increase (decrease) in financing and                                      
leasing assets .............................            74.7      (594.9)        (205.7)       (1,599.6)           --     (2,325.5)
Inter-company loans and investments ........        (5,328.5)         --             --              --       5,328.5           --
Other ......................................              --          --             --           167.2            --        167.2
                                                   ---------     -------       --------       ---------     ---------    ---------
Net cash flows (used for) provided by                                         
  investing activities .....................        (5,253.8)     (594.9)        (205.7)       (1,432.4)      5,328.5     (2,158.3)
                                                   ---------     -------       --------       ---------     ---------    ---------

Cash Flows From Financing Activities:                                         

Net increase (decrease) in debt ............        (1,218.6)     (337.7)       2,489.6           155.3            --      1,088.6
Net loans extended -- pledged ..............              --          --             --          (270.3)           --       (270.3)
Inter-company financing ....................              --     1,205.3       (2,778.1)        6,901.3      (5,328.5)          --
Cash dividends paid ........................           (61.9)         --             --              --            --        (61.9)
Other ......................................              --          --             --           (51.9)           --        (51.9)
                                                   ---------     -------       --------       ---------     ---------    ---------
Net cash flows provided by (used for)                                         
  financing activities .....................        (1,280.5)      867.6         (288.5)        6,734.4      (5,328.5)       704.5
                                                   ---------     -------       --------       ---------     ---------    ---------
Net increase (decrease) in cash and                                           
  cash equivalents .........................          (434.7)        5.2          139.7           311.3            --         21.5
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 ...       $   876.7     $ 676.0       $  267.2       $   411.8     $      --    $ 2,231.7
                                                   =========     =======       ========       =========     =========    =========

Six Months Ended June 30, 2004                                                

Cash Flows From Operating Activities:                                         

Net cash flows provided                                                       
  by operations ............................       $   128.8     $ 514.0       $  166.4       $  (360.4)    $      --    $   448.8
                                                   ---------     -------       --------       ---------     ---------    ---------

Cash Flows From Investing Activities:                                         

Net (decrease) increase  in financing and                                     
  leasing assets ...........................           457.5       322.3         (122.7)       (2,408.2)           --     (1,751.1)
Inter-company loans and investments ........        (2,453.7)         --             --              --       2,453.7           --
Other ......................................              --          --             --            51.1            --         51.1
                                                   ---------     -------       --------       ---------     ---------    ---------
Net cash flows (used for) provided by                                         
  investing activities .....................        (1,996.2)      322.3         (122.7)       (2,357.1)      2,453.7     (1,700.0)
                                                   ---------     -------       --------       ---------     ---------    ---------

Cash Flows From Financing Activities:                                         

Net increase (decrease) in debt ............         1,475.1      (566.1)           6.8           231.2            --      1,147.0
Inter-company financing ....................              --      (134.5)          47.4         2,540.8      (2,453.7)          --
Cash dividends paid ........................           (55.9)         --             --              --            --        (55.9)
Other ......................................              --          --             --           (35.9)           --        (35.9)
                                                   ---------     -------       --------       ---------     ---------    ---------
Net cash flows provided by                                                    
  (used for) financing activities ..........         1,419.2      (700.6)          54.2         2,736.1      (2,453.7)     1,055.2
                                                   ---------     -------       --------       ---------     ---------    ---------
Net (decrease) increase in cash and                                           
  cash equivalents .........................          (448.2)      135.7           97.9            18.6            --       (196.0)
Cash and cash equivalents,                                                    
  beginning of period ......................         1,479.9       410.6          227.5          (144.3)           --      1,973.7
                                                   ---------     -------       --------       ---------     ---------    ---------
Cash and cash equivalents, end of period ...       $ 1,031.7     $ 546.3       $  325.4       $  (125.7)    $      --    $ 1,777.7
                                                   =========     =======       ========       =========     =========    =========



                                       19


                         CIT GROUP INC. AND SUBSIDIARIES

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

Note 15 -- Subsequent Events

      In connection with a share repurchase  program authorized by the Company's
Board of Directors, on July 19, 2005, the Company entered into an agreement with
Goldman,  Sachs & Co.  ("Goldman  Sachs") to  purchase  shares of the  Company's
common  stock  for  an  aggregate  purchase  price  of  $500  million  under  an
accelerated  stock  buyback  program.  The buyback  agreement  provides  for the
upfront  delivery of $500 million to Goldman  Sachs and the initial  delivery of
shares to CIT, followed by the potential delivery of additional shares depending
upon the price of CIT common stock  during the term of the  program.  Additional
shares may be delivered to CIT at two subsequent dates, during the third quarter
when minimum and maximum  number of shares will be set and in the fourth quarter
at the end of the program.  Repurchased  shares delivered to CIT will be held in
treasury.

      The number of additional shares the Company may receive over the remaining
term of the  agreement,  which expires during  December 2005,  will generally be
based upon the  volume-weighted  average  price of the  Company's  common  stock
during the term of the program.  However, as part of the agreement,  minimum and
maximum  share prices will be set,  which will serve to determine  the number of
shares to be received.  The minimum and maximum share prices will be established
based upon the volume-weighted average price, during a period that began on July
25, 2005,  and will be completed  during the third quarter of 2005.  The Company
expects that the program will be completed in December 2005, although in certain
circumstances the completion date may be accelerated or extended.

      In  connection  with the program,  the Company  expects that Goldman Sachs
will purchase shares of the Company's common stock in the open market over time.
Also in conjunction  with the program,  Goldman Sachs may sell CIT shares in the
open market over time. These activities undertaken by Goldman Sachs are expected
to increase the amount of short  interest in the  Company's  stock,  but will be
reversed over the course of the agreement term.

      On July 28, 2005, the Company  delivered $500 million to Goldman Sachs and
received  the  initial  delivery of  approximately  8.2  million  shares,  while
retaining the right to receive  additional  shares as explained  above.  The 8.2
million shares  represents 80% of the minimum expected share delivery based upon
preliminary  pricing.  In no event,  will CIT receive  less than the 8.2 million
shares.

      On July 26,  2005,  the Company  issued $500 million  aggregate  amount of
Series A and Series B preferred equity securities. The offering was comprised of
$350 million 6.35%  non-cumulative  fixed rate Series A preferred stock and $150
million 5.189% non-cumulative  adjustable rate Series B preferred stock. Holders
of the Series A  preferred  shares  will be  entitled  to receive  dividends  as
declared,  at an annual rate of 6.35%.  Holders of the Series B preferred shares
will be entitled to receive  dividends as declared,  at an annual rate of 5.189%
through and including  September 15, 2010, and thereafter at an annual  floating
rate spread over a pre-specified  benchmark rate. Both the Series A and Series B
preferred  stock are callable at par at any time after  September 15, 2010.  The
intended use of proceeds  from this  offering was to fund the  repurchase of our
common stock in conjunction  with the  previously  announced  accelerated  stock
buyback program.

      On July 19,  2005,  the Company  announced  the  definitive  agreement  to
acquire  Healthcare  Business  Credit  Corporation   ("HBCC"),  a  full  service
healthcare  financing  company that  specializes  in  asset-based  and cash flow
financing to U.S.  healthcare  providers.  HBCC, which is located in New Jersey,
has approximately $500 million in assets and $1 billion in lending  commitments.
The transaction is expected to close in the third quarter of 2005.


                                       20


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  as well as  rendering  management
advisory services.

      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

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



                                                            Quarters Ended June 30,    Six Months Ended June 30,
                                                            -----------------------    -------------------------
                                                              2005          2004          2005            2004
                                                             ------        ------        ------          ------
                                                                                                
Net income.............................................      $220.7        $176.6        $431.1          $365.9
Net income per diluted share...........................      $ 1.03        $ 0.82        $ 2.01          $ 1.70
Net income as a percentage of AEA......................        1.86%         1.86%         1.88%           1.95%
Return on average tangible equity......................        16.3%         13.7%         15.7%           14.4%
Return on average equity...............................        13.9%         12.5%         13.8%           13.1%


--------------------------------------------------------------------------------
For the six months  ended June 30,  2004,  net  income,  net income per  diluted
share,  net income as a percentage of average earning assets ("AEA"),  return on
average  tangible  equity  and  return  on  average  equity  excluding  gain  on
redemption  of debt,  were  $340.4  million,  $1.58,  1.82%,  13.4%  and  12.2%,
respectively.

      Current quarter net income includes: a pre-tax $25.2 million restructuring
charge  corresponding to the termination benefits of approximately 200 employees
in conjunction  with the  realignment  of Commercial  Finance and other business
streamlining  activities  (detailed further in Note 12 -- Severance and Facility
Restructuring  Reserves)  and a  pre-tax  $22.0  million  gain on the  sale of a
significant  portion of the business aircraft  portfolio.  Prior year first half
net  income  included a pre-tax  $41.8  million  gain on early debt  redemption.
Excluding these transactions,  the improved results reflected lower charge-offs,
strong non-spread revenues and a lower effective tax rate.

Results by Business Segment

      The  tables  that  follow  summarize  selected  financial  information  by
business  segment.  See Note 3 -- Business  Segments  Information for details on
2005   realignment   initiatives  and  measuring   segment   performance   using
risk-adjusted  capital.  The 2004  results  have been  conformed  to the current
presentation  reflecting  the revised 2005 capital  allocation  methodology  and
certain asset transfers, as described in Note 3. ($ in millions)



                                                                 Quarters Ended June 30,
                                           ----------------------------------------------------------------------
                                                         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......      $ 79.1     2.84%        23.9%        $ 65.6     2.66%        20.3%
Specialty Finance -- consumer........        16.1     0.61%         9.2%          14.2     1.60%        18.7%
                                           ------                               ------      
   Total Specialty Finance..........         95.2     1.76%        18.4%          79.8     2.37%        20.0%
                                           ------                               ------
Commercial Services.................         42.6     6.43%        25.5%          40.0     5.87%        26.2%
Corporate Finance...................         43.4     2.21%        20.6%          48.3     2.97%        28.5%
Equipment Finance...................         34.2     2.19%        15.6%          19.3     1.12%         7.5%
Capital Finance.....................         38.9     1.72%        12.4%          13.2     0.65%         6.3%
                                           ------                               ------
   Total Commercial Finance.........        159.1     2.47%        17.5%         120.8     1.99%        15.6%
                                           ------                               ------      
Corporate, including certain charges        (33.6)   (0.29)%         --          (24.0)   (0.27)%         --
                                           ------                               ------
   Total............................       $220.7     1.86%        16.3%        $176.6     1.86%        13.7%
                                           ======                               ======



                                       21




                                                                Six Months Ended June 30,
                                           ----------------------------------------------------------------------
                                                        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......      $154.2     2.76%        23.5%        $134.5     2.74%        21.0%
Specialty Finance -- consumer........        32.4     0.71%        10.2%          21.7     1.33%        15.2%
                                           ------                               ------
   Total Specialty Finance..........        186.6     1.84%        18.9%         156.2     2.39%        19.9%
                                           ------                               ------
Commercial Services.................         79.9     6.23%        25.0%          76.3     5.76%        25.0%
Corporate Finance...................         85.1     2.19%        20.4%          78.2     2.40%        23.1%
Equipment Finance...................         55.5     1.78%        12.6%          35.4     1.03%         6.9%
Capital Finance.....................         65.5     1.48%        10.7%          35.7     0.88%         8.7%
                                           ------                               ------
   Total Commercial Finance.........        286.0     2.25%        16.0%         225.6     1.87%        14.6%
                                           ------                               ------
Corporate, including certain charges        (41.5)   (0.19)%         --          (15.9)   (0.10)%         --
                                           ------                               ------
   Total............................       $431.1     1.88%        15.7%        $365.9     1.95%        14.4%
                                           ======                               ======


      Capital is allocated 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.  The  targeted  risk-adjusted  capital  allocations  by segment (as a
percentage  of average  managed  assets)  are as follows:  Specialty  Finance --
commercial 9%, Specialty Finance -- consumer 5%, Commercial Services,  Corporate
Finance and Equipment Finance 10% and Capital Finance 14%.

      Results by segment were as follows:

      o     Specialty  Finance -- commercial  reflected  stronger second quarter
            earnings  in  the  major   vendor  unit,   while   earnings  in  the
            international, small / mid-ticket leasing and small business lending
            units were strong.

      o     Specialty  Finance -- consumer  reported strong home lending results
            due to a higher earning assets base and lower charge-offs. Education
            lending  earnings turned positive in the second quarter and included
            gains on approximately  $300 million in loan sales.  Returns in this
            segment  were  below  last  year  given  the  2005  addition  of the
            education  lending  business,  however  our home  lending  portfolio
            generated  returns on a  risk-adjusted  basis that met the corporate
            hurdle rate for the six months ended June 30, 2005 and 2004.

      o     Commercial   Services  earnings   benefited  from  continued  strong
            factoring  commissions  (in  amount).   However,   commission  rates
            declined modestly from the prior year.

      o     Corporate  Finance  earnings  improvement  from the  prior  year was
            particularly  strong in the  Capital  Markets and  Communications  &
            Media units,  reflecting higher risk-adjusted margins and non-spread
            revenue. The earnings decline from the prior year quarter was due to
            a large  syndication  gain on a project  finance asset  completed in
            2004.

      o     Equipment  Finance  returns  for the  quarter  reflected  the  $22.0
            million  pretax  gain from the sale of a  majority  of the  business
            aircraft portfolio, while year to date also reflected improvement in
            the level of charge-offs.

      o     Capital  Finance  earnings  improved  from  the  prior  year  due to
            stronger  operating lease margins in both aerospace and rail and the
            lower  effective  tax rate  resulting  from  aircraft  transfers  to
            Ireland. See "Income Taxes" for additional information.

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



                                                            Quarters Ended June 30,    Six Months Ended June 30,
                                                            -----------------------    -------------------------
                                                              2005          2004          2005          2004
                                                             ------        ------        ------        ------ 
                                                                                               
Unallocated expenses...................................      $(18.3)       $(23.9)       $(31.8)       $(39.3)
Restructuring charges..................................       (15.4)           --         (15.4)           --
Gain on debt redemption................................          --            --            --          25.5
Venture capital operating income/(losses)(1)...........         0.1          (0.1)          5.7          (2.1)
                                                             ------        ------        ------        ------ 
   Total...............................................      $(33.6)       $(24.0)       $(41.5)       $(15.9)
                                                             ======        ======        ======        ====== 


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


                                       22


Net Finance Margin

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



                                                          Quarters Ended June 30,    Six Months Ended June 30,
                                                          -----------------------    -------------------------
                                                            2005          2004          2005          2004
                                                          ---------     ---------     ---------     ---------
                                                                                              
Finance income -- loans and capital leases..............  $   736.2     $   577.0     $ 1,400.2     $ 1,133.6
Rental income on operating leases......................       370.5         331.9         728.5         672.2
Interest expense.......................................       466.7         300.0         860.9         598.0
                                                          ---------     ---------     ---------     ---------
   Net finance income..................................       640.0         608.9       1,267.8       1,207.8
Depreciation on operating lease equipment..............       241.2         237.9         478.8         473.7
                                                          ---------     ---------     ---------     ---------
   Net finance margin..................................   $   398.8     $   371.0     $   789.0     $   734.1
                                                          =========     =========     =========     =========
As a % of AEA:
Finance income -- loans and capital leases..............       6.20%         6.08%         6.10%         6.05%
Rental income on operating leases......................        3.12%         3.49%         3.18%         3.59%
Interest expense.......................................        3.93%         3.16%         3.75%         3.19%
                                                          ---------     ---------     ---------     ---------
   Net finance income..................................        5.39%         6.41%         5.53%         6.45%
Depreciation on operating lease equipment..............        2.03%         2.50%         2.09%         2.53%
                                                          ---------     ---------     ---------     ---------
   Net finance margin..................................        3.36%         3.91%         3.44%         3.92%
                                                          =========     =========     =========     =========
As a % of AOL:
Rental income on operating leases......................       17.42%        17.40%        17.32%        17.65%
Depreciation on operating lease equipment..............       11.34%        12.47%        11.38%        12.44%
                                                          ---------     ---------     ---------     ---------
   Net operating lease margin..........................        6.08%         4.93%         5.94%         5.21%
                                                          =========     =========     =========     =========
Average Earning Assets.................................   $47,484.3     $37,992.8     $45,870.8     $37,499.1
                                                          =========     =========     =========     =========
Average Operating Leases Equipment ("AOL").............   $ 8,508.7     $ 7,628.5     $ 8,413.7     $ 7,613.6
                                                          =========     =========     =========     =========


      Analysis of net finance margin is as follows:

      o     Finance income for 2005  benefited  from assets  repricing at higher
            market interest rates, and higher 2005 asset levels.

      o     Interest expense increased from 2004, reflecting debt assumed in the
            education lending acquisition, higher 2005 market interest rates and
            the effect of extending  the maturity of the debt  portfolio,  which
            exceeded the savings from  refinancing  higher-cost  debt at tighter
            2005 spreads.

      o     The decline in net finance  margin as a  percentage  of AEA reflects
            the blending of the lower-margin  education lending receivables into
            the portfolio,  lower  yield-related  fees (as prepayments  declined
            this quarter), as well as pricing pressure,  reflecting liquidity in
            many of our lending  businesses,  particularly in Corporate  Finance
            and  Equipment  Finance.  Lease  margin  trends  were  favorable  as
            discussed below.

      o     Rental  income  increased  over  the  prior  year  periods  as rates
            strengthened in aerospace and rail. Depreciation expense declined as
            a percentage of AOL from 2004,  reflecting  the continued  asset mix
            change  from  shorter-term  small to  mid-ticket  leasing  assets in
            Specialty  Finance and Equipment  Finance to longer-lived  assets in
            Capital  Finance.  The 2004  depreciation  expense  includes a $14.8
            million impairment charge. See  "Concentrations -- Operating Leases"
            for additional information regarding our operating lease assets.

      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.


                                       23


      At the date that  interest rate  sensitivity  is modeled,  "baseline"  net
interest income is derived using 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
July 1, 2005 would reduce net income by an estimated $15 million  after-tax over
the next twelve months. A corresponding  decrease in the yield curve would cause
an increase in net income of a like  amount.  A 100 basis point  increase in the
yield curve on July 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
static analysis 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.

      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 June 30, 2005

Commercial paper, variable-rate senior
   notes and bank credit facilities.........................   $16,678.0      3.28%    $20,225.5      3.69%
Fixed-rate senior and subordinated notes....................    26,685.9      5.06%     23,138.4      4.84%
                                                               ---------               ---------
Composite...................................................   $43,363.9      4.37%    $43,363.9      4.30%
                                                               =========               =========

Quarter Ended June 30, 2004

Commercial paper, variable-rate senior
   notes and bank credit facilities.........................   $14,875.7      1.55%    $18,250.0      2.33%
Fixed-rate senior and subordinated notes....................    19,312.4      5.71%     15,938.1      5.19%
                                                               ---------               ---------
Composite...................................................   $34,188.1      3.90%    $34,188.1      3.67%
                                                               =========               =========

Six Months Ended June 30, 2005

Commercial paper, variable-rate senior
   notes and bank credit facilities.........................   $16,003.1      3.05%    $19,917.4      3.47%
Fixed-rate senior and subordinated notes....................    25,498.2      5.00%     21,583.9      4.76%
                                                               ---------               ---------
Composite...................................................   $41,501.3      4.25%    $41,501.3      4.14%
                                                               =========               =========

Six Months Ended June 30, 2004

Commercial paper, variable-rate senior
   notes and bank credit facilities.........................   $14,289.9      1.56%    $18,036.9      2.30%
Fixed-rate senior and subordinated notes....................    19,130.3      5.70%     15,383.3      5.26%
                                                               ---------               ---------
Composite...................................................   $33,420.2      3.93%    $33,420.2      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.


                                       24


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 June 30,    Six Months Ended June 30,
                                                           -----------------------    -------------------------
                                                              2005          2004          2005         2004
                                                             ------        ------        ------        ------
                                                                                              
Net finance margin.....................................      $398.8        $371.0        $789.0        $734.1
Provision for credit losses............................        47.2          65.7          92.5         151.3
                                                             ------        ------        ------        ------
Net finance margin after provision for credit
   losses (risk adjusted margin).......................      $351.6        $305.3        $696.5        $582.8
                                                             ======        ======        ======        ======

As a % of AEA:
Net finance margin.....................................        3.36%         3.91%         3.44%         3.92%
Provision for credit losses............................        0.40%         0.70%         0.40%         0.81%
                                                             ------        ------        ------        ------
Net finance margin after provision for credit
   losses (risk adjusted margin).......................        2.96%         3.21%         3.04%         3.11%
                                                             ======        ======        ======        ======


      For both the quarter and the six months,  credit quality,  including lower
charge-offs, mitigated the previously discussed decline in net finance margin in
relation to 2004. 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 June 30,    Six Months Ended June 30,
                                                           -----------------------    -------------------------
                                                              2005          2004          2005          2004
                                                             ------        ------        ------        ------
                                                                                              
Fees and other income..................................      $168.6        $141.0        $318.8        $267.7
Factoring commissions..................................        56.3          53.5         111.1         108.5
Gains on sales of leasing equipment....................        20.9          27.1          43.5          54.4
Gain on sale of business aircraft portfolio............        22.0            --          22.0            --
Gains on securitizations...............................        11.1          11.9          22.9          33.3
                                                             ------        ------        ------        ------
   Total other revenue.................................      $278.9        $233.5        $518.3        $463.9
                                                             ======        ======        ======        ======
Other revenue as a percentage of AEA...................        2.35%         2.46%         2.26%         2.47%
                                                             ======        ======        ======        ======


      o     Fees and other income include securitization-related  servicing fees
            and accretion,  syndication fees,  miscellaneous fees and gains from
            asset  sales.   The  improvement  from  2004  reflected  gains  from
            receivable  sales in Specialty  Finance -- consumer,  including  the
            sale of  approximately  $300  million in  education  lending  assets
            during  the  second  quarter,  as well as strong  fees in  Corporate
            Finance.

      o     Factoring  commissions,  though up  modestly  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     During the  second  quarter we sold the  majority  of the  Equipment
            Finance business aircraft  portfolio  (approximately  $900 million),
            resulting  in  a  $22.0  million  gain.   The  remaining   portfolio
            (approximately $600 million) was transferred to Capital Finance. See
            "Financing and Leasing Assets" section for further detail.


                                       25


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



                                                           Quarters Ended June 30,    Six Months Ended June 30,
                                                           -----------------------    -------------------------
                                                              2005          2004          2005          2004
                                                             ------        ------        ------        ------
                                                                                              
Total volume securitized...............................    $1,052.7        $847.2      $1,981.7      $2,083.6
Gains..................................................    $   11.1        $ 11.9      $   22.9      $   33.3
Gains as a percentage of volume securitized............        1.06%         1.40%         1.16%         1.60%
Gains as a percentage of pre-tax income................        3.32%         4.11%         3.42%         5.55%
Securitized assets.....................................                                $7,459.9      $8,401.0
Retained interest in securitized assets................                                $1,086.0      $1,178.5


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 June 30,     Six Months Ended June 30,
                                                           -----------------------    -------------------------
                                                              2005          2004          2005          2004
                                                             ------        ------        ------        ------
                                                                                              
Balance beginning of period............................      $620.4        $636.7        $617.2        $643.7
                                                             ------        ------        ------        ------
Provision for credit losses -- finance receivables......       47.2          65.7          92.5         151.3
Reserves relating to acquisitions, other...............         8.6           2.2          15.6           8.9
                                                             ------        ------        ------        ------
   Additions to reserve for credit losses, net.........        55.8          67.9         108.1         160.2
                                                             ------        ------        ------        ------
Net credit losses

   Specialty Finance -- commercial......................       26.1          23.5          45.5          52.0
   Specialty Finance -- consumer........................       13.5           9.9          24.5          20.1
   Commercial Services.................................         5.5           5.0          12.1          10.0
   Corporate Finance...................................         1.9          23.2           7.2          51.4
   Equipment Finance...................................         6.9          15.5          13.3          41.8
   Capital Finance.....................................          --           6.5           0.4           7.6
                                                             ------        ------        ------        ------
Total net credit losses................................        53.9          83.6         103.0         182.9
                                                             ------        ------        ------        ------
Balance end of period..................................      $622.3        $621.0        $622.3        $621.0
                                                             ======        ======        ======        ======
Reserve for credit losses as a percentage of
   finance receivables.................................                                    1.54%         1.95%
                                                                                          ======        ======
Reserve for credit losses as a percentage of
   past due receivables (60 days or more)(1)(2)........                                    91.0%        108.9%
                                                                                          ======        ======
Reserve for credit losses as a percentage of
   non-performing assets(2)............................                                   131.6%        110.5%
                                                                                          ======        ======


--------------------------------------------------------------------------------
(1)   The reserve for credit losses as a percentage of past due  receivables and
      non-performing accounts, excluding telecommunications reserves and account
      balances, were 96.3% and 105.9% at June 30, 2005 and 2004, respectively.

(2)   At June 30, 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
      because such loans are subject to the U.S. government guarantee.

      The  reserve  for  credit  losses  was  $622.3  million  (1.54% of finance
receivables)  at June 30, 2005,  compared to $617.2 million  (1.76%) at December
31,  2004.  The  increase in reserve  amount from  December  31, 2004 was due to
portfolio  growth and  increased  risk  related to U.S.  commercial  airline hub
carriers,  reflecting the continuation of high fuel costs and losses, as well as
the  potential  for  additional  bankruptcies  in this sector.  The decline as a
percentage  of  receivables   represents  credit  quality   improvements  across
portfolios and asset mix changes,  including an additional  $4.2 billion of U.S.
Government-guaranteed education lending loans.

      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.


                                       26


      The  reserve  included  specific  reserves,   excluding  telecommunication
accounts,  relating to impaired loans of $32.8 million, $42.4 million, and $35.9
million at June 30, 2005,  December  31, 2004 and June 30, 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.

      See Concentrations for additional  information on the commercial aerospace
portfolio.

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                       Six Months Ended
                                        --------------------------------      --------------------------------
                                        June 30, 2005      June 30, 2004      June 30, 2005      June 30, 2004
                                        -------------      -------------      -------------      -------------
                                                                                   
   Specialty Finance -- commercial..    $26.1   1.17%     $23.5    1.17%     $ 45.5   1.02%    $ 52.0    1.30%
   Specialty Finance -- consumer....     13.5   0.53%       9.9    1.18%       24.5   0.55%      20.1    1.30%
                                        -----             -----              ------            ------
     Total Specialty Finance Group.      39.6   0.83%      33.4    1.17%       70.0   0.79%      72.1    1.30%
                                        -----             -----              ------            ------
   Commercial Services.............       5.5   0.33%       5.0    0.32%       12.1   0.38%      10.0    0.33%
   Corporate Finance...............       1.9   0.10%      23.2    1.43%        7.2   0.19%      51.4    1.59%
   Equipment Finance...............       6.9   0.48%      15.5    0.99%       13.3   0.47%      41.8    1.33%
   Capital Finance.................        --   0.00%       6.5    1.49%        0.4   0.04%       7.6    0.88%
                                        -----             -----              ------            ------
     Total Commercial Finance Group      14.3   0.26%      50.2    0.97%       33.0   0.31%     110.8    1.08%
                                        -----             -----              ------            ------
     Total.........................     $53.9   0.52%     $83.6    1.04%     $103.0   0.52%    $182.9    1.15%
                                        =====             =====              ======            ======


      Net charge-offs for the quarter were 0.52% of average finance receivables,
unchanged from last quarter and down from 1.04% last year.  Charge-offs  for the
quarter  ended June 30,  2004,  excluding  amounts  related to  liquidating  and
specifically-reserved  telecommunication  accounts, were $55.4 million or 0.72%.
The most  notable  improvements  from the prior  year were in  Capital  Finance,
Equipment Finance and the communication & media and capital markets units within
Corporate Finance. Additional analysis by segment follows:

      o     Specialty   Finance  --  commercial   charge-offs  for  the  quarter
            increased   from  2004   primarily  due  to  higher  losses  in  the
            small-ticket portfolios.

      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 Services charge-offs were modestly above the prior year.

      o     Corporate Finance charge-off  improvement was driven by a decline in
            the  capital  markets  unit   charge-offs  and  by  recoveries  from
            previously written-off accounts in the communication and media unit.

      o     Equipment  Finance  charge-off  improvement  continued in the second
            quarter of 2005, as current quarter  charge-offs,  were  essentially
            flat with last quarter and considerably below the 2004 levels.

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


                                       27


      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                      Six Months Ended
                                        --------------------------------      --------------------------------
                                        June 30, 2005     June 30, 2004      June 30, 2005      June 30, 2004
                                        -------------     -------------      -------------      -------------
                                                                                   
   Specialty Finance -- commercial..    $35.6   1.12%    $ 34.9    1.15%     $ 65.3   1.03%    $ 74.9    1.22%
   Specialty Finance -- consumer....     20.1   0.72%      15.0    1.21%       36.6   0.74%      29.7    1.25%
                                        -----            ------              ------            ------
     Total Specialty Finance Group.      55.7   0.93%      49.9    1.17%      101.9   0.90%     104.6    1.23%
                                        -----            ------              ------            ------
   Commercial Services.............       5.5   0.33%       5.0    0.32%       12.1   0.38%      10.0    0.33%
   Corporate Finance...............       2.1   0.11%      23.2    1.43%        7.7   0.21%      51.4    1.59%
   Equipment Finance...............      10.1   0.49%      27.4    1.19%       21.7   0.53%      69.0    1.49%
   Capital Finance.................        --   0.00%       6.5    1.49%        0.4   0.04%       7.6    0.88%
                                        -----            ------              ------            ------
     Total Commercial Finance Group      17.7   0.29%      62.1    1.05%       41.9   0.35%     138.0    1.17%
                                        -----            ------              ------            ------
     Total.........................     $73.4   0.60%    $112.0    1.10%     $143.8   0.61%    $242.6    1.19%
                                        =====            ======              ======            ======


      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):



                                                                 June 30, 2005             December 31, 2004
                                                             ---------------------      ----------------------
                                                                                               
Past due accounts:

   Specialty Finance -- commercial......................      $281.2         3.27%        $283.3         3.22%
   Specialty Finance -- consumer........................       249.6         2.35%         116.4         2.27%
                                                              ------                      ------
     Total Specialty Finance Group.....................        530.8         2.76%         399.7         2.87%
                                                              ------                      ------
   Commercial Services.................................         39.7         0.62%          88.0         1.42%
   Corporate Finance...................................         46.5         0.58%          43.3         0.65%
   Equipment Finance...................................         41.1         0.93%          50.1         0.79%
   Capital Finance.....................................         25.7         1.04%          26.9         1.47%
                                                              ------                      ------
     Total Commercial Finance Group....................        153.0         0.72%         208.3         0.99%
                                                              ------                      ------
     Total.............................................       $683.8         1.69%        $608.0         1.73%
                                                              ======                      ======


                                                                 June 30, 2005             December 31, 2004
                                                             ---------------------      ----------------------
                                                                                               
Non-performing accounts:

   Specialty Finance -- commercial......................      $163.1         1.90%        $165.9         1.88%
   Specialty Finance -- consumer........................       135.2         1.27%         119.3         2.32%
                                                              ------                      ------
     Total Specialty Finance Group.....................        298.3         1.55%         285.2         2.05%
                                                              ------                      ------
   Commercial Services.................................         10.2         0.16%          56.8         0.92%
   Corporate Finance...................................         69.4         0.87%          61.9         0.92%
   Equipment Finance...................................         78.5         1.78%         131.2         2.06%
   Capital Finance.....................................         16.3         0.66%           4.6         0.25%
                                                              ------                      ------
     Total Commercial Finance Group....................        174.4         0.82%         254.4         1.21%
                                                              ------                      ------
     Total.............................................       $472.7         1.17%        $539.6         1.54%
                                                              ======                      ======

Non-accrual loans                                             $410.9                      $458.4

Repossessed assets.....................................         61.8                        81.2
                                                              ------                      ------
     Total non-performing accounts.....................       $472.7                      $539.6
                                                              ======                      ======


--------------------------------------------------------------------------------
Corporate Finance and Equipment Finance  non-performing  assets include accounts
that are less than sixty days past due.


                                       28



      Delinquency  levels,  though down from the prior quarter (largely due to a
reduction in Commercial  Services),  increased  from December 31, 2004 primarily
due to the education lending acquisition, as excluding these assets, delinquency
was $569.5 million (1.57%) at June 30, 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  level was essentially
            unchanged from last quarter and the fourth quarter of 2004.

      o     Specialty  Finance -- consumer  delinquency  increased from December
            31,  2004,  due  to the  education  lending  acquisition.  Excluding
            education  lending  receivables, delinquencies  were $135.3  million
            (2.10%), versus $116.4 million (2.27%) last year-end, reflecting the
            continued home lending growth.

      o     Commercial  Services  delinquency was down from 2004 due to the work
            out of one significant account.

      o     Corporate   Finance,   Equipment   Finance   and   Capital   Finance
            delinquencies remained at the relatively 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 June 30, 2005.

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



                                                                 June 30, 2005             December 31, 2004
                                                             ---------------------        --------------------
                                                                                               
Managed past due accounts:
   Specialty Finance -- commercial......................      $362.4         2.70%        $402.1         2.82%
   Specialty Finance -- consumer........................       348.0         2.92%         227.8         3.45%
                                                              ------                      ------
     Total Specialty Finance Group.....................        710.4         2.80%         629.9         3.02%
                                                              ------                      ------
   Commercial Services.................................         39.7         0.62%          88.0         1.42%
   Corporate Finance...................................         47.3         0.59%          43.3         0.65%
   Equipment Finance...................................         57.7         0.81%          90.3         0.96%
   Capital Finance.....................................         25.7         1.04%          26.9         1.47%
                                                              ------                      ------
     Total Commercial Finance Group....................        170.4         0.71%         248.5         1.03%
                                                              ------                      ------

     Total.............................................       $880.8         1.78%        $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):



                                                           Quarters Ended June 30,   Six Months Ended June 30,
                                                           -----------------------   -------------------------
                                                            2005          2004          2005          2004
                                                          ---------     ---------     ---------     ---------
                                                                                              
Salaries and employee benefits.........................   $   164.7     $   156.8     $   331.0     $   302.2
Other general operating expenses.......................       107.1          95.6         201.8         190.2
                                                          ---------     ---------     ---------     ---------
Salaries and general operating expenses................       271.8         252.4         532.8         492.4
Provision for restructuring............................        25.2            --          25.2            --
                                                          ---------     ---------     ---------     ---------
Total..................................................   $   297.0     $   252.4     $   558.0     $   492.4
                                                          =========     =========     =========     =========
Efficiency ratio(1)....................................        43.7%         41.5%         42.3%         41.0%
Salaries and general operating expenses as a
   percentage of AMA(2)................................        2.16%         2.17%         2.09%         2.12%
Average Managed Assets.................................   $54,912.7     $46,608.4     $53,428.2     $46,406.5


--------------------------------------------------------------------------------
(1)   Efficiency ratio is the ratio of salaries and general  operating  expenses
      to operating margin,  excluding the provision for credit losses. Excluding
      the provision for restructuring and the gain on sale of business aircraft,
      the  efficiency  ratio was 41.4% and 41.0% for the  quarter and six months
      ended June 30, 2005.

(2)   "AMA" means average managed  assets,  which is average earning assets plus
      the  average  of  finance  receivables  previously  securitized  and still
      managed by us.  Excluding the provision  for  restructuring,  the ratio of
      salaries and general  operating  expenses to managed  assets was 1.98% and
      1.99% for the quarter and six months ended June 30, 2005.


                                       29


      Salaries and general  operating  expenses  for the quarter  ended June 30,
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 and sales incentive plans),
consistent with the improved volume, fees and profitability.  Operating expenses
for  education  lending were $16.7 million and $23.7 million for the quarter and
six months ended June 30, 2005.

      Personnel totaled  approximately 6,110 at June 30, 2005, versus 6,130 last
quarter  and 5,705 last year.  The  increase  from 2004 was  largely  due to the
education lending acquisition and higher international headcount.

      Improvement in the efficiency ratio remains one of management's goals, and
several   initiatives   are   underway  to  reduce   costs,   including   system
consolidations and process efficiency improvements. Accordingly, a $25.2 million
restructuring charge was accrued during the quarter,  reflecting the realignment
of Commercial Finance and back-office  streamlining and consolidation activities
in Specialty Finance.  The charge consists largely of employee termination costs
related to approximately  200 personnel.  We anticipate  reinvesting the savings
from  these  initiatives  in  sales  and  growth  initiatives,  as  well  as the
continuation of streamlining initiatives. We expect the streamlining initiatives
to reduce costs by approximately $23 million in 2006.

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 33.8% and 39.0% for the quarters ended June 30,
2005 and 2004 and 35.3% and 39.0% for the respective  year to date periods.  The
reduction in the 2005 effective tax rate, which is based on our revised estimate
of  annual  effective  tax  rate  of  approximately   35%,   reflects   improved
profitability in certain foreign locations,  as well as our plan to relocate and
place certain aerospace assets in Ireland with offshore  funding,  as provisions
of the  American  Jobs  Creation  Act of 2004 provide  favorable  treatment  for
certain aircraft leasing operations conducted offshore.  In total, we anticipate
transferring  approximately 40 commercial aircraft during the year. The improved
profitability in international  operations  resulted from our initiative to grow
our  international  profitability  via better platform  efficiency  coupled with
asset growth.

      At  June  30,  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 utilize  these  federal  losses
fully.  Accordingly,  we do not believe a valuation  allowance is required  with
respect to these federal net  operating  losses.  As of June 30, 2005,  based on
management's  assessment  as to  realizability,  the net deferred tax  liability
includes a valuation  allowance of approximately  $9.4 million relating to state
net operating losses.

      CIT has open tax years in the U.S.,  Canada and other  jurisdictions  that
are currently  under  examination  by the  applicable  taxing  authorities,  and
certain 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.


                                       30


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):



                                                                         June 30,    December 31,   Percentage
                                                                           2005         2004          Change
                                                                        ---------     ---------     ----------
                                                                                                 
Specialty Finance Group
   Specialty Finance -- commercial

     Finance receivables............................................    $ 8,590.2     $ 8,805.7        (2.4)%
     Operating lease equipment, net.................................      1,105.8       1,078.7          2.5%
     Finance receivables held for sale..............................      1,031.9       1,288.4       (19.9)%
                                                                        ---------     ---------
       Owned assets.................................................     10,727.9      11,172.8        (4.0)%
     Finance receivables securitized and managed by CIT.............      3,797.2       4,165.5        (8.8)%
                                                                        ---------     ---------
     Managed assets.................................................     14,525.1      15,338.3        (5.3)%
                                                                        ---------     ---------
   Specialty Finance -- consumer

     Finance receivables -- home lending............................      6,172.9       4,896.8         26.1%
     Finance receivables -- education lending.......................      4,170.9            --           N/A
     Finance receivables -- other...................................        273.2         236.0         15.8%
     Finance receivables held for sale..............................        282.0         241.7         16.7%
                                                                        ---------     ---------
       Owned assets.................................................     10,899.0       5,374.5        102.8%
     Home lending finance receivables securitized 
       and managed by CIT ..........................................      1,027.6       1,228.7        (16.4)%
                                                                        ---------     ---------
     Managed assets.................................................     11,926.6       6,603.2         80.6%
                                                                        ---------     ---------
Commercial Finance Group
   Commercial Services

     Finance receivables............................................      6,417.2       6,204.1          3.4%
                                                                        ---------     ---------
   Corporate Finance

     Finance receivables............................................      7,998.0       6,702.8         19.3%
     Operating lease equipment, net.................................         78.3          35.1        123.1%
     Finance receivables held for sale..............................         27.9            --          N/A
                                                                        ---------     ---------
       Owned assets.................................................      8,104.2       6,737.9         20.3%
     Finance receivables securitized and managed by CIT.............         54.0            --          N/A
                                                                        ---------     ---------
     Managed assets.................................................      8,158.2       6,737.9         21.1%
                                                                        ---------     ---------
   Equipment Finance

     Finance receivables............................................      4,420.7       6,373.1       (30.6)%
     Operating lease equipment, net.................................        121.4         440.6       (72.4)%
     Finance receivables held for sale..............................         94.1         110.7       (15.0)%
                                                                        ---------     ---------
       Owned assets.................................................      4,636.2       6,924.4       (33.0)%
     Finance receivables securitized and managed by CIT.............      2,581.1       2,915.5       (11.5)%
                                                                        ---------     ---------
     Managed assets.................................................      7,217.3       9,839.9       (26.7)%
                                                                        ---------     ---------
   Capital Finance

     Finance receivables............................................      2,466.2       1,829.7         34.8%
     Operating lease equipment, net.................................      7,337.4       6,736.5          8.9%
                                                                        ---------     ---------
       Owned assets.................................................      9,803.6       8,566.2         14.4%
                                                                        ---------     ---------
   Other -- Equity Investments......................................         31.6         181.0       (82.5)%
                                                                        ---------     ---------
   Total

     Finance receivables............................................    $40,509.3     $35,048.2         15.6%
     Operating lease equipment, net.................................      8,642.9       8,290.9          4.2%
     Finance receivables held for sale..............................      1,435.9       1,640.8       (12.5)%
                                                                        ---------     ---------
     Financing and leasing assets excl. equity investments..........     50,588.1      44,979.9         12.5%
     Equity investments (included in other assets)..................         31.6         181.0       (82.5)%
                                                                        ---------     ---------
       Owned assets.................................................     50,619.7      45,160.9         12.1%
     Finance receivables securitized and managed by CIT.............      7,459.9       8,309.7       (10.2)%
                                                                        ---------     ---------
       Managed assets...............................................    $58,079.6     $53,470.6          8.6%
                                                                        =========     =========



                                       31



      The six-month  activity  reflects strong volumes and the education lending
acquisition,  offset by asset  sales and  syndications,  done  largely  for risk
management and capital allocation purposes,  particularly in the second quarter.
Additional trends by segment follow:

      o     Specialty  Finance -- commercial  declined despite strong volume, as
            runoff / liquidations  were similarly high. The trend also reflected
            the sale of over $300 million of  liquidating  manufactured  housing
            assets in the first quarter of 2005.

      o     Specialty Finance -- consumer increased,  reflecting the acquisition
            of the $4.3 billion  education lending unit in addition to continued
            strength in the home equity lending market,  where  originations and
            purchases  were  partially   offset  by  sales  to  balance  certain
            portfolio demographics and risk characteristics.

      o     Commercial   Services   increased,   reflecting   the   purchase  of
            substantially  all of the factoring  assets of  Receivables  Capital
            Management,  a division of SunTrust,  in the first  quarter of 2005,
            while the decline from last quarter was due to seasonal runoff.

      o     The increase in Corporate  Finance  reflects  strong volumes and the
            transfer  of  approximately   $850  million  of  sports  and  gaming
            portfolio assets and healthcare assets from Equipment Finance.

      o     Equipment Finance  declined,  reflecting the sale of $923 million in
            business aircraft assets, the transfer of the remaining $0.6 billion
            of  this  portfolio  to  Capital   Finance,   and  the  transfer  of
            approximately   $450  million  in  healthcare  assets  to  Corporate
            Finance.  In addition,  the $400 million sports and gaming portfolio
            was transferred to Corporate Finance last quarter.

      o     Capital Finance's increase reflected commercial aerospace deliveries
            and the transfer of the remaining  business aircraft  portfolio from
            Equipment Finance during the quarter.

      o     Equity investments decreased due to the completion of the previously
            contracted sale of most of the remaining private equity funds.

         Consistent with our capital optimization  activities during the current
period,  we will consider  other  opportunities  for more rapid  liquidation  of
non-strategic and under-performing assets to the extent available.

Business Volumes

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



                                                           Quarters Ended June 30,   Six Months Ended June 30,
                                                           -----------------------   -------------------------
                                                             2005          2004         2005           2004
                                                           --------      --------     ---------     ---------
                                                                                              
Specialty Finance -- commercial.........................   $2,685.2      $2,411.0     $ 5,022.7     $ 4,929.0
Specialty Finance -- consumer...........................    2,306.3         867.3       3,668.8       1,925.2
Commercial Services....................................        76.1         142.4         172.1         253.5
Corporate Finance......................................     1,324.7         685.0       2,159.1       1,291.4
Equipment Finance......................................     1,044.6       1,049.2       1,959.7       1,971.3
Capital Finance........................................       641.7         438.4         892.9         550.9
                                                           --------      --------     ---------     ---------
   Total new business volume...........................    $8,078.6      $5,593.3     $13,875.3     $10,921.3
                                                           ========      ========     =========     =========


      o     Specialty  Finance --  commercial  volume  increase was  broad-based
            across units, including strength in the vendor programs.

      o     Specialty  Finance  --  consumer  volume  increase  included  strong
            origination  volume,  including  bulk  receivable  purchases in home
            lending.

      o     Commercial  Services volume was low in relation to the prior year in
            the seasonally soft second quarter.

      o     Corporate  Finance's  capital markets and  communications  and media
            units posted strong volumes and drove the favorable trends.

      o     Capital Finance year-over-year volume increases reflected additional
            aircraft fundings.


                                       32


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 June 30, 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):

                                                        June 30,    December 31,
                                                          2005          2004
                                                        --------    -----------
Capital Finance -- Aerospace..........................  $4,920.0     $4,461.0
Capital Finance -- Rail and Other.....................   2,417.4      2,275.5
Specialty Finance.....................................   1,105.8      1,078.7
Equipment Finance.....................................     121.4        440.6
Corporate Finance.....................................      78.3         35.1
                                                        --------     --------
   Total..............................................  $8,642.9     $8,290.9
                                                        ========     ========

      The  increases  in  the  Capital  Finance  aerospace  portfolio  reflected
deliveries  of  eleven  new  commercial   aircraft,   partially  offset  by  the
disposition of eight 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 $220.4 million
and  $118.3  million  at June 30,  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):

                                                        June 30,    December 31,
                                                          2005         2004
                                                        --------    -----------
Commercial aerospace -- non-tax optimized............   $  339.7      $  336.6
Commercial aerospace -- tax optimized................      219.3         221.0
Project finance......................................      349.4         334.9
Rail.................................................      241.3         233.9
Other................................................      122.3         115.4
                                                        --------      --------
   Total leveraged lease transactions................   $1,272.0      $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
recently extended until January 2009, pursuant to an automatic renewal provision
in the agreement. The Avaya agreement,  which relates to profit sharing on a CIT
direct origination program, extends through September 2006.


                                       33


      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):

                                                      June 30,    December 31,
                                                        2005          2004
                                                      --------    ------------
Owned Financing and Leasing Assets

Dell................................................. $3,546.1      $3,389.4
Snap-on..............................................  1,073.2       1,114.7
Avaya Inc............................................    586.8         620.7

Securitized Financing and Leasing Assets

Dell................................................. $2,297.6      $2,489.2
Snap-on..............................................     54.0          64.8
Avaya Inc............................................    504.8         599.6

Dell International Financing and 
   Leasing Assets Included above

Dell -- owned........................................  $1,366.6      $1,403.6
Dell -- securitized..................................      46.2           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  business  is largely
originated  through a broker network.  As part of originating  business  through
this core channel, we employ an active portfolio management practice, whereby we
target desired  portfolio mix / risk  attributes in terms of product type,  lien
position,  and geographic  concentrations,  among other  factors.  We supplement
business  with  opportunistic  purchases  in the  secondary  market  when market
conditions are favorable from a credit and price perspective.  The interest rate
environment over the last 18 months,  combined with substantial volume growth in
the industry, have made these bulk asset purchases attractive.

      The home lending  portfolio  totaled $6.2 billion (owned) and $7.3 billion
(managed)  at June 30, 2005,  representing  12.3% and 12.5% of owned and managed
assets, respectively. Selected statistics for our managed home lending portfolio
are as follows:

      o     93% first mortgages.

      o     Average loan size of approximately $108.7 thousand.

      o     Top 5 state concentrations  (California,  Texas, Florida,  Ohio, and
            Pennsylvania) represented an aggregate 43% of the managed portfolio.

      o     47% fixed-rate.

      o     Average loan-to-value of 81%.

      o     Average FICO score of 633.

      o     Delinquencies  (sixty days or more) were 3.17% and 3.59% at June 30,
            2005 and December 31, 2004. 

      o     Charge-offs were 1.05% and 0.95% for the quarters ended June 30, and
            March 31, 2005.

Education Lending Portfolio (Student Loan Xpress)

      The Specialty Finance -- consumer  education lending  portfolio,  which is
marketed  as  Student  Loan  Xpress,  totaled  $4.3  billion  at June 30,  2005,
representing 8.5% of owned and 7.4% of managed assets.  Loan origination volumes
for the June 2005 quarter were $383.5 million, and $554.2 million for the period
of CIT ownership.  Student Loan Xpress has arrangements  with certain  financial
institutions  to sell  selected  loans and works  jointly  with these  financial
institutions to promote this mutually beneficial relationship.


                                       34


      Selected  statistics for our education lending portfolio are as follows ($
in millions):

                                                      June 30,      March 31,
                                                        2005          2005
                                                      --------      --------
Finance receivables by product type
Consolidation loans..............................     $3,954.8      $3,997.9
Other U.S. Government guaranteed loans...........        322.6         424.6
Private (non-guaranteed) loans and other.........         14.1          13.4
                                                      --------      --------
   Total.........................................     $4,291.5      $4,435.9
                                                      ========      ========

      o     Delinquencies  (sixty  days or more) were $114.3  million,  2.66% of
            finance  receivables at June 30, 2005 and $112.6  million,  2.60% at
            March 31, 2005.

      o     Top 5 state  concentrations  (California,  New  York,  Pennsylvania,
            Texas,   and  Illinois)   represented  an  aggregate  36.4%  of  the
            portfolio.

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.

                                                       June 30,    December 31,
                                                        2005          2004
                                                      --------     ------------
State

California............................................   10.7%        10.3%
Texas.................................................    7.3%         7.8%
New York..............................................    6.7%         6.8%
All other states......................................   54.5%        52.8%
                                                         ----         ---- 
   Total U.S..........................................   79.2%        77.7%
                                                         ====         ==== 
Country

Canada................................................    5.1%         5.5%
England...............................................    3.6%         3.9%
France................................................    1.3%         1.4%
Australia.............................................    1.2%         1.3%
China.................................................    1.1%         1.2%
Germany...............................................    1.0%         1.2%
All other countries...................................    7.5%         7.8%
                                                         ----         ---- 
   Total Outside U.S..................................   20.8%        22.3%
                                                         ====         ==== 

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.


                                       35


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

                                        June 30, 2005       December 31, 2004
                                      ------------------   --------------------
                                          Net                 Net
                                      Investment  Number   Investment    Number
                                      ----------  ------   ----------    ------
By Region:

   Europe.........................     $2,226.7      71      $2,160.0      72
   North America..................      1,081.4      61       1,057.7      66
   Asia Pacific...................      1,511.0      55       1,242.4      46
   Latin America..................        594.2      23         611.3      25
   Africa / Middle East...........        159.8       5          54.2       3
                                       --------     ---      --------     ---
Total.............................     $5,573.1     215      $5,125.6     212
                                       ========     ===      ========     ===
By Manufacturer:                                            

   Boeing.........................     $2,708.6     132      $2,558.8     133
   Airbus.........................      2,818.9      75       2,536.9      70
   Other..........................         45.6       8          29.9       9
                                       --------     ---      --------     ---
Total.............................     $5,573.1     215      $5,125.6     212
                                       ========     ===      ========     ===
By Body Type(1):                                            

   Narrow body....................     $4,262.8     171      $3,894.9     168
   Intermediate...................        920.4      19         842.7      18
   Wide body......................        344.3      17         358.1      17
   Other..........................         45.6       8          29.9       9
                                       --------     ---      --------     ---
Total.............................     $5,573.1     215      $5,125.6     212
                                       ========     ===      ========     ===
By Product:                                                 

   Operating lease................     $4,791.5     169      $4,324.6     167
   Leverage lease (other).........        339.7      12         336.6      12
   Leverage lease (tax optimized).        219.3       9         221.0       9
   Capital lease..................        130.3       6         137.4       6
   Loan...........................         92.3      19         106.0      18
                                       --------     ---      --------     ---
Total.............................     $5,573.1     215      $5,125.6     212
                                       ========     ===      ========     ===
Other Data:                                               

Off-lease aircraft................            6                    2
Number of accounts................           96                   92
Weighted average age of 
  fleet (years) ..................            6                    6
Largest customer net investment...     $  281.9             $  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 $1,058.4 million at
June 30, 2005. Each of the top five exposures is to carriers outside of the U.S.
The  largest  exposure to a U.S.  carrier at June 30,  2005 was $165.2  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  profitability  of the  commercial  aerospace  portfolio  has improved
throughout the year reflecting a number of positive factors including: improving
global demand for commercial  aircraft,  continued  recovery in rental rates and
lower tax rates.  Additionally,  the risk-based  capital returns on new aircraft
deliveries  (from our existing order book) exceed our targeted hurdle rate. As a
result, we are considering  whether to extend our aircraft order book beyond its
current  expiration  of Spring  2007.  Any future  order  book  would  likely be
smaller, slightly shorter and more flexible than our previous order.

      The regional  aircraft  portfolio at June 30, 2005 consisted of 119 planes
and a net investment of $349.1  million.  The carriers are primarily  located in
North America and Latin America. Operating leases account for about 36.8% 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.


                                       36


      At June 30,  2005,  six  aircraft  were  off-lease  (book  value of $106.7
million),  five of which we have  obtained  letters  of intent  for new  leases.
Despite some recent  improvement in rental rates,  current  placements remain at
compressed  rental rates,  which reflect current market  conditions.  Generally,
leases are being  written for terms  between  three and five  years.  Within the
regional  aircraft  portfolio at June 30, 2005, there were 4 aircraft  off-lease
with a total book value of approximately $20.3 million.

      The following is a list of our exposure to current or previously-announced
aerospace  carriers that have filed for  bankruptcy  protection  and the current
status of the related aircraft at June 30, 2005:

      o     UAL Corp.  -- United  Airlines  leases  two  CIT-owned  narrow  body
            aircraft  (Boeing  757  aircraft)  with a net  investment  of  $46.0
            million.  We also hold  Senior A tranche  Enhanced  Equipment  Trust
            Certificates  ("EETCs")  issued by United  Airlines,  which are debt
            instruments collateralized by aircraft operated by the airline, with
            a fair value of $30.3  million.  We have an  outstanding  balance of
            $9.4 million  (with a  commitment  of $31.3  million)  relating to a
            debtor-in-possession  facility in connection  with United  Airlines'
            filing under Chapter 11 as of June 30, 2005.

      o     US  Airways  -- On  September  12,  2004,  US  Airways  Group,  Inc.
            announced that it had filed for  reorganization  under Chapter 11 of
            the U.S. Bankruptcy Code. Under an existing agreement,  we lease one
            CIT-owned 737-300, for a total net investment of $5.9 million.

      In total,  we have  exposures to U.S.  commercial  airline hub carriers of
approximately $403 million at June 30, 2005. See "Reserve for Credit Losses" for
additional   information   regarding  our  reserves  and  the  applicability  to
commercial aerospace.

      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

      In conjunction with capital  optimization and risk management  activities,
we are actively managing the composition of the commercial  aerospace  portfolio
in terms of type and age of aircraft,  among other factors.  As a result, we may
consider sales of certain aircraft and new aircraft deliveries in the future.

      See table in "Risk  Management"  section  and 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.


                                       37


      We evaluate and monitor various risk metrics:

      o     Margin at Risk, 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,  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 rate    Floating rate  Fixed rate    Floating rate
                                                         ----------    -------------  ----------    -------------
                      June 30, 2005

                                                                                             
Assets.................................................      48%            52%           48%            52%
Liabilities............................................      54%            46%           42%            58%

                    December 31, 2004

Assets.................................................      55%            45%           55%            45%
Liabilities............................................      60%            40%           46%            54%


      Total  interest  sensitive  assets were $47.4 billion and $41.7 billion at
June 30, 2005 and December 31, 2004. Total interest  sensitive  liabilities were
$41.6  billion and $35.9  billion at June 30, 2005 and December  31,  2004.  The
addition of the  education  lending  receivables  and related  debt during first
quarter  increased the  proportions of  floating-rate  assets and liabilities at
June 30, 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  accumulated  other
comprehensive loss 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  accumulated  other   comprehensive   loss  in  the
Consolidated  Balance  Sheets.  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 accumulated other  comprehensive loss (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  $3.3  billion  at June 30,  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.


                                       38


      We maintain  registration  statements  with the  Securities  and  Exchange
Commission  ("SEC") covering debt securities that we may sell in the future.  At
June 30, 2005, our registration  statements had $6.9 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 $7.5
billion:  $3.4 billion in  variable-rate  medium-term  notes and $4.1 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 2005,
we issued $0.3 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  June  30,  2005,  we  had
approximately  $5.0  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.

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

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



Liquidity Measurement                                             Current Target      June 30, 2005        December 31, 2004
---------------------                                             --------------      -------------        -----------------
                                                                                                        
Commercial paper to total debt............................        Maximum of 15%             7%                   11%
Short-term debt to total debt.............................        Maximum of 45%            28%                   31%
Bank lines to commercial paper............................        Minimum of 100%          211%                  150%
Aggregate alternative liquidity* to short-term debt.......        Minimum of 75%           115%                  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.


                                       39


      The following tables  summarize  significant  contractual  obligations and
projected  cash  receipts,  and  contractual  commitments at June 30, 2005 ($ in
millions):



                                                  Payments and Collections by Period(3) Ending June 30,
                                         ------------------------------------------------------------------------
                                            Total       2006          2007       2008          2009        2010+
                                         ---------   ---------    ---------   ---------     --------    ---------
                                                                                            
Commercial Paper.......................  $ 3,253.4   $ 3,253.4    $      --   $      --     $     --    $      --
Variable-rate senior unsecured notes...   13,556.0     4,505.1      5,625.4     2,217.3        837.7        370.5
Fixed-rate senior unsecured notes......   22,457.4     3,999.3      1,910.6     3,130.6      1,691.9     11,725.0
Non-recourse, secured borrowings.......    3,938.8     1,157.9           --          --           --      2,780.9
Preferred capital security.............      252.9          --           --          --           --        252.9
Lease rental expense...................      320.9        54.1         52.9        46.0         31.4        136.5
                                         ---------   ---------    ---------   ---------     --------    ---------
   Total contractual obligations.......   43,779.4    12,969.8      7,588.9     5,393.9      2,561.0     15,265.8
                                         ---------   ---------    ---------   ---------     --------    ---------
Finance receivables(1).................   40,509.3    12,048.6      4,362.2     3,717.2      2,460.6     17,920.7
Operating lease rental income..........    3,443.4     1,118.6        836.4       550.9        378.5        559.0
Finance receivables held for sale(2)...    1,435.9     1,435.9           --          --           --           --
Cash -- current balance.................   2,231.7     2,231.7           --          --           --           --
Retained interest in securitizations
   and other investments...............    1,122.0       819.8        124.2        42.9         98.2         36.9
                                         ---------   ---------    ---------   ---------     --------    ---------
   Total projected cash receipts.......   48,742.3    17,654.6      5,322.8     4,311.0      2,937.3     18,516.6
                                         ---------   ---------    ---------   ---------     --------    ---------
Net projected cash inflow (outflow)....  $ 4,962.9   $ 4,684.8    $(2,266.1)  $(1,082.9)    $  376.3    $ 3,250.8
                                         =========   =========    =========   =========     ========    =========


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



                                                            Commitment Expiration by June 30,
                                         -----------------------------------------------------------------------
                                            Total       2006         2007        2008          2009       2010+
                                         ---------    --------     --------    --------       ------    --------
                                                                                        
Credit extensions(1)...................  $ 9,337.1    $1,725.2     $  870.6    $  880.4       $912.6    $4,948.3
Aircraft purchases.....................    1,560.0       794.0        640.0       126.0           --          --
Letters of credit......................    1,200.6     1,156.9         28.2         0.2         13.1         2.2
Sale-leaseback payments................      472.4        10.0         31.0        31.1         31.1       369.2
Manufacturer purchase commitments......      593.1       593.1           --          --           --          --
Guarantees.............................      156.3       144.2           --        10.5          1.6          --
Acceptances............................       27.3        27.3           --          --           --          --
                                         ---------    --------     --------    --------       ------    --------
   Total contractual commitments.......  $13,346.8    $4,450.7     $1,569.8    $1,048.2       $958.4    $5,319.7
                                         =========    ========     ========    ========       ======    ========


--------------------------------------------------------------------------------
(1)   Excludes  amounts  related  to  a  third-party  vendor  program  that  are
      cancellable at any time or for any reason by the Company.  See Note 10 for
      additional explanation.

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.

      During the quarter ended March 31, 2005, we recorded a charge  relating to
third-party  servicing  errors.  During  the  quarter  ended June 30,  2005,  we
received  and  reviewed  the  servicer's   internal  control   enhancements  and
remediation   plan.   The   servicer's   remediation   plan  included   improved
reconciliation  procedures  and  additional  systems  change  controls.  We  are
continuing to implement  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.


                                       40


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):



                                                                                       June 30,    December 31,
                                                                                         2005          2004
                                                                                       --------    ------------
                                                                                                    
Securitized Assets:

   Specialty Finance -- commercial................................................     $3,797.2      $4,165.5
   Specialty Finance -- home lending..............................................      1,027.6       1,228.7
   Equipment Finance..............................................................      2,581.1       2,915.5
   Corporate Finance..............................................................         54.0            --
                                                                                       --------      --------
     Total securitized assets.....................................................     $7,459.9      $8,309.7
                                                                                       ========      ========
   Securitized assets as a % of managed assets....................................         12.8%         15.5%
                                                                                       ========      ========



                                                           Quarters Ended June 30,    Six Months Ended June 30,
                                                           -----------------------    -------------------------
                                                             2005           2004         2005          2004
                                                           --------        ------      --------      --------
                                                                                              
Volume Securitized:

   Specialty Finance -- commercial.....................    $  787.2        $475.5      $1,462.3      $1,438.8
   Equipment Finance...................................       265.5         371.7         519.4         644.8
                                                           --------        ------      --------      --------
     Total volume securitized..........................    $1,052.7        $847.2      $1,981.7      $2,083.6
                                                           ========        ======      ========      ========



      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 June 30,  2005 of $1.1
billion.  Retained  interests are subject to credit and  prepayment  risk. As of
June 30, 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.


                                       41


      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.................................................      43.28%        12.32%
Weighted average expected credit losses...........................................       0.50%         0.70%
Weighted average discount rate....................................................       7.77%         9.00%
Weighted average life (in years)..................................................       1.28          2.10


      The key assumptions used in measuring the fair value of retained interests
in securitized assets at June 30, 2005 were as follows:



                                                            Commercial Equipment     Home Lending
                                                           -----------------------        and      Recreational
                                                           Specialty     Equipment   Manufactured    Vehicles
                                                            Finance      Finance(1)     Housing      and Boat
                                                           ---------     ----------  ------------    --------
                                                                                             
Weighted average prepayment speed......................       18.7%         11.7%        25.8%         21.5%
Weighted average expected credit losses................       0.97%         1.28%        1.52%         1.35%
Weighted average discount rate.........................       7.92%         9.45%       13.09%        15.00%
Weighted average life (in years).......................       1.15          1.37         3.10          2.66


--------------------------------------------------------------------------------
(1)   Includes retained interests transferred to Corporate Finance during 2005.

      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 related receivables,  restricted cash and 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.

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):



                                                                                                 June 30,     December 31,
                                                                                                   2005          2004
                                                                                                 ---------    ------------
                                                                                                               
Commercial paper and term debt...........................................................        $43,205.6     $37,471.0
                                                                                                 ---------     ---------
Preferred capital securities.............................................................            252.9         253.8
Stockholders' equity(1)..................................................................          6,413.7       6,073.7
Goodwill and other intangible assets.....................................................           (903.1)       (596.5)
                                                                                                 ---------     ---------
  Total tangible stockholders' equity and preferred capital securities...................          5,763.5       5,731.0
                                                                                                 ---------     ---------
Total tangible capitalization............................................................        $48,969.1     $43,202.0
                                                                                                 =========     =========
Tangible stockholders' equity(1) and Preferred Capital Securities to managed assets .....             9.92%        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."


                                       42


      The education  lending  acquisition in Specialty Finance -- consumer and a
factoring  purchase in  Commercial  Services  drove the increase in goodwill and
acquired intangibles from December 2004.

      The preferred  capital  securities are 7.7% 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  accounting
principles  generally accepted in the United States ("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.

Statistical Data

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



                                                                                     Six Months Ended June 30,
                                                                                     -------------------------
                                                                                        2005           2004
                                                                                      ---------     ---------
                                                                                                     
Finance income....................................................................         9.28%         9.64%
Interest expense..................................................................         3.75%         3.19%
                                                                                      ---------     ---------
Net finance income................................................................         5.53%         6.45%
Depreciation on operating lease equipment.........................................         2.09%         2.53%
                                                                                      ---------     ---------
Net finance margin................................................................         3.44%         3.92%
Provision for credit losses.......................................................         0.40%         0.81%
                                                                                      ---------     ---------
Net finance margin after provision for credit losses..............................         3.04%         3.11%
Other revenue.....................................................................         2.26%         2.47%
Gain (loss) on venture capital investments........................................         0.05%         0.02%
                                                                                      ---------     ---------
Operating margin..................................................................         5.35%         5.60%
Salaries and general operating expenses...........................................         2.32%         2.63%
Provision for restructuring.......................................................         0.11%         0.00%
Gain on redemption of debt........................................................         0.00%         0.23%
                                                                                      ---------     ---------
Income before provision for income taxes..........................................         2.92%         3.20%
Provision for income taxes........................................................        (1.03)%       (1.25)%
Minority interest, after tax......................................................        (0.01)%        0.00%
                                                                                      ---------     ---------
  Net income......................................................................         1.88%         1.95%
                                                                                      =========     =========
Average Earning Assets............................................................    $45,870.8     $37,499.1
                                                                                      =========     =========



                                       43


Non-GAAP Financial Measurements

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

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

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



                                                                                      June 30,    December 31,
                                                                                        2005          2004
                                                                                      ---------     ---------
Managed assets(1):
                                                                                                    
Finance receivables...............................................................    $40,509.3     $35,048.2
Operating lease equipment, net....................................................      8,642.9       8,290.9
Finance receivables held for sale.................................................      1,435.9       1,640.8
Equity and venture capital investments (included in other assets).................         31.6         181.0
                                                                                      ---------     ---------
Total financing and leasing portfolio assets......................................     50,619.7      45,160.9
Securitized assets................................................................      7,459.9       8,309.7
                                                                                      ---------     ---------
   Managed assets.................................................................    $58,079.6     $53,470.6
                                                                                      =========     =========
Earning assets(2):

Total financing and leasing portfolio assets......................................    $50,619.7     $45,160.9
Credit balances of factoring clients..............................................     (3,649.2)     (3,847.3)
                                                                                      ---------     ---------
   Earning assets.................................................................    $46,970.5     $41,313.6
                                                                                      =========     =========
Tangible equity(3):

Total equity......................................................................    $ 6,401.2     $ 6,055.1
Other comprehensive loss relating to derivative financial instruments.............         29.5          27.1
Unrealized gain on securitization investments.....................................        (17.0)         (8.5)
Goodwill and intangible assets....................................................       (903.1)       (596.5)
                                                                                      ---------     ---------
Tangible common equity............................................................      5,510.6       5,477.2
Preferred capital securities......................................................        252.9         253.8
                                                                                      ---------     ---------
   Tangible equity................................................................    $ 5,763.5     $ 5,731.0
                                                                                      =========     =========
Debt, net of overnight deposits(4):
Total debt........................................................................    $43,458.5     $37,724.8
Overnight deposits................................................................     (1,149.2)     (1,507.3)
Preferred capital securities......................................................       (252.9)       (253.8)
                                                                                      ---------     ---------
   Debt, net of overnight deposits................................................    $42,056.4     $35,963.7
                                                                                      =========     =========


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


                                       44


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 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.


                                       45


Item 4. Controls and Procedures

      As previously  disclosed,  management  has  determined  that the lack of a
control  capability 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 June 30, 2005, we continued developing
the  transactional-level  reconciliations  of  book  to tax  differences  of our
business  units  and  legal  entities,  which  in  turn  validated  our  current
methodology in connection with remediating the material weakness.

      We are completing the transactional-level  reconciliations, as well as the
computations of other tax basis balance sheet assets and liabilities,  including
the net operating loss  carryforward.  Accordingly,  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 second quarter of 2005 that have materially affected,
or are reasonably likely to materially  affect,  the Company's  internal control
over financial reporting.


                                       46


                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

NorVergence Related Litigation

      On September 9, 2004,  Exquisite  Caterers Inc., et al. v. Popular Leasing
Inc., et al. ("Exquisite Caterers"), a putative national class action, was filed
against 13 financial  institutions,  including CIT, which 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 has alleged 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,  were filed by  NorVergence  customers  against CIT and other  financial
institutions.  On June 16,  2005,  the Court in  Exquisite  Caterers  denied the
plaintiffs'  motion  for  class  certification.  Plaintiffs  filed a motion  for
reconsideration  of the Court's  denial.  Thereafter,  the putative class action
suits in Florida  and New York and one of the  putative  class  action  suits in
Illinois were dismissed as to CIT,  leaving pending  putative class action suits
in Illinois and Texas.

      On July 14, 2004,  the U.S.  Bankruptcy  Court ordered the  liquidation of
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
has entered  into  settlement  agreements  with all of those  Attorneys  General
except for California and Texas. Under those  settlements,  lessees will have an
opportunity  to resolve all claims by and against CIT by paying a percentage  of
the remaining balance on their lease. CIT has also produced documents related to
NorVergence at the request of the Federal Trade Commission  ("FTC").  No further
action by the FTC against CIT is expected.  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 has produced documents in response to that subpoena.

Other Litigation

      In addition,  there are various legal  proceedings  that have been brought
against  CIT 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 June 30, 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 March 31, 2005 ............     1,348,391       $39.51                                  931,000
                                          ----------                                       
   April 1 - 30, 2005 ................       630,000       $38.99            630,000             5,301,000(2)
   May 1 - 31, 2005 ..................       630,000       $40.78            630,000             4,671,000
   June 1 - 30, 2005 .................       765,100       $42.23            765,100             3,905,900
                                          ----------                                       
   Total Purchases ...................     2,025,100                                            
                                          ----------                                       
Reissuances(1)........................    (1,164,686)                                      
                                          ----------                                       
Balance at June 30, 2005..............     2,208,805                                       
                                          ==========                                      


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

(2)   Reflects the  repurchase  program for up to an additional 5 million shares
      to be used  for  employee  stock  purchase  plans  and  general  corporate
      purposes  that was approved by the  Company's  Board of Directors on April
      18, 2005.

                                       47


      In connection with a share repurchase  program authorized by the Company's
Board of Directors, on July 19, 2005, the Company entered into an agreement with
Goldman,  Sachs & Co.  ("Goldman  Sachs") to  purchase  shares of the  Company's
common  stock  for  an  aggregate  purchase  price  of  $500  million  under  an
accelerated  stock  buyback  program.  The buyback  agreement  provides  for the
upfront  delivery of $500 million to Goldman  Sachs and the initial  delivery of
shares to CIT, followed by the potential delivery of additional shares depending
upon the price of CIT common stock  during the term of the  program.  Additional
shares may be delivered to CIT at two subsequent dates, during the third quarter
when minimum and maximum  number of shares will be set and in the fourth quarter
at the end of the program.  Repurchased  shares delivered to CIT will be held in
treasury.

      The number of additional shares the Company may receive over the remaining
term of the  agreement,  which expires during  December 2005,  will generally be
based upon the  volume-weighted  average  price of the  Company's  common  stock
during the term of the program.  However, as part of the agreement,  minimum and
maximum  share prices will be set,  which will serve to determine  the number of
shares to be received.  The minimum and maximum share prices will be established
based upon the volume-weighted  average price during a period that began on July
25, 2005,  and will be completed  during the third quarter of 2005.  The Company
expects that the program will be completed in December 2005, although in certain
circumstances the completion date may be accelerated or extended.

      In  connection  with the program,  the Company  expects that Goldman Sachs
will purchase shares of the Company's common stock in the open market over time.
Also in conjunction  with the program,  Goldman Sachs may sell CIT shares in the
open market over time. These activities undertaken by Goldman Sachs are expected
to increase the amount of short  interest in the  Company's  stock,  but will be
reversed over the course of the agreement term.

      On July 28, 2005, the Company  delivered $500 million to Goldman Sachs and
received  the  initial  delivery of  approximately  8.2  million  shares,  while
retaining the right to receive  additional  shares as explained  above.  The 8.2
million shares  represents 80% of the minimum expected share delivery based upon
preliminary  pricing.  In no event,  will CIT receive  less than the 8.2 million
shares.

      On July 26,  2005,  the Company  issued $500 million  aggregate  amount of
Series A and Series B preferred equity securities. The offering was comprised of
$350 million 6.35%  non-cumulative  fixed rate Series A preferred stock and $150
million 5.189% non-cumulative  adjustable rate Series B preferred stock. Holders
of the Series A  preferred  shares  will be  entitled  to receive  dividends  as
declared,  at an annual rate of 6.35%.  Holders of the Series B preferred shares
will be entitled to receive  dividends as declared,  at an annual rate of 5.189%
through and including  September 15, 2010, and thereafter at an annual  floating
rate spread over a pre-specified  benchmark rate. Both the Series A and Series B
preferred  stock are callable at par at any time after  September 15, 2010.  The
intended use of proceeds  from this  offering was to fund the  repurchase of our
common stock in conjunction  with the  previously  announced  accelerated  stock
buyback program.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

      None

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

      The annual meeting of stockholders was held on May 11, 2005. The following
table  includes  individuals,  comprising  all of the directors of CIT, who were
elected to the Board of Directors, each with the number of votes shown, to serve
until the next annual  meeting of  stockholders,  or until  succeeded by another
qualified director who has been elected, along with all other proposals and vote
tallies:

Proposal                                                 Votes           Votes
  No.         Description              Votes For        Withheld        Abstain
-------- ----------------------       -----------      -----------     --------
   1     Election of Directors:
         GARY C. BUTLER               109,977,954      81,012,782         --
         WILLIAM A. FARLINGER         189,603,008       1,387,728         --
         WILLIAM M. FREEMAN           177,238,830      13,751,906         --
         HON. THOMAS H. KEAN          175,048,156      15,942,580         --


                                       48


Proposal                                                 Votes           Votes
  No.         Description              Votes For        Withheld        Abstain
-------- ----------------------       -----------     -------------   ----------
         MARIANNE MILLER PARRS        189,657,686        1,333,050           --
         JEFFREY M. PEEK              185,436,076        5,554,660           --
         TIMOTHY M. RING              177,268,799       13,721,937           --
         JOHN R. RYAN                 189,657,558        1,333,178           --
         PETER J. TOBIN               189,646,864        1,343,872           --
         LOIS M. VAN DEUSEN           189,661,021        1,329,715           --
   2     Ratification of Independent 
         Accountants                  189,704,057          293,217       993,462
   3     Other business                74,707,328      103,710,158    12,573,250

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).

            3.3   Certificate of Designations  relating to the Company's  6.350%
                  Non-Cummulative  Preferred  Stock  Series A  (incorporated  by
                  reference  to  Exhibit 3 to Form 8-A  filed by CIT on July 29,
                  2005).

            3.4   Certificate   of   Designations   relating  to  the  Company's
                  Non-Cumulative  Preferred  Stock,  Series B  (incorporated  by
                  reference  to  Exhibit  3 to Form 8-A filed by CIT on July 29,
                  2005).

            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.

            10.1* Master  Confirmation  Agreement  and the related  Supplemental
                  Confirmation dated as of July 19, 2005 between Goldman,  Sachs
                  and Co. and CIT Group Inc. relating to CIT's accelerated stock
                  repurchase program.

            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.

----------
*     Portions  of  this  exhibit  have  been  redacted  and  are  subject  of a
      confidential  treatment request filed with the Secretary of the Securities
      and  Exchange  Commission  pursuant  to rule  24b-2  under the  Securities
      Exchange Act of 1934 as amended.


                                       49


                                   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

August 5, 2005


                                       50