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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 September 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 Section 13 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 [_]

      Indicate  by check mark  whether  the  registrant  is a shell  company as
defined in Rule 12b-2 under the Securities Exchange Act of 1934. Yes [_] No [X]

      As of October 28, 2005, there were 199,775,814  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)...........  5-21
Item 2. Management's Discussion and Analysis of Financial
          Condition and Results of Operations and
Item 3. Quantitative and Qualitative Disclosure about Market Risk........  22-48
Item 4. Controls and Procedures..........................................   49

                           Part II--Other Information:

Item 1. Legal Proceedings................................................   50
Item 2. Unregistered Sales of Equity Securities and
          Use of Proceeds................................................   50
Item 3. Default Upon Senior Securities...................................   51
Item 4. Submission of Matters to a Vote of Security Holders..............   51
Item 5. Other Information................................................   51
Item 6. Exhibits.........................................................   52

Signatures ..............................................................   53


                                       i


                         PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                  September 30,   December 31,
                                                                      2005            2004
                                                                  -------------   ------------
                                                                           
                                            ASSETS
Financing and leasing assets:
   Finance receivables ........................................    $  38,290.5   $  35,048.2
   Student lending receivables pledged ........................        4,396.1            --
   Reserve for credit losses ..................................         (652.8)       (617.2)
                                                                   -----------   -----------
   Net finance receivables ....................................       42,033.8      34,431.0
   Operating lease equipment, net .............................        9,184.4       8,290.9
   Financing and leasing assets held for sale .................        1,848.4       1,640.8
Cash and cash equivalents, including $347.3 and $0.0 restricted        1,935.4       2,210.2
Retained interest in securitizations and other investments ....        1,180.9       1,228.2
Goodwill and intangible assets, net ...........................        1,003.8         596.5
Other assets ..................................................        2,964.9       2,713.7
                                                                   -----------   -----------
Total Assets ..................................................    $  60,151.6   $  51,111.3
                                                                   ===========   ===========

                              LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
   Commercial paper ...........................................    $   5,185.1   $   4,210.9
   Variable-rate senior unsecured notes .......................       14,318.1      11,545.0
   Fixed-rate senior unsecured notes ..........................       21,473.3      21,715.1
   Non-recourse, secured borrowings -- student lending ........        3,737.7            --
   Preferred capital securities ...............................          252.5         253.8
                                                                   -----------   -----------
Total debt ....................................................       44,966.7      37,724.8
Credit balances of factoring clients ..........................        4,267.1       3,847.3
Accrued liabilities and payables ..............................        4,293.7       3,443.7
                                                                   -----------   -----------
   Total Liabilities ..........................................       53,527.5      45,015.8
Commitments and Contingencies (Note 10)
Minority interest .............................................           49.8          40.4
Stockholders' Equity:
   Preferred stock: $0.01 par value, 100,000,000 authorized,
     Issued and outstanding:
       Series A 14,000,000 with a liquidation preference
         of $25 per share .....................................          350.0            --
       Series B 1,500,000 with a liquidation preference
         of $100 per share ....................................          150.0            --
   Common stock: $0.01 par value, 600,000,000 authorized,
     Issued: 212,284,056 and 212,112,203 ......................            2.1           2.1
     Outstanding: 200,268,812 and 210,440,170
   Paid-in capital, net of deferred compensation of $54.4
     and $39.3 ................................................       10,598.7      10,674.3
   Accumulated deficit ........................................       (3,943.2)     (4,499.1)
   Accumulated other comprehensive loss .......................          (50.6)        (58.4)
Less: treasury stock, 12,015,244 and 1,672,033 shares, at cost          (532.7)        (63.8)
                                                                   -----------   -----------
Total Common Stockholders' Equity .............................        6,074.3       6,055.1
                                                                   -----------   -----------
   Total Stockholders' Equity .................................        6,574.3       6,055.1
                                                                   -----------   -----------
Total Liabilities and Stockholders' Equity ....................    $  60,151.6   $  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            Nine Months Ended
                                                                          September 30,               September 30,
                                                                     ----------------------      ----------------------
                                                                       2005          2004          2005          2004
                                                                     --------      --------      --------      --------
                                                                                                   
Finance income .................................................     $1,153.7      $  957.0      $3,282.4      $2,762.8
Interest expense ...............................................        495.4         315.4       1,356.3         913.4
                                                                     --------      --------      --------      --------
Net finance income .............................................        658.3         641.6       1,926.1       1,849.4
Depreciation on operating lease equipment ......................        242.6         248.2         721.4         721.9
                                                                     --------      --------      --------      --------
Net finance margin .............................................        415.7         393.4       1,204.7       1,127.5
Provision for credit losses ....................................         69.9          60.2         162.4         211.5
                                                                     --------      --------      --------      --------
Net finance margin after provision for credit losses ...........        345.8         333.2       1,042.3         916.0
Other revenue ..................................................        253.8         216.7         784.2         684.3
                                                                     --------      --------      --------      --------
Operating margin ...............................................        599.6         549.9       1,826.5       1,600.3
Salaries and general operating expenses ........................        281.1         248.1         813.9         740.5
Provision for restructuring ....................................           --            --          25.2            --
Gain on redemption of debt .....................................           --            --            --          41.8
                                                                     --------      --------      --------      --------
Income before provision for income taxes .......................        318.5         301.8         987.4         901.6
Provision for income taxes .....................................        (93.0)       (117.7)       (328.8)       (351.6)
Minority interest, after tax ...................................         (0.8)         (0.2)         (2.8)         (0.2)
                                                                     --------      --------      --------      --------
Net income before preferred stock dividends ....................        224.7         183.9         655.8         549.8
Preferred stock dividends ......................................         (5.2)           --          (5.2)           --
                                                                     --------      --------      --------      --------
Net income available to common stockholders ....................     $  219.5      $  183.9      $  650.6      $  549.8
                                                                     ========      ========      ========      ========
Earnings per common share
Basic earnings per common share ................................     $   1.08      $   0.87      $   3.13      $   2.60
Diluted earnings per common share ..............................     $   1.06      $   0.86      $   3.06      $   2.56
Number of common shares -- basic (thousands) ...................      203,103       210,489       208,088       211,286
Number of common shares -- diluted (thousands) .................      207,952       214,179       212,580       215,116
Dividends per common share .....................................     $   0.16      $   0.13      $   0.45      $   0.39


                 See Notes to Consolidated Financial Statements.


                                       2


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                           Accumulated
                                                                             Accumulated       Other                       Total
                                             Preferred   Common    Paid-in    (Deficit)/   Comprehensive    Treasury   Stockholders'
                                               Stock      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..............................                                          650.6                                     650.6
Foreign currency translation
  adjustments ..........................                                                        (47.3)                      (47.3)
Change in fair values of derivatives
  qualifying as cash flow hedges .......                                                         42.6                        42.6
Unrealized gain on equity and
  securitization investments, net ......                                                         12.1                        12.1
Minimum pension liability
  adjustment ...........................                                                          0.4                         0.4
                                                                                                                         --------
Total comprehensive income..............                                                                                    658.4
                                                                                                                         --------
Issuance of Series A and B
  preferred stock ......................      500.0                    (10.1)                                               489.9
Cash dividends..........................                                          (94.7)                                    (94.7)
Restricted common stock grants
  amortization .........................                                32.7                                                 32.7
Shares acquired under stock
  repurchase agreement .................                               (52.3)                                (447.7)       (500.0)
Treasury stock purchased, at cost ......                                                                     (208.5)       (208.5)
Exercise of stock option awards.........                               (45.4)                                 184.1         138.7
Employee stock purchase plan
  participation .......................                                 (0.5)                                   3.2           2.7
                                             ------      ------    ---------  ---------        ------       -------      --------
September 30, 2005.....................      $500.0      $  2.1    $10,598.7  $(3,943.2)       $(50.6)      $(532.7)     $6,574.3
                                             ======      ======    =========  =========        ======       =======      ========


                 See Notes to Consolidated Financial Statements.


                                       3


                        CIT GROUP INC. AND SUBSIDIARIES

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



                                                                        Nine Months Ended
                                                                          September 30,
                                                                      -------------------
                                                                       2005         2004
                                                                      ------       ------
                                                                          
Cash Flows From Operations
Net income (loss) .............................................    $    650.6   $    549.8
Adjustments to reconcile net income (loss) to net cash flows
   from operations:
   Depreciation and amortization ..............................         752.8        747.5
   Provision for deferred federal income taxes ................         236.8        274.2
   Provision for credit losses ................................         162.4        211.5
   Gains on equipment, receivable and investment sales ........        (125.7)      (174.3)
   Gain on debt redemption ....................................            --        (41.8)
   Decrease (increase) in finance receivables held for sale ...          91.6       (771.5)
   Decrease in other assets ...................................          27.7        133.5
   Increase (decrease) in accrued liabilities and payables ....         489.9       (258.1)
   Other ......................................................         (93.7)       (74.7)
                                                                   ----------   ----------
Net cash flows provided by operations .........................       2,192.4        596.1
                                                                   ----------   ----------
Cash Flows From Investing Activities
Loans extended ................................................     (41,169.6)   (37,978.6)
Collections on loans ..........................................      38,178.4     34,905.9
Proceeds from asset and receivable sales ......................       4,214.4      3,112.1
Purchase of finance receivable portfolios .....................      (2,817.6)    (2,027.4)
Purchases of assets to be leased ..............................      (1,687.7)      (874.3)
Net decrease in short-term factoring receivables ..............        (481.3)      (416.1)
Acquisitions, net of cash acquired ............................        (315.1)      (724.8)
Goodwill and intangibles assets acquired ......................        (423.0)      (114.1)
Other .........................................................         137.0         69.2
                                                                   ----------   ----------
Net cash flows (used for) investing activities ................      (4,364.5)    (4,048.1)
                                                                   ----------   ----------
Cash Flows From Financing Activities
Proceeds from the issuance of variable and fixed-rate notes ...       9,581.4     10,071.7
Repayments of variable and fixed-rate notes ...................      (7,818.5)    (6,549.8)
Net increase in commercial paper ..............................         974.2        322.6
Net loans extended -- pledged in conjunction with
  secured borrowings ..........................................        (782.2)          --
Issuance of preferred stock ...................................         489.9           --
Treasury stock repurchases ....................................        (521.2)          --
Cash dividends paid ...........................................         (94.7)       (83.6)
Net repayments of non-recourse leveraged lease debt ...........          81.6        (38.6)
Other .........................................................         (13.2)       (83.9)
                                                                   ----------   ----------
Net cash flows provided by financing activities ...............       1,897.3      3,638.4
                                                                   ----------   ----------
Net (decrease) increase in cash and cash equivalents ..........        (274.8)       186.4
Cash and cash equivalents, beginning of period ................       2,210.2      1,973.7
                                                                   ----------   ----------
Cash and cash equivalents, end of period ......................    $  1,935.4   $  2,160.1
                                                                   ==========   ==========
Supplementary Cash Flow Disclosure
Interest paid .................................................    $  1,185.8   $    911.7
Federal, foreign, state and local income taxes paid, net ......    $     64.0   $     74.4


                 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,  student lending and structured  financing products as well as offering
management  advisory  services.  CIT operates  primarily in North America,  with
locations in Europe, Latin America, Australia and the Asia-Pacific region.

      These  financial  statements  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.

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):



                                                                     Quarters Ended        Nine Months Ended
                                                                      September 30,           September 30,
                                                                    -----------------      ------------------
                                                                     2005       2004        2005       2004
                                                                    ------     ------      ------     ------
                                                                                          
Net income available to common stockholders, as reported.......     $219.5     $183.9      $650.6     $549.8
Stock-based compensation expense -- fair value method,
  after tax....................................................       (4.7)      (5.1)      (14.6)     (15.6)
                                                                    ------     ------      ------     ------
Proforma net income............................................     $214.8     $178.8      $636.0     $534.2
                                                                    ======     ======      ======     ======
Basic earnings per common share as reported....................     $ 1.08     $ 0.87      $ 3.13     $ 2.60
Basic earnings per common share proforma.......................     $ 1.06     $ 0.85      $ 3.06     $ 2.53
Diluted earnings per common share as reported..................     $ 1.06     $ 0.86      $ 3.06     $ 2.56
Diluted earnings per common share proforma.....................     $ 1.03     $ 0.83      $ 2.99     $ 2.48


      For the quarters ended September 30, 2005 and 2004, net income as reported
includes $5.9 million and $3.4 million of after-tax compensation cost related to
restricted  stock awards,  while the  year-to-date  costs were $20.0 million for
2005 and $10.9 million for 2004.

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


                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited)

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").  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 implementation 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 Common Share

      Basic earnings per common share ("EPS") is computed by dividing net income
by the weighted-average  number of common shares outstanding for the period. The
diluted EPS computation  includes the potential  impact of dilutive  securities,
including  stock options and  restricted  stock grants.  The dilutive  effect of
stock options is computed  using the treasury  stock  method,  which assumes the
repurchase of common  shares by CIT at the average  market price for the period.
Options that do not have a dilutive  effect (because the exercise price is above
the market price) are not included in the denominator and averaged approximately
15.9 million shares and 18.2 million shares for the quarters ended September 30,
2005 and 2004,  and 16.3  million  shares and 17.0  million  shares for the nine
months ended September 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 common share  amounts,
which  are in whole  dollars;  weighted-average  common  share  balances  are in
thousands):



                                     Quarter Ended September 30, 2005        Quarter Ended September 30, 2004
                                   ------------------------------------    -------------------------------------
                                     Income        Shares     Per Share      Income       Shares       Per Share
                                   (Numerator)  (Denominator)   Amount     (Numerator)  (Denominator)    Amount
                                   -----------  ------------- ---------    -----------  -------------  ---------
                                                                                       
Basic EPS:
  Income available to common
    stockholders................     $219.5        203,103      $1.08       $183.9         210,489       $0.87
Effect of Dilutive Securities:
  Restricted shares.............                       960                                     649
  Performance shares............                       893                                      --
  Stock options.................                     2,996                                   3,041
                                     ------        -------                  ------         -------
Diluted EPS.....................     $219.5        207,952      $1.06       $183.9         214,179       $0.86
                                     ======        =======                  ======         =======

                                  Nine Months Ended September 30, 2005    Nine Months Ended September 30, 2004
                                  ------------------------------------    ------------------------------------
Basic EPS:
  Income available to common
    stockholders................     $650.6        208,088      $3.13       $549.8         211,286       $2.60
Effect of Dilutive Securities:..
  Restricted shares.............                       909                                     650
  Performance shares............                       656                                      --
  Stock options.................                     2,927                                   3,180
                                     ------        -------                  ------         -------
Diluted EPS.....................     $650.6        212,580      $3.06       $549.8         215,116       $2.56
                                     ======        =======                  ======         =======



                                       6


                         CIT GROUP INC. AND SUBSIDIARIES

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

      The average common shares  outstanding for the quarter ended September 30,
2005 reflects the receipt of 10,063,467  treasury  shares in conjunction  with a
stock buyback agreement. See Note 6 for additional information.

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.   The  former
Commercial  Finance segment was 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):



                        Specialty    Specialty                                                         Corporate
                        Finance -    Finance -    Commercial  Corporate  Equipment  Capital    Total      and
                        commercial    consumer     Services    Finance    Finance   Finance   Segments   Other     Consolidated
                        ----------   ----------   ----------  ---------  ---------  --------  -------- ----------  ------------
                                                                                         
Quarter Ended
September 30, 2005
Net finance income ...    $   294.4  $    51.9    $   37.0    $   78.5    $   37.6  $   152.1  $   651.5  $  6.8    $   658.3
Depreciation on
  operating lease
  equipment ..........        143.0         --          --         2.9         6.7       90.0      242.6      --        242.6
Provision for credit
  losses .............         23.7        9.2         6.3        (3.2)        3.4        2.3       41.7    28.2         69.9
Other revenue ........         67.0       21.4        76.0        31.9        24.5      (75.4)     145.4   108.4        253.8
Income taxes .........        (31.7)     (10.0)      (29.3)      (29.0)      (12.9)      44.6      (68.3)  (24.7)       (93.0)
Net income ...........         74.5       16.8        48.4        46.2        22.1        5.8      213.8     5.7        219.5
Quarter Ended
September 30, 2004
Net finance income ...    $   308.8  $    34.6    $   29.9    $   63.5    $   53.0  $   130.3  $   620.1  $ 21.5    $   641.6
Depreciation on
  operating lease
  equipment ..........        157.1         --          --         1.1        12.7       77.4      248.3    (0.1)       248.2
Provision for credit
  losses .............         31.7        7.8         7.3         3.5         7.8         --       58.1     2.1         60.2
Other revenue ........         79.5        9.4        74.1        21.2        23.1        5.2      212.5     4.2        216.7
Income taxes .........        (42.9)      (8.0)      (26.9)      (22.5)      (12.1)     (11.8)    (124.2)    6.5       (117.7)
Net income (loss)  ...         69.5       12.2        42.6        32.7        20.1       27.9      205.0   (21.1)       183.9
At or for the Nine
Months Ended
September 30, 2005
Net finance income ...    $   871.8  $   143.0    $   98.7    $  224.7    $  130.6  $   421.1  $ 1,889.9  $ 36.2    $ 1,926.1
Depreciation on
  operating lease
  equipment ..........        426.5         --          --         8.6        28.5      257.9      721.5    (0.1)       721.4
Provision for credit
  losses .............         67.9       26.6        18.4         4.5        16.7        2.7      136.8    25.6        162.4
Other revenue ........        246.2       59.5       212.4        95.2        94.8      (61.5)     646.6   137.6        784.2
Income taxes .........       (122.1)     (30.5)      (77.7)      (80.3)      (47.0)      30.3     (327.3)   (1.5)      (328.8)
Net income (loss)  ...        228.7       49.2       128.3       131.3        77.6       71.3      686.4   (35.8)       650.6
Total financing and
  leasing assets .....     10,717.2   11,776.7     7,388.9     9,054.2     4,676.1   10,137.4   53,750.5      --     53,750.5
Total managed assets..     14,713.4   12,688.1     7,388.9     9,100.3     7,261.8   10,137.4   61,289.9      --     61,289.9


                                       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
                         ----------   ----------   ----------  ---------  ---------  --------  -------- ----------  ------------
                                                                                          
At or for the Nine
Months Ended
September 30, 2004
Net finance income ....    $   878.7  $    90.7    $   81.2    $  200.5    $  163.9  $   363.3  $ 1,778.3  $ 71.1    $ 1,849.4
Depreciation on
  operating lease
  equipment ...........        441.6         --          --         3.2        38.0      239.2      722.0    (0.1)       721.9
Provision for credit
  losses ..............         83.2       23.8        17.3        24.5        49.6        7.6      206.0     5.5        211.5
Other revenue .........        228.3       39.6       212.0        90.1        81.2       24.3      675.5     8.8        684.3
Income taxes ..........       (100.9)     (22.1)      (76.2)      (73.6)      (33.7)     (27.2)    (333.7)  (17.9)      (351.6)
Net income (loss)  ....        204.0       33.9       118.9       110.9        55.5       63.6      586.8   (37.0)       549.8
Total financing and
  leasing assets ......     11,289.1    4,427.7     6,764.0     6,628.2     6,844.6    8,465.6   44,419.2      --     44,419.2
Total managed assets ..     15,006.7    5,780.3     6,764.0     6,628.2     9,769.3    8,465.6   52,414.1      --     52,414.1


      Corporate  and Other  results for the  quarter  ended  September  30, 2005
include a reserve for credit losses of $34.6  million and a $6.8 million  pretax
securitization   retained  interest  impairment  charge  relating  to  estimated
Hurricanes  Katrina and Rita losses.  These amounts  reflect  management's  best
estimate  of  loss  as of  September  30,  2005  based  on  available,  relevant
information.  Total business  segment owned and  securitized  receivables in the
three most impacted states (Louisiana,  Alabama and Mississippi) as of September
30, 2005 were  approximately  $925 million and $200 million.  Of these  amounts,
exposure to commercial and consumer  customers  located in the Federal Emergency
Management  Agency  ("FEMA")  designated  disaster  areas and other  areas  that
management  determined  were  significantly  impacted  were  approximately  $600
million and $50 million  respectively,  including  approximately $250 million in
the FEMA designated disaster areas relating  principally to equipment and vendor
finance assets and home mortgages.  For commercial loans, management performed a
loan-by-loan  assessment of estimated  loss. For the equipment and vendor assets
and home mortgages in the FEMA designated disaster areas,  management  performed
an analysis of exposure by zip code, including flood versus non-flood designated
locations,   supplemented  with  a  range  of  corresponding   estimated  damage
assessments.   This  estimate  of  loss  involves   considerable   judgment  and
assumptions  about  uncertain  matters,  including the existence of insurance in
force with respect to damages  incurred,  insurance  claims and proceeds and the
extent of property  damage.  Management  will  continue to assess the  financial
impact of the hurricanes as more information becomes available.

      During the quarter ended September 30, 2005,  management initiated actions
to sell $190  million of older,  out-of-production  aircraft and $125 million in
manufactured  housing  receivables.  These assets were reclassified to Financing
and Leasing  Assets  Held for Sale and marked to  estimated  fair  value,  which
resulted in pretax  losses  recorded in other  revenue  during the quarter ended
September 30, 2005 of $86.6 million in Capital  Finance  related to aircraft and
$20.0  million in  Specialty  Finance - commercial  related to the  manufactured
housing  receivables.  The estimated  fair values were  developed  from relevant
market information, including third party sales for similar equipment, published
appraisal data and other relevant market place data.


                                       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):



                                                      September 30, 2005      December 31, 2004
                                                      Amount     Percent      Amount    Percent
                                                      ------------------      -----------------
                                                                              
Geographic
North America:
West ............................................     $10,292.4    19.1%     $ 8,595.3    19.0%
Northeast .......................................      10,246.2    19.1%       8,463.4    18.7%
Midwest .........................................       8,954.6    16.7%       6,907.0    15.3%
Southeast .......................................       7,626.0    14.2%       6,283.3    14.0%
Southwest .......................................       5,630.9    10.5%       4,848.3    10.7%
Canada ..........................................       2,968.2     5.5%       2,483.4     5.5%
                                                      ---------   -----      ---------   -----
Total North America .............................      45,718.3    85.1%      37,580.7    83.2%
Other foreign ...................................       8,032.2    14.9%       7,580.2    16.8%
                                                      ---------   -----      ---------   -----
Total ...........................................     $53,750.5   100.0%     $45,160.9   100.0%
                                                      =========   =====      =========   =====
Industry
Manufacturing(1)(7) .............................     $ 7,497.6    13.9%     $ 6,932.0    15.4%
Retail(2) .......................................       7,052.2    13.1%       5,859.4    13.0%
Consumer based lending -- home lending ..........       6,886.4    12.8%       5,069.8    11.2%
Commercial airlines (including regional airlines)       5,998.4    11.2%       5,512.4    12.2%
Consumer based lending -- student lending .......       4,552.4     8.5%            --       --
Service industries ..............................       3,000.6     5.6%       2,854.5     6.3%
Transportation(3) ...............................       2,664.8     5.0%       2,969.6     6.6%
Consumer based lending -- non-real estate(4) ....       2,120.0     3.9%       2,480.1     5.5%
Wholesaling .....................................       1,877.3     3.5%       1,727.5     3.8%
Healthcare services .............................       1,782.9     3.3%         992.5     2.2%
Construction equipment ..........................       1,437.1     2.7%       1,603.1     3.5%
Communications(5) ...............................       1,216.1     2.3%       1,292.1     2.9%
Other (no industry greater than 2.2%)(6)(7) .....       7,664.7    14.2%       7,867.9    17.4%
                                                      ---------   -----      ---------   -----
Total ...........................................     $53,750.5   100.0%     $45,160.9   100.0%
                                                      =========   =====      =========   =====


--------------------------------------------------------------------------------
(1)   Includes  manufacturers  of apparel  (2.8%),  followed by food and kindred
      products,   chemical  and  allied   products,   textiles,   transportation
      equipment, industrial machinery and equipment, and other industries.

(2)   Includes retailers of apparel (5.7%) and general merchandise (4.1%).

(3)   Includes rail (3.6%),  followed by over-the-road  trucking,  shipping, bus
      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  $297.9 million and $335.2 million of equipment  financed for the
      telecommunications  industry at September  30, 2005 and December 31, 2004,
      respectively, but excludes telecommunications equipment financed for other
      industries.

(6)   The largest  concentration  included  in "Other" is the energy,  power and
      utilities sectors,  which totaled $1.1 billion, or 2.1% of total financing
      and  leasing   assets  at  September  30,  2005.   This  amount   includes
      approximately  $696.2  million in project  financing and $359.0 million in
      rail cars on lease.

(7)   Total  exposure to  manufacturers  of  automobiles  and related  suppliers
      included in  Manufacturing  and Other was less than 1% of total  financing
      and leasing assets at September 30, 2005.


                                       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):



                                                                  September 30,  December 31,
                                                                       2005         2004
                                                                  -------------  ------------
                                                                           
Retained interests in commercial loans:
   Retained subordinated securities ...........................    $     402.3   $     446.2
   Interest-only strips .......................................          390.0         292.4
   Cash reserve accounts ......................................          291.0         323.4
                                                                   -----------   -----------
   Total retained interests in commercial loans ...............        1,083.3       1,062.0
                                                                   -----------   -----------
Retained interests in consumer loans:(1)
   Retained subordinated securities ...........................           56.3          76.6
   Interest-only strips .......................................            4.8          17.0
   Cash reserve accounts ......................................             --            --
                                                                   -----------   -----------
   Total retained interests in consumer loans .................           61.1          93.6
                                                                   -----------   -----------
Total retained interests in securitizations ...................        1,144.4       1,155.6
Aerospace equipment trust certificates and other(2) ...........           36.5          72.6
                                                                   -----------   -----------
   Total ......................................................    $   1,180.9   $   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 -- Stockholders' Equity

Treasury Stock

      Pursuant to authorization by the Company's Board of Directors, on July 19,
2005, the Company  entered into an agreement to purchase shares of the Company's
common  stock  for  an  aggregate  purchase  price  of  $500  million  under  an
accelerated stock buyback program.

      On July 28,  2005,  the Company  paid $500 million and received an initial
delivery of  8,232,655  shares.  On August 12,  2005,  the  Company  received an
additional  1,830,812 shares under the program. CIT retains the right to receive
up to a maximum of 1,232,261  additional shares at the conclusion of the program
in the fourth quarter of 2005.  The actual amount  received will depend on CIT's
common  stock  price  during the  remaining  term of the  repurchase  agreement.
Repurchased shares delivered to CIT are held in treasury.

Preferred Stock

      On July 26,  2005,  the Company  issued $500 million  aggregate  amount of
Series A and  Series B  preferred  equity  securities.  The  proceeds  from this
offering  were used to fund the  repurchase  of our common stock in  conjunction
with the accelerated  stock buyback program.  The key terms of the issuances are
as follows:



                             Series A                                 Series B
-----------------------------------------------------------------------------------------------------
                                                                
Securities issued            Stated value of $350  million,           Stated value of $150  million,
                             comprised of 14 million shares           comprised   of   1.5   million
                             of 6.35%  non-cumulative fixed           shares        of        5.189%
                             rate  preferred  stock,  $0.01           non-cumulative adjustable rate
                             par  value per  share,  with a           preferred  stock,   $0.01  par
                             liquidation value of $25.                value   per   share,   with  a
                                                                      liquidation value of $100.
-----------------------------------------------------------------------------------------------------



                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

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



                             Series A                                 Series B
-----------------------------------------------------------------------------------------------------
                                                                
Dividends                    Annual  fixed-rate  of  6.35%,           Annual  fixed-rate  of 5.189%,
                             paid  quarterly,  when  and if           paid  quarterly,  when  and if
                             declared   by  the   Board  of           declared   by  the   Board  of
                             Directors.    Dividends    are           Directors,  through  September
                             non-cumulative.                          15, 2010, and thereafter at an
                                                                      annual  floating  rate  spread
                                                                      over a pre-specified benchmark
                                                                      rate.       Dividends      are
                                                                      non-cumulative.
-----------------------------------------------------------------------------------------------------
Redemption / maturity        No stated  maturity  date. Not           No stated  maturity  date. Not
                             redeemable  prior to September           redeemable  prior to September
                             15,      2010.      Redeemable           15,      2010.      Redeemable
                             thereafter at $25 per share at           thereafter  at $100 per  share
                             the option of CIT.                       at the option of CIT.
-----------------------------------------------------------------------------------------------------
Voting rights                No voting rights.                        No voting rights.
-----------------------------------------------------------------------------------------------------


Accumulated Other Comprehensive Loss

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

                                                     September 30,  December 31,
                                                         2005          2004
                                                     -------------  ------------
Changes in fair values of derivatives
  qualifying as cash flow hedges ..................    $  15.5      $ (27.1)
Foreign currency translation adjustments ..........      (84.5)       (37.2)
Minimum pension liability adjustments .............       (2.3)        (2.7)
Unrealized gain on equity and securitization
  investments .....................................       20.7          8.6
                                                       -------      -------
Total accumulated other comprehensive loss ........    $ (50.6)     $ (58.4)
                                                       =======      =======

      The changes in fair values of  derivatives  qualifying as cash flow hedges
related to  variations  in market  interest  rates during the quarter,  as these
derivatives  hedge the interest rate  variability  associated with an equivalent
amount  of  variable-rate  debt,  including  commercial  paper.  See  Note 7 for
additional information.

      During the nine months ended September 30, 2005,  $47.5 million in foreign
currency   translation   losses  were   reclassified  to  the  foreign  currency
translation component of equity from other assets and liabilities,  representing
translation  adjustments,  net of hedging  activity,  relating to the  company's
investments in foreign operations. This reclassification followed the completion
of enhancements in internal  controls,  including  additional  proof and control
procedures, with respect to foreign currency accounting.

      Total  comprehensive  income was $198.5 million and $220.9 million for the
quarters ended September 30, 2005 and 2004 and $658.4 million and $610.3 million
for the nine months ended September 30, 2005 and 2004.

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,  derivatives entered
into are designated according to a hedge objective against a specific liability,
forecasted  transaction or, in limited instances,  assets. The critical terms of
the derivatives,  including notional amounts,  rates,  indices,  and maturities,
match the related terms of the underlying hedged items.

      CIT utilizes interest rate swaps, whereby a fixed rate of interest is paid
and a variable rate of interest is received by the Company. These swaps hedge
the cash flow variability associated with forecasted issuances of


                                       11


                         CIT GROUP INC. AND SUBSIDIARIES

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

commercial paper and specific  variable-rate  debt  instruments.  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.

      CIT also utilizes  interest rate swaps whereby a variable rate of interest
is paid and a fixed rate of interest is  received  by the  Company.  These swaps
primarily hedge specific  fixed-rate debt instruments and are designated as fair
value hedges.  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.  A limited  number  of these  swaps  hedge  the cash flow  variability
associated  with specific  variable rate assets and are  classified as cash flow
hedges.

      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     Gain (Loss)
                                                             --------------   -----------   -----------
                                                                                     
Balance at December 31, 2004 -- unrealized loss ..........      ($ 41.3)        $  14.2       ($27.1)
Changes in values of derivatives qualifying as cash
  flow hedges ............................................         69.8           (27.2)        42.6
                                                                -------         -------      -------
Balance at September 30, 2005 -- unrealized gain .........      $  28.5         ($ 13.0)     $  15.5
                                                                =======         =======      =======


      The unrealized gain as of and for the nine months ended September 30, 2005
reflects  higher market  interest  rates since the inception of the hedges.  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  $3.8
million, net of tax, of the Accumulated Other Comprehensive Loss as of September
30, 2005 is expected to be  reclassified to earnings over the next twelve months
as contractual cash payments are made.

      Hedge ineffectiveness  occurs in certain cash flow hedges, and is 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 September 30, 2005.........       $0.1            Increase
Quarter ended September 30, 2004.........       $0.2            Increase
Nine months ended September 30, 2005.....       $1.1            Increase
Nine months ended September 30, 2004.....       $0.5            Decrease

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



                               September 30,  December 31,
                                    2005          2004
                               -------------  ------------
                                                    
Variable to fixed-rate swaps....  $ 6,684.9    $ 3,533.6     Hedge the cash flow variability
                                                             associated with forecasted
                                                             commercial paper issuances
                                                             and specific variable
                                                             rate debt (cash flow hedges).

Fixed to variable-rate swaps....    7,962.9      7,642.6     Hedge specific fixed rate debt (fair
                                                             value hedges); and in limited instances,
                                                             hedge the cash flow variability
                                                             associated with specific variable rate
                                                             assets (cash flow hedges)


      In  addition  to the  swaps  in  the  table  above,  in  conjunction  with
securitizations,  at September 30, 2005, CIT has $1.9 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 $1.9 billion in notional amount at September 30, 2005 to
insulate the related interest rate risk.


                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

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

      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  specific  foreign
currency denominated debt or loans to and net investments in foreign operations.
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  under SFAS 133 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 change in the fair value
adjustment for the quarter and nine months ended  September 30, 2005 amounted to
a $(0.2)  million  and $5.3  million  pretax  (loss)/gain.  CIT also has certain
cross-currency swaps (with a combined notional principal amount of $237 million)
and certain U.S.  dollar  interest rate swaps (with  notional  principal  amount
totaling  $1,680  million) that are excluded from the  preceding  tables.  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 September 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 $2.1
billion and $2.0 billion, and securitized assets included in managed assets were
approximately  $2.5 billion at both period ends. CIT's equity  investment in and
loans to the joint  venture was  approximately  $204 million and $267 million at
September 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.  Financing
and leasing  assets were  approximately  $1.1  billion  and  securitized  assets
included in managed  assets  were $0.1  billion at both  September  30, 2005 and
December 31, 2004.  In addition to the owned and  securitized  assets  purchased
from the Snap-on  joint  venture,  CIT's equity  investment  in and loans to the
joint  venture were  approximately  $10 million and $16 million at September 30,
2005 and December 31, 2004.


                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

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

      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.  CIT's
investment in and loans to the joint venture were approximately $278 million and
$191 million at September 30, 2005 and December 31, 2004.

      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.  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 at September 30, 2005 and December 31, 2004.

      Certain  shareholders of CIT provide  investment  management,  banking and
investment banking services in the normal course of business.

Note 9 -- Postretirement and Other Benefit Plans

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



                                                           For the Quarters             For the Nine Months
                                                          Ended September 30,           Ended September 30,
                                                         --------------------           -------------------
                                                         2005            2004           2005          2004
                                                         ----            ----           ----          ----
                                                                                          
Retirement Plans
Service cost.........................................     $ 4.9         $ 4.4           $14.7         $13.3
Interest cost........................................       4.2           3.9            12.9          11.7
Expected return on plan assets.......................      (4.8)         (4.0)          (14.4)        (12.1)
Amortization of net (gain) loss......................       0.7           0.7             2.1           2.1
                                                          -----         -----           -----         -----
Net periodic benefit cost............................       5.0           5.0            15.3          15.0
(Gain) Loss due to Settlements & Curtailments........        --            --             0.5            --
Cost for Special Termination Benefits................        --            --             2.3            --
                                                          -----         -----           -----         -----
Net amount recognized................................     $ 5.0         $ 5.0           $18.1         $15.0
                                                          =====         =====           =====         =====
Postretirement Plans
Service cost.........................................     $ 0.6         $ 0.5           $ 1.7         $ 1.4
Interest cost........................................       0.8           0.8             2.4           2.5
Amortization of net (gain) loss......................       0.2            --             0.7           0.5
                                                          -----         -----           -----         -----
Net periodic benefit cost............................     $ 1.6         $ 1.3           $ 4.8         $ 4.4
                                                          =====         =====           =====         =====


      CIT previously disclosed in the notes to consolidated financial statements
for the year ended  December  31,  2004,  that it  expected to  contribute  $4.0
million  to its  pension  plans in 2005.  CIT  contributed  $7.7  million to the
pension  plans for the nine months  ended  September  30,  2005,  and  currently
expects to fund  approximately an additional $15 million during the last quarter
of 2005.


                                       14


                         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):



                                                                       September 30, 2005
                                                           --------------------------------------
                                                               Due to Expire                       December 31,
                                                           ----------------------                      2004
                                                            Within         After         Total         Total
                                                           One Year      One Year     Outstanding   Outstanding
                                                           --------      --------     -----------   -----------
                                                                                          
Financing Commitments
Financing and leasing assets............................    $1,674.0      $7,849.1      $9,523.1      $8,428.3
Letters of credit and acceptances:
  Standby letters of credit.............................       406.5         106.5         513.0         618.3
  Other letters of credit...............................       503.8           0.2         504.0         588.3
  Acceptances...........................................        24.7            --          24.7          16.4
Guarantees..............................................       200.9          12.1         213.0         133.1
Purchase and Funding Commitments
Aerospace purchase commitments..........................       716.0       2,375.0       3,091.0       2,168.0
Other equipment purchase commitments....................       372.8            --         372.8         397.0
Sale-leaseback payments.................................        31.0         433.7         464.7         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  $15.6  billion  and $9.8  billion at  September  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  indicates
that customers typically will not 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 whom 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. If the customer is unable to pay according to the
contractual  terms,  then CIT purchases the receivables  from the client.  As of
September  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's firm  purchase  commitments  relate  predominantly  to  purchases of
commercial  aircraft and rail equipment.  The commitments to purchase commercial
aircraft are with both Airbus  Industrie and The Boeing Company.  These purchase
commitments  are fixed price,  but are subject to customary  price increases for
future  changes  in  inflation  and  manufacturing  components.   The  aerospace
equipment  purchases  are  contracted  for a  specific  model  aircraft  using a
baseline  aircraft  specification at fixed prices,  which reflect discounts from
fair market purchase prices  prevailing at the time of commitment.  The delivery
price of an aircraft may also change  depending on the final  specifications  of
the   aircraft,   including   engine   thrust,   aircraft   weight  and  seating
configuration.  Equipment  purchases  are recorded at delivery date at the final
purchase price paid,  which includes  purchase  price  discounts,  price changes
relating to specification  changes and price increases relating to inflation and
manufacturing  components.  Accordingly,  the commitment amounts detailed in the
preceding table are based



                                       15


                         CIT GROUP INC. AND SUBSIDIARIES

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

on estimated values. Pursuant to existing contractual  commitments,  62 aircraft
remain to be purchased (17 within the next twelve months). Lease commitments are
in place for fourteen of the  remaining  aircraft to be delivered  over the next
twelve months.  The order amount  excludes CIT's options to purchase  additional
aircraft.  CIT entered into a purchase  commitment with Airbus  Industrie for an
additional 29 aircraft to be delivered  between 2007 and 2013 during the quarter
ended September 30, 2005, which are included in the preceding table.

      Outstanding  commitments to purchase  equipment to be leased to customers,
other  than  aircraft,  relates  primarily  to rail  equipment.  Rail  equipment
purchase  commitments  are at  fixed  prices  subject  to  price  increases  for
inflation and manufacturing  components.  The time period between commitment and
purchase for rail equipment is generally less than 18 months. Additionally,  CIT
is party to railcar  sale-leaseback  transactions under which it is obligated to
pay a remaining total of $464.7 million,  or approximately  $31 million per year
through 2010 and declining thereafter through 2024, which is more than offset by
CIT's  re-lease of the assets,  provided  CIT can  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
in the Superior Court of New Jersey 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  complaint   alleged  that  NorVergence   misrepresented   the
capabilities  of, and overcharged for, the equipment leased to its customers and
that the  NorVergence  Leases are  unenforceable.  Plaintiffs  seek  rescission,
punitive  damages,  treble  damages and attorneys'  fees. In addition,  putative
class  action  suits in  Illinois  and  Texas,  all  based  upon  the same  core
allegations  and seeking the same relief,  were filed by  NorVergence  customers
against CIT and other financial  institutions  and remain pending.  The Court in
Exquisite  Caterers  certified  a  New  Jersey-only  class,  and  a  motion  for
decertification is pending.

      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 the Attorneys  General in each of
these states,  except for Texas.  Under those  settlements,  lessees have had an
opportunity  to resolve all claims by and against CIT by paying a percentage  of
the remaining balance on their leases.  CIT has also produced  documents related
to  NorVergence  at the  request of the  Federal  Trade  Commission  ("FTC") and
pursuant to a subpoena 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.

      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.


                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

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

Note 12 -- Severance and Facility Restructuring Reserves

      The following table summarizes previously established purchase accounting
liabilities (pre-tax) related to severance of employees and closing 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, foreign currency
  translation and other                             191          21.3           --          2.2         23.5
2005 utilization............................       (279)        (22.5)          (5)        (2.3)       (24.8)
                                                   ----         -----           --         ----        -----
Balance at September 30, 2005...............         41         $11.0           10         $5.6        $16.6
                                                   ====         =====           ==         ====        =====


      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 in the quarter ended June 30, 2005
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 were largely paid during the quarter
ended 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  $1,003.8 million at September 30,
2005,  which  consisted  of $780.9  million of goodwill,  and $222.9  million of
intangible assets by segment ($ in millions):



                                                   Specialty     Specialty
                                                   Finance --    Finance --     Commercial      Corporate
                                                   commercial     consumer       Services        Finance         Total
                                                   ----------     --------       --------        -------         -----
                                                                                                
Goodwill
Balance at December 31, 2004 .................      $  62.3       $     --       $  261.6       $  108.8       $  432.7
Additions, foreign currency translation, other         (8.1)         257.2           (0.1)          99.2          348.2
                                                    -------       --------       --------       --------       --------
Balance at September 30, 2005 ................      $  54.2       $  257.2       $  261.5       $  208.0       $  780.9
                                                    =======       ========       ========       ========       ========
Intangible Assets
Balance at December 31, 2004 .................      $  68.0       $     --       $   95.8       $     --       $  163.8
Additions, foreign currency translation, other        (12.3)          29.4           30.3           27.4           74.8
Amortization .................................         (7.3)          (0.4)          (7.8)          (0.2)         (15.7)
                                                    -------       --------       --------       --------       --------
Balance at September 30, 2005 ................      $  48.4       $   29.0       $  118.3       $   27.2       $  222.9
                                                    =======       ========       ========       ========       ========


      In accordance with SFAS No. 142,  "Goodwill and Other  Intangible  Assets"
("SFAS  142"),   goodwill  is  no  longer  amortized  but  instead  is  assessed
periodically for impairment.  The Company periodically reviews and evaluates its
goodwill and intangible  assets for potential  impairment at a minimum annually,
or more frequently if  circumstances  indicate that impairment is possible.  The
most recent goodwill and intangible asset impairment analyses indicated that the
fair values of each were in excess of the carrying values.

      Other intangible assets, net, are comprised primarily of acquired customer
relationships   (Specialty  Finance  and  Commercial   Services),   as  well  as
proprietary  computer  software and related  transaction  processes  (Commercial
Services). The increase was primarily related to acquisitions: a student lending
acquisition  in  Specialty  Finance -  consumer,  a  healthcare  acquisition  in
Corporate  Finance and a factoring  acquisition  in Commercial  Services.  Other
intangible  assets are being  amortized over their  corresponding  lives ranging
from five


                                       17


                         CIT GROUP INC. AND SUBSIDIARIES

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

to twenty  years in  relation  to the  related  cash  flows,  where  applicable.
Amortization  expense totaled $5.5 million and $15.7 million for the quarter and
nine months  ended  September  30, 2005 versus $3.3 million and $7.8 million for
the  respective  prior year  periods.  Accumulated  amortization  totaled  $39.4
million and $23.7  million at September  30, 2005 and  December  31,  2004.  The
projected  amortization  for the years ended December 31, 2005 through  December
31, 2009 is: $21.5 million for 2005;  $21.6 million for 2006;  $18.5 million for
2007; $18.8 million for 2008 and $19.2 million for 2009.

      The  increase  in  goodwill  during the period  was  primarily  due to the
student  lending  acquisition  in Specialty  Finance - consumer and a healthcare
acquisition in Corporate Finance, both detailed below.

      Healthcare Acquisition

      In  July  2005,  CIT  acquired,   for  cash,  Healthcare  Business  Credit
Corporation  ("HBCC"),  a  full  service  health  care  financing  company  that
specializes in asset-based and cash flow financing to U.S. healthcare providers.
The HBCC  acquisition  was  accounted  for under the purchase  method,  with the
acquired  assets and  liabilities  recorded at their estimated fair values as of
the acquisition date. The assets acquired included approximately $500 million of
finance receivables and $127 million of goodwill and intangible assets.

      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.

      During 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.


                                       18


                         CIT GROUP INC. AND SUBSIDIARIES

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

Note 14 -- Summarized Financial Information of Subsidiaries

      The following presents condensed  consolidating  financial information for
CIT  Holdings  LLC. 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 this subsidiary. CIT has not presented related
financial  statements or other  information for this subsidiary on a stand-alone
basis.  The remaining debt  associated  with Capita  Corporation  (formerly AT&T
Capital Corporation),  a subsidiary  previously  disclosed,  matured in 2005 and
prior period amounts  associated with this subsidiary are included in the "Other
Subsidiaries"   column  in  the  tables  below.   Also  included   under  "Other
Subsidiaries"  is a 100%-owned  finance  subsidiary of CIT Group Inc.,  Canadian
Funding Company LLC, for which CIT has fully and unconditionally  guaranteed the
debt securities. ($ in millions):



                                                                               CIT
              CONSOLIDATING                                     CIT          Holdings         Other
             BALANCE SHEETS                                  Group Inc.         LLC        Subsidiaries   Eliminations       Total
             --------------                                  ----------      --------      ------------   ------------       -----
                                                                                                          
September 30, 2005
ASSETS
Net finance receivables ..............................      $   1,013.3     $  2,161.9     $  38,858.6    $       --     $  42,033.8
Operating lease equipment, net .......................               --          194.9         8,989.5            --         9,184.4
Finance receivables held for sale ....................               --           64.5         1,783.9            --         1,848.4
Cash and cash equivalents ............................            711.7          144.1         1,079.6            --         1,935.4
Other assets .........................................         10,000.1          307.2         1,416.6      (6,574.3)        5,149.6
                                                            -----------     ----------     -----------    ----------     -----------
  Total Assets .......................................      $  11,725.1     $  2,872.6     $  52,128.2    $ (6,574.3)    $  60,151.6
                                                            ===========     ==========     ===========    ==========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt .................................................      $  37,688.8     $  4,254.1     $   3,023.8    $       --     $  44,966.7
Credit balances of factoring clients .................               --             --         4,267.1            --         4,267.1
Accrued liabilities and payables .....................        (32,538.0)      (1,789.4)       38,621.1            --         4,293.7
                                                            -----------     ----------     -----------    ----------     -----------
  Total Liabilities ..................................          5,150.8        2,464.7        45,912.0            --        53,527.5
Minority interest ....................................               --             --            49.8            --            49.8
Total Stockholders' Equity ...........................          6,574.3          407.9         6,166.4      (6,574.3)        6,574.3
                                                            -----------     ----------     -----------    ----------     -----------
  Total Liabilities and
  Stockholders' Equity ...............................      $  11,725.1     $  2,872.6     $  52,128.2    $ (6,574.3)    $  60,151.6
                                                            ===========     ==========     ===========    ==========     ===========
December 31, 2004
ASSETS
Net finance receivables ..............................      $   1,121.1     $  1,682.7     $  31,627.2    $       --     $  34,431.0
Operating lease equipment, net .......................               --          130.8         8,160.1            --         8,290.9
Finance receivables held for sale ....................               --           72.0         1,568.8            --         1,640.8
Cash and cash equivalents ............................          1,311.4          127.5           771.3            --         2,210.2
Other assets .........................................          9,536.8          316.2           740.5      (6,055.1)        4,538.4
                                                            -----------     ----------     -----------    ----------     -----------
  Total Assets .......................................      $  11,969.3     $  2,329.2     $  42,867.9    $ (6,055.1)    $  51,111.3
                                                            ===========     ==========     ===========    ==========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt .................................................      $  34,699.1     $  1,383.8     $   1,641.9    $       --     $  37,724.8
Credit balances of factoring clients .................               --             --         3,847.3            --         3,847.3
Accrued liabilities and payables  (including
  inter-company payables and receivables) ............        (28,784.9)        (591.3)       32,819.9            --         3,443.7
                                                            -----------     ----------     -----------    ----------     -----------
  Total Liabilities ..................................          5,914.2          792.5        38,309.1            --        45,015.8
Minority interest ....................................               --             --            40.4            --            40.4
Total Stockholders' Equity ...........................          6,055.1        1,536.7         4,518.4      (6,055.1)        6,055.1
                                                            -----------     ----------     -----------    ----------     -----------
  Total Liabilities and
  Stockholders' Equity ...............................      $  11,969.3     $  2,329.2     $  42,867.9    $ (6,055.1)    $  51,111.3
                                                            ===========     ==========     ===========    ==========     ===========



                                       19


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                              CIT
                CONSOLIDATING                                  CIT          Holdings         Other
             STATEMENTS OF INCOME                           Group Inc.         LLC        Subsidiaries   Eliminations       Total
             --------------------                           ----------      --------      ------------   ------------       -----
                                                                                                         
Nine Months Ended September 30, 2005
Finance income .........................................   $    30.8         $  174.4       $ 3,077.2      $     --     $ 3,282.4
Interest expense .......................................       (22.3)            57.4         1,321.2            --       1,356.3
                                                           ---------         --------       ---------      --------     ---------
Net finance income .....................................        53.1            117.0         1,756.0            --       1,926.1
Depreciation on operating lease equipment ..............          --             34.3           687.1            --         721.4
                                                           ---------         --------       ---------      --------     ---------
Net finance margin .....................................        53.1             82.7         1,068.9            --       1,204.7
Provision for credit losses ............................        22.8              8.5           131.1            --         162.4
                                                           ---------         --------       ---------      --------     ---------
Net finance margin, after provision for credit losses ..        30.3             74.2           937.8            --       1,042.3
Equity in net income of subsidiaries ...................       722.7               --              --        (722.7)           --
Other revenue ..........................................        (2.7)            85.4           701.5            --         784.2
                                                           ---------         --------       ---------      --------     ---------
Operating margin .......................................       750.3            159.6         1,639.3        (722.7)      1,826.5
Operating expenses .....................................       130.6             65.8           617.5            --         813.9
Provision for restructuring ............................          --               --            25.2            --          25.2
                                                           ---------         --------       ---------      --------     ---------
Income (loss) before provision for income taxes ........       619.7             93.8           996.6        (722.7)        987.4
Benefit (provision) for income taxes ...................        36.1            (34.5)         (330.4)           --        (328.8)
Minority interest, after tax ...........................          --               --            (2.8)           --          (2.8)
Preferred stock dividends ..............................        (5.2)              --              --            --          (5.2)
                                                           ---------         --------       ---------      --------     ---------
Net income available to common stockholders ............   $   650.6         $   59.3       $   663.4      $ (722.7)    $   650.6
                                                           =========         ========       =========      ========     =========
Nine Months Ended September 30, 2004
Finance income .........................................   $    24.5         $  143.8       $ 2,594.5      $     --     $ 2,762.8
Interest expense .......................................       (62.5)            10.9           965.0            --         913.4
                                                           ---------         --------       ---------      --------     ---------
Net finance income .....................................        87.0            132.9         1,629.5            --       1,849.4
Depreciation on operating lease equipment ..............          --             32.5           689.4            --         721.9
                                                           ---------         --------       ---------      --------     ---------
Net finance margin .....................................        87.0            100.4           940.1            --       1,127.5
Provision for credit losses ............................        13.9              8.5           189.1            --         211.5
                                                           ---------         --------       ---------      --------     ---------
Net finance margin, after provision for credit losses ..        73.1             91.9           751.0            --         916.0
Equity in net income of subsidiaries ...................       533.5               --              --        (533.5)           --
Other revenue ..........................................        (3.0)            70.3           617.0            --         684.3
                                                           ---------         --------       ---------      --------     ---------
Operating margin .......................................       603.6            162.2         1,368.0        (533.5)      1,600.3
Operating expenses .....................................        94.5             69.7           576.3            --         740.5
Gain on redemption of debt .............................        41.8                               --            --          41.8
                                                           ---------         --------       ---------      --------     ---------
Income (loss) before provision for income taxes ........       550.9             92.5           791.7        (533.5)        901.6
Provision benefit for income taxes .....................        (1.1)           (36.1)         (314.4)           --        (351.6)
Minority interest, after tax ...........................          --               --            (0.2)           --          (0.2)
                                                           ---------         --------       ---------      --------     ---------
Net income available to common stockholders ............   $   549.8         $   56.4       $   477.1      $ (533.5)    $   549.8
                                                           =========         ========       =========      ========     =========



                                       20


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                             CIT
                CONSOLIDATING                                  CIT          Holdings        Other
             STATEMENTS OF CASH FLOWS                       Group Inc.         LLC       Subsidiaries   Eliminations      Total
             ------------------------                       ----------      --------     ------------   ------------      -----
                                                                                                        
Nine Months Ended September 30, 2005
Cash Flows From Operating Activities:
Net cash flows provided by (used for) operations .......     $ 3,446.9     $   209.6     $  (1,464.1)    $       --    $   2,192.4
                                                             ---------     ---------     -----------     ----------    -----------
Cash Flows From Investing Activities:
Net increase (decrease) in financing and leasing
  assets ...............................................          84.8        (555.7)       (4,030.6)            --       (4,501.5)
Decrease in inter-company loans and investments ........      (6,995.1)           --              --        6,995.1             --
Other ..................................................            --            --           137.0             --          137.0
                                                             ---------     ---------     -----------     ----------    -----------
Net cash flows (used for) provided by
  investing activities .................................      (6,910.3)       (555.7)       (3,893.6)       6,995.1       (4,364.5)
                                                             ---------     ---------     -----------     ----------    -----------
Cash Flows From Financing Activities:
Net increase (decrease) in debt ........................       2,989.7       2,870.3        (3,041.3)            --        2,818.7
Net loans extended -- pledged in conjunction
  with secured borrowings ..............................            --            --          (782.2)            --         (782.2)
Inter-company financing ................................            --      (2,507.6)        9,502.7       (6,995.1)            --
Cash dividends paid ....................................         (94.7)           --              --             --          (94.7)
Other ..................................................         (31.3)           --           (13.2)            --          (44.5)
                                                             ---------     ---------     -----------     ----------    -----------
Net cash flows provided by (used for)
  financing activities .................................       2,863.7         362.7         5,666.0       (6,995.1)       1,897.3
                                                             ---------     ---------     -----------     ----------    -----------
Net (decrease) increase in cash and cash equivalents ...        (599.7)         16.6           308.3             --         (274.8)
Cash and cash equivalents, beginning of period .........       1,311.4         127.5           771.3             --        2,210.2
                                                             ---------     ---------     -----------     ----------    -----------
Cash and cash equivalents, end of period ...............     $   711.7     $   144.1     $   1,079.6     $       --    $   1,935.4
                                                             =========     =========     ===========     ==========    ===========
Nine Months Ended September 30, 2004
Cash Flows From Operating Activities:
Net cash flows provided by (used for) operations .......     $  (177.8)    $   (91.9)    $     865.8     $       --    $     596.1
                                                             ---------     ---------     -----------     ----------    -----------
Cash Flows From Investing Activities:
Net increase (decrease) in financing and leasing assets          490.9        (147.0)       (4,461.2)            --       (4,117.3)
Decrease in inter-company loans and investments ........      (4,359.0)           --              --        4,359.0             --
Other ..................................................            --            --            69.2             --           69.2
                                                             ---------     ---------     -----------     ----------    -----------
Net cash flows (used for) provided by
  investing activities .................................      (3,868.1)       (147.0)       (4,392.0)       4,359.0       (4,048.1)
                                                             ---------     ---------     -----------     ----------    -----------
Cash Flows From Financing Activities:
Net increase (decrease) in debt ........................       4,114.9         (43.6)         (265.4)            --        3,805.9
Inter-company financing ................................            --         307.6         4,051.4       (4,359.0)            --
Cash dividends paid ....................................         (83.6)           --              --             --          (83.6)
Other ..................................................            --            --           (83.9)            --          (83.9)
                                                             ---------     ---------     -----------     ----------    -----------
Net cash flows provided by (used for)
  financing activities .................................       4,031.3         264.0         3,702.1       (4,359.0)       3,638.4
                                                             ---------     ---------     -----------     ----------    -----------
Net (decrease) increase in cash and cash equivalents ...         (14.6)         25.1           175.9             --          186.4
Cash and cash equivalents, beginning of period .........       1,479.9         227.5           266.3             --        1,973.7
                                                             ---------     ---------     -----------     ----------    -----------
Cash and cash equivalents, end of period ...............     $ 1,465.3     $   252.6     $     442.2     $       --    $   2,160.1
                                                             =========     =========     ===========     ==========    ===========



                                       21


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,  as
well as offering management advisory services.

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

      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                    Nine Months Ended
                                                                            September 30,                       September 30,
                                                                      -------------------------           -------------------------
                                                                        2005             2004               2005              2004
                                                                      -------           -------           -------           -------
                                                                                                                
Net income ($ in millions) .................................          $ 219.5           $ 183.9           $ 650.6           $ 549.8
Net income per diluted share ...............................          $  1.06           $  0.86           $  3.06           $  2.56
Net income as a percentage of AEA ..........................             1.80%             1.88%             1.84%             1.92%
Return on average tangible common equity ...................             17.0%             14.1%             16.2%             14.3%
Return on average common equity ............................             14.3%             12.8%             14.0%             13.0%

--------------------------------------------------------------------------------
      Net income for the quarter ended September 30, 2005 includes the following
items:

      o     A  pre-tax  gain of  $115.0  million  on the  sale of a real  estate
            investment ($0.34 diluted EPS increase);

      o     Pre-tax  charges of $86.6 million on certain  aircraft held for sale
            and $20.0 million on certain  manufactured  housing  assets held for
            sale (total $0.31 diluted EPS decrease);

      o     Total pretax hurricane provisions of $41.3 million, including credit
            losses  of  $34.6   million  and  a  $6.8  million   impairment   on
            securitization retained interests due to Hurricanes Katrina and Rita
            ($0.13 diluted EPS decrease); and

      o     A  $17.6  million  tax  liability  reversal   corresponding  to  the
            conclusion  of a tax  return  filing  matter  in  our  international
            operations for which reserves were  previously  taken ($0.08 diluted
            EPS increase).

      In addition to the items above, year to date 2005 net income includes:

      o     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

      o     A pre-tax $22.0 million gain on the sale of a significant portion of
            the business aircraft portfolio.

      Prior year to date net income  included a pre-tax  $41.8  million  gain on
early debt redemption specified above. Excluding all the noteworthy transactions
specified above, the improved 2005 results reflected lower  charge-offs,  strong
non-spread revenues and a lower effective tax rate.


                                       22


Results by Business Segment

      The  tables  that  follow  summarize  selected  financial  information  by
business segment. See Note 3 -- Business Segment 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 September 30,
                                                       ----------------------------------------------------------------------------
                                                                      2005                                      2004
                                                       -----------------------------------      -----------------------------------
                                                                   Return      Return on                   Return       Return on
                                                         Net        on       Risk-Adjusted        Net        on       Risk-Adjusted
                                                       Income       AEA         Capital         Income       AEA         Capital
                                                       ------      ------    -------------      ------     -------    -------------
                                                                                                         
Specialty Finance - commercial ..................      $ 74.5       2.71%        22.7%          $ 69.5       2.62%         22.4%
Specialty Finance - consumer ....................        16.8       0.59%         8.9%            12.2       1.24%         16.3%
                                                       ------                                   ------
   Total Specialty Finance ......................        91.3       1.63%        17.3%            81.7       2.25%         21.2%
                                                       ------                                   ------
Commercial Services .............................        48.4       6.50%        27.2%            42.6       6.25%         27.3%
Corporate Finance ...............................        46.2       2.14%        19.3%            32.7       1.99%         19.9%
Equipment Finance ...............................        22.1       1.88%        12.4%            20.1       1.17%          7.9%
Capital Finance .................................         5.8       0.23%         1.7%            27.9       1.35%         13.4%
                                                       ------                                   ------
   Total Commercial Finance .....................       122.5       1.86%        13.0%           123.3       2.02%         15.9%
                                                       ------                                   ------
Corporate, including certain charges ............         5.7       0.05%          --            (21.1)     (0.23)%          --
                                                       ------                                   ------
Net income and return on tangible
   common stockholders' equity ..................      $219.5       1.80%        17.0%          $183.9       1.88%         14.1%
                                                       ======                                   ======




                                                                               Nine Months Ended September 30,
                                                       ----------------------------------------------------------------------------
                                                                      2005                                      2004
                                                       -----------------------------------      -----------------------------------
                                                                   Return      Return on                   Return       Return on
                                                         Net        on       Risk-Adjusted        Net        on       Risk-Adjusted
                                                       Income       AEA         Capital         Income       AEA         Capital
                                                       ------      ------    -------------      ------     -------    -------------
                                                                                                         
Specialty Finance - commercial ..................      $228.7       2.74%        23.3%          $204.0       2.68%         21.5%
Specialty Finance - consumer ....................        49.2       0.67%         9.7%            33.9       1.30%         15.6%
                                                       ------                                   ------
   Total Specialty Finance ......................       277.9       1.77%        18.3%           237.9       2.33%         20.3%
                                                       ------                                   ------
Commercial Services .............................       128.3       6.32%        25.8%           118.9       5.93%         25.8%
Corporate Finance ...............................       131.3       2.17%        20.0%           110.9       2.26%         22.1%
Equipment Finance ...............................        77.6       1.84%        12.5%            55.5       1.07%          7.2%
Capital Finance .................................        71.3       0.99%         7.4%            63.6       1.04%         10.3%
                                                       ------                                   ------
   Total Commercial Finance .....................       408.5       2.09%        14.9%           348.9       1.92%         15.0%
                                                       ------                                   ------
Corporate, including certain charges ............       (35.8)     (0.11)%         --            (37.0)     (0.14)%          --
                                                       ------                                   ------
Net income and return on tangible
   common stockholders' equity ..................      $650.6       1.84%        16.2%          $549.8       1.92%         14.3%
                                                       ======                                   ======


      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  net income for the current  quarter
            includes  a  pre-tax  $20.0  million  mark-to-market  charge  on the
            portion of our manufactured housing receivables  transferred to held
            for sale.  Net  income  for the  quarter  outpaced  the  prior  year
            primarily due to improved  vendor  finance  earnings,  while year to
            date earnings  improvements were driven by the  international  units
            and small business lending.

      o     Specialty  Finance - consumer reported strong results over the prior
            year.  The  improvement  over last year for both quarter and year to
            date is primarily  driven by a higher asset base in the home lending
            business


                                       23


            and the addition of the student lending business in 2005. Returns in
            this segment were below last year due to the addition of the student
            lending  business.  Student  lending return rates are low reflecting
            the low  risk of loss  due to the  related  guarantees  by the  U.S.
            government.

      o     Commercial  Services  earnings are driven by factoring  commissions,
            which  continued  to grow  along  with  the  asset  level.  However,
            commission  rates  declined  modestly  from  the  prior  year  (as a
            percentage of factoring volume).

      o     Corporate  Finance  earnings  improvement  from the  prior  year was
            particularly  strong in the Capital Markets and the  Communications,
            Media  &  Entertainment   units,   reflecting  higher  risk-adjusted
            margins, including higher recoveries, and non-spread revenue.

      o     Equipment  Finance  returns  improved  over the prior year driven by
            stronger margins and improvement in the level of charge-offs.

      o     Capital Finance  earnings reflect an $86.6 million pre-tax charge in
            the quarter on a mark-to-market  adjustment on aircraft  transferred
            to held for sale.  However,  earnings  remained  positive due to the
            following:  (1) the release of an international  tax liability;  (2)
            the lower  effective tax rate resulting  from aircraft  transfers to
            Ireland;  and (3) improved  operating results,  reflecting  stronger
            operating  lease  margins in both  aerospace  and rail.  See "Income
            Taxes" for additional information.

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



                                                                          Quarters Ended                  Nine Months Ended
                                                                           September 30,                     September 30,
                                                                      -----------------------           -----------------------
                                                                       2005             2004             2005             2004
                                                                      ------           ------           ------           ------
                                                                                                             
Unallocated expenses ...........................................      $(33.1)          $(17.8)          $(64.9)          $(57.1)
Real estate investment gain ....................................        69.7               --             69.7               --
Hurricane charges ..............................................       (25.6)              --            (25.6)              --
Preferred stock dividends ......................................        (5.2)              --             (5.2)              --
Restructuring charges ..........................................          --               --            (15.4)              --
Gain on debt redemption ........................................          --               --               --             25.5
Venture capital operating income / (losses)(1) .................        (0.1)            (3.3)             5.6             (5.4)
                                                                      ------           ------           ------           ------
   Total .......................................................      $  5.7           $(21.1)          $(35.8)          $(37.0)
                                                                      ======           ======           ======           ======


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


                                       24


Net Finance Margin

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



                                                                 Quarters Ended                      Nine Months Ended
                                                                  September 30,                        September 30,
                                                           ----------------------------        ----------------------------
                                                              2005              2004              2005              2004
                                                           ----------        ----------        ----------        ----------
                                                                                                     
Finance income -- loans and capital leases .........       $    777.0        $    596.5        $  2,177.3        $  1,730.1
Rental income on operating leases ..................            376.7             360.5           1,105.1           1,032.7
Interest expense ...................................            495.4             315.4           1,356.3             913.4
                                                           ----------        ----------        ----------        ----------
   Net finance income ..............................            658.3             641.6           1,926.1           1,849.4
Depreciation on operating lease equipment ..........            242.6             248.2             721.4             721.9
                                                           ----------        ----------        ----------        ----------
   Net finance margin ..............................       $    415.7        $    393.4        $  1,204.7        $  1,127.5
                                                           ==========        ==========        ==========        ==========
As a % of AEA:
Finance income -- loans and capital leases .........             6.37%             6.08%             6.16%             6.05%
Rental income on operating leases ..................             3.09%             3.68%             3.13%             3.62%
Interest expense ...................................             4.06%             3.22%             3.84%             3.20%
                                                           ----------        ----------        ----------        ----------
   Net finance income ..............................             5.40%             6.54%             5.45%             6.47%
Depreciation on operating lease equipment ..........             1.99%             2.53%             2.04%             2.53%
                                                           ----------        ----------        ----------        ----------
   Net finance margin ..............................             3.41%             4.01%             3.41%             3.94%
                                                           ==========        ==========        ==========        ==========
As a % of AOL:
Rental income on operating leases ..................            16.97%            18.32%            17.14%            17.84%
Depreciation on operating lease equipment ..........            10.93%            12.61%            11.19%            12.47%
                                                           ----------        ----------        ----------        ----------
   Net operating lease margin ......................             6.04%             5.71%             5.95%             5.37%
                                                           ==========        ==========        ==========        ==========
Average Earning Assets .............................       $ 48,782.6        $ 39,195.6        $ 47,092.3        $ 38,119.0
                                                           ==========        ==========        ==========        ==========
Average Operating Lease Equipment ("AOL") ..........       $  8,878.7        $  7,873.2        $  8,597.2        $  7,720.1
                                                           ==========        ==========        ==========        ==========


      Analysis of net finance margin is as follows:

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

      o     Interest expense increased from 2004, reflecting debt assumed during
            acquisitions,  incremental  debt to fund portfolio growth and higher
            2005 market interest rates to fund the growth, as well as 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  student lending  receivables into
            the  portfolio,   lower  yield-related  fees,  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 on higher asset
            levels and strong rates 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  year to date  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 finance income simulations.

      At the date that  interest rate  sensitivity  is modeled,  "baseline"  net
finance 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,


                                       25


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 finance 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 finance
income.

      An immediate  hypothetical  100 basis point increase in the yield curve on
October 1, 2005 would  reduce net income by an estimated  $14 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 October 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 September 30, 2005
Commercial paper, variable-rate senior
  notes and bank credit facilities ......................     $17,780.3    3.72%          $21,514.3      4.04%
Fixed-rate senior and subordinated notes ................      26,032.7    5.10%           22,298.7      4.98%
                                                              ---------                   ---------
Composite ...............................................     $43,813.0    4.54%          $43,813.0      4.52%
                                                              =========                   =========
Quarter Ended September 30, 2004
Commercial paper, variable-rate senior notes
  and bank credit facilities ............................     $15,855.5    1.78%          $17,661.7      2.54%
Fixed-rate senior and subordinated notes ................      19,357.5    5.76%           17,551.3      4.96%
                                                              ---------                   ---------
Composite ...............................................     $35,213.0    3.97%          $35,213.0      3.75%
                                                              =========                   =========
Nine Months Ended September 30, 2005
Commercial paper, variable-rate senior notes
  and bank credit facilities ............................     $16,595.6    3.29%          $20,449.7      3.67%
Fixed-rate senior and subordinated notes ................      25,676.3    5.03%           21,822.2      4.84%
                                                              ---------                   ---------
Composite ...............................................     $42,271.9    4.35%          $42,271.9      4.27%
                                                              =========                   =========
Nine Months Ended September 30, 2004
Commercial paper, variable-rate senior notes
  and bank credit facilities ............................     $14,742.5    1.69%          $17,842.5      2.43%
Fixed-rate senior and subordinated notes ................      19,206.0    5.72%           16,106.0      5.16%
                                                              ---------                   ---------
Composite ...............................................     $33,948.5    3.97%          $33,948.5      3.72%
                                                              =========                   =========


      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.


                                       26


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                     Nine Months Ended
                                                                     September 30,                        September 30,
                                                              ---------------------------         -----------------------------
                                                                2005              2004              2005                2004
                                                              ---------         ---------         ---------           ---------
                                                                                                          
Net finance margin .....................................      $   415.7         $   393.4         $ 1,204.7           $ 1,127.5
Provision for credit losses ............................           69.9              60.2             162.4               211.5
                                                              ---------         ---------         ---------           ---------
Net finance margin after provision for
  credit losses (risk adjusted margin) .................      $   345.8         $   333.2         $ 1,042.3           $   916.0
                                                              =========         =========         =========           =========
As a % of AEA:
Net finance margin .....................................           3.41%             4.01%             3.41%               3.94%
Provision for credit losses ............................           0.57%             0.61%             0.46%               0.74%
                                                              ---------         ---------         ---------           ---------
Net finance margin after provision for
  credit losses (risk adjusted margin) .................           2.84%             3.40%             2.95%               3.20%
                                                              =========         =========         =========           =========


      The  provision  for the 2005  quarter  includes  $34.6  million for credit
losses due to the hurricanes,  which reflects  managements best current estimate
of such  losses.  The  decline in the year to date  provision  mirrors the lower
charge-off  trend and helped  mitigate 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               Nine Months Ended
                                                                            September 30,                  September 30,
                                                                       -----------------------        -----------------------
                                                                        2005            2004            2005           2004
                                                                       -------         -------        -------         -------
                                                                                                          
Fees and other income ..........................................       $ 149.6         $ 119.6        $ 468.4         $ 387.3
Factoring commissions ..........................................          63.5            59.5          174.6           168.0
Gains on sales of leasing equipment ............................          20.7            23.5           64.2            77.9
Gains on securitizations .......................................          11.3             9.9           34.2            43.2
Gain on sale of real estate investment .........................         115.0              --          115.0              --
Charge related to aircraft held for sale .......................         (86.6)             --          (86.6)             --
Gain on sale of business aircraft ..............................            --              --           22.0              --
Charge related to manufactured housing assets 
  held for sale.................................................         (20.0)             --          (20.0)             --
Gain on venture capital investments ............................           0.3             4.2           12.4             7.9
                                                                       -------         -------        -------         -------
   Total other revenue .........................................       $ 253.8         $ 216.7        $ 784.2         $ 684.3
                                                                       =======         =======        =======         =======
Other revenue as a percentage of AEA ...........................          2.08%           2.21%          2.22%           2.39%
                                                                       =======         =======        =======         =======


      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  student  lending  assets,  as well as strong  fees in  Corporate
            Finance.  This was in part  offset by lower  securitization  related
            fees as those asset balances declined from last year.

      o     Factoring  commissions  increased over last year on higher factoring
            asset balances,  but reflected  slightly lower factoring rates (as a
            percentage  of  factoring  volume).


                                       27


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



                                                                    Quarters Ended                  Nine Months Ended
                                                                     September 30,                     September 30,
                                                              ---------------------------       ---------------------------
                                                                2005              2004            2005              2004
                                                              --------          -------         --------          --------
                                                                                                      
Total volume securitized ................................     $1,396.5          $783.8          $3,378.2          $2,867.4
Gains ...................................................     $   11.3          $  9.9          $   34.2          $   43.2
Gains as a percentage of volume securitized .............         0.81%           1.26%             1.01%             1.51%
Gains as a percentage of pre-tax income .................         3.55%           3.28%             3.46%             4.79%
Securitized assets ......................................                                       $7,539.4          $7,994.9
Retained interest in securitized assets .................                                       $1,144.4          $1,124.9


      The lower gain percentage of volume  securitized  during the quarter ended
September 30, 2005 reflects a greater  proportion of vendor program assets sold,
which have lower yields.

      o     During the quarter, we sold an interest in a real estate investment,
            Waterside  Plaza,  a  residential  complex  in New  York  City,  and
            recognized a pre-tax gain of approximately $115 million.

      o     During the  quarter,  certain  aircraft  with a net  carrying  value
            totaling  approximately  $190 million were classified as assets held
            for sale based on  management's  decision to actively  market  these
            assets, and a mark-to-market charge of $86.6 million was recorded in
            Capital Finance. These aircraft types included commercial,  regional
            and  business  aircraft.  Year to date  results also reflect a $22.0
            million  gain on the sale of a  majority  of the  Equipment  Finance
            business aircraft portfolio (approximately $900 million). During the
            quarter ended  September 30, 2005, the remaining  business  aircraft
            portfolio was transferred to Capital  Finance.  See  "Concentration"
            and "Financing and Leasing Assets" sections for further detail.

      o     During the quarter,  we accelerated the liquidation of approximately
            $125  million in  manufactured  housing  assets.  These  assets were
            reclassified as held for sale on the financial statements and marked
            to estimated fair value resulting in a $20.0 million charge.

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              Nine Months Ended
                                                                     September 30,                September 30,
                                                                -----------------------        -------------------
                                                                 2005             2004          2005         2004
                                                                ------           ------        ------       ------
                                                                                                 
Balance beginning of period ................................    $622.3           $621.0        $617.2       $643.7
                                                                ------           ------        ------       ------
Provision for credit losses -- finance receivables .........      35.3             60.2         127.8        211.5
Provision for credit losses -- hurricane losses ............      34.6               --          34.6           --
Reserves relating to acquisitions, other ...................       8.6             29.0          24.2         37.9
                                                                ------           ------        ------       ------
   Additions to reserve for credit losses, net .............      78.5             89.2         186.6        249.4
                                                                ------           ------        ------       ------
Net credit losses
   Specialty Finance - commercial ..........................      24.1             32.2          69.6         84.2
   Specialty Finance - consumer ............................      15.1             10.3          39.6         30.4
   Commercial Services .....................................       6.3              7.2          18.4         17.2
   Corporate Finance .......................................      (3.2)            14.8           4.0         66.2
   Equipment Finance .......................................       3.4              7.8          16.7         49.6
   Capital Finance .........................................       2.3               --           2.7          7.6
                                                                ------           ------        ------       ------
Total net credit losses ....................................      48.0             72.3         151.0        255.2
                                                                ------           ------        ------       ------
Balance end of period ......................................    $652.8           $637.9        $652.8       $637.9
                                                                ======           ======        ======       ======
Reserve for credit losses as a percentage
   of finance receivables ..................................                                     1.53%        1.85%
                                                                                                =====       ======
Reserve for credit losses as a percentage of
   past due receivables (60 days or more)(1) ...............                                     87.0%       111.3%
                                                                                               ======       ======
Reserve for credit losses as a percentage of
   non-performing assets(1) ................................                                    119.4%       120.7%
                                                                                               ======       ======

--------------------------------------------------------------------------------
(1)   The reserve for credit losses as a percentage of past due  receivables and
      non-performing accounts, excluding telecommunications reserves and account
      balances, were 100.7% and 113.5% at September 30, 2004, respectively.

(2)   At September  30, 2005,  the reserve to  non-performing  asset  percentage
      exceeded the reserve to  delinquency  percentage  due to the fact that the
      student lending portfolio has no non-performing assets, as student lending
      past due  receivables are not classified as  non-performing  assets to the
      extent such loans are subject to the U.S. government guarantee.


                                       28


      The  reserve  for  credit  losses  was  $652.8  million  (1.53% of finance
receivables)  at  September  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 a $34.6 million  provision for estimated  hurricane damage (see table below),
portfolio  growth,  and increased  risk related to U.S.  commercial  airline hub
carriers,  reflecting the  continuation of high fuel costs and airline  industry
operating 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 the addition of
$4.4 billion of U.S. government-guaranteed  education lending loans. The reserve
includes specific reserves,  excluding  telecommunication  accounts, relating to
impaired  loans of $68.3  million and $42.4  million at  September  30, 2005 and
December 31, 2004.  The increase from 2004 relating to impaired  loans  reflects
amounts related to bankrupt U.S. hub carriers.

      During the quarter,  we  established  a $34.6  million  reserve for credit
losses related to Hurricanes Katrina and Rita. This amount reflects management's
best  estimate of loss as of  September  30, 2005 based on  available,  relevant
information.  Total business  segment owned and  securitized  receivables in the
three most impacted states (Louisiana,  Alabama and Mississippi) as of September
30, 2005 were  approximately  $925 million and $200 million.  Of these  amounts,
exposure to commercial and consumer  customers  located in the Federal Emergency
Management  Agency  ("FEMA")  designated  disaster  areas and other  areas  that
management  determined  were  significantly  impacted  were  approximately  $600
million and $50 million  respectively,  including  approximately $250 million in
the FEMA designated disaster areas relating  principally to equipment and vendor
finance assets and home mortgages.  For commercial loans management  performed a
loan-by-loan  assessment of estimated  loss. For equipment and vendor assets and
home  mortgages the FEMA  designated  disaster  areas,  management  performed an
analysis of exposure by zip code,  including flood versus  non-flood  designated
locations,   supplemented  with  a  range  of  corresponding   estimated  damage
assessments.   This  estimate  of  loss  involves   considerable   judgment  and
assumptions  about  uncertain  matters,  including the existence of insurance in
force with respect to damages  incurred,  insurance  claims and proceeds and the
extent of property  damage.  Management  will  continue to assess the  financial
impact of the hurricanes as more information becomes available.

      A  summary  of  the  estimated  hurricane  charges  is  as  follows  ($ in
millions):

                                                             Reserve for
                                                            Credit Losses
                                                            -------------
      Specialty Finance - commercial.....................       $ 4.2
      Specialty Finance - consumer.......................        16.9
                                                                -----
         Total Specialty Finance Group...................        21.1
                                                                -----
      Commercial Services................................         3.0
      Corporate Finance..................................         6.5
      Equipment Finance..................................         4.0
      Capital Finance....................................          --
                                                                -----
         Total Commercial Finance Group..................        13.5
                                                                -----
         Total...........................................       $34.6
                                                                =====

      The reserve for credit losses is determined based on three key components:
(1) specific  reserves for  collateral  and cash flow  dependent  loans that are
impaired  under SFAS 114;  (2)  reserves for  estimated  losses  inherent in the
portfolio  based upon historical and projected  credit trends;  and (3) reserves
for economic  environment and other factors.  The 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,  and inherent uncertainty with respect
to our estimate of hurricane losses.

      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.


                                       29


      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 September 30,              Nine Months Ended September 30,
                                                ---------------------------------------   ---------------------------------------
                                                       2005                  2004                2005                 2004
                                                ------------------    -----------------   ------------------   ------------------
                                                                                                    
Specialty Finance - commercial ..............   $24.1        1.10%    $32.2       1.56%   $ 69.6       1.04%   $ 84.2       1.38%
Specialty Finance - consumer ................    15.1        0.55%     10.3       1.10%     39.6       0.56%     30.4       1.23%
                                                -----                 -----               ------               ------
   Total Specialty Finance Group ............    39.2        0.79%     42.5       1.42%    109.2       0.79%    114.6       1.34%
                                                -----                 -----               ------               ------
Commercial Services .........................     6.3        0.36%      7.2       0.46%     18.4       0.37%     17.2       0.37%
Corporate Finance ...........................    (3.2)      (0.15)%    14.8       0.90%      4.0       0.07%     66.2       1.36%
Equipment Finance ...........................     3.4        0.31%      7.8       0.49%     16.7       0.43%     49.6       1.05%
Capital Finance .............................     2.3        0.39%       --         --       2.7       0.15%      7.6       0.58%
                                                -----                 -----               ------               ------
   Total Commercial Finance Group ...........     8.8        0.16%     29.8       0.57%     41.8       0.25%    140.6       0.90%
                                                -----                 -----               ------               ------
   Total ....................................   $48.0        0.46%    $72.3       0.88%   $151.0       0.50%   $255.2       1.06%
                                                =====                 =====               ======               ======


      Charge-offs  for the quarter and nine months  ended  September  30,  2004,
excluding    amounts   related   to   liquidating   and    specifically-reserved
telecommunication  accounts,  were $57.6  million  (0.72%)  and  $186.3  million
(0.80%).  The most  notable  improvements  from the prior  year were in  Capital
Finance,  Equipment  Finance  and the  Communications,  Media  &  Entertainment,
Capital  Markets,  and Global Sponsor  Finance units within  Corporate  Finance.
Additional analysis by segment follows:

      o     Specialty Finance - commercial  charge-offs for the quarter improved
            from 2004 primarily in the vendor program.

      o     Specialty Finance - consumer  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 recoveries
            from previously written-off accounts in the Communications,  Media &
            Entertainment, Capital Markets, and Global Sponsor Finance units.

      o     Equipment  Finance  charge-off  improvement  continued,  as  current
            quarter   charge-offs   remained  very  low,   particularly  in  the
            construction business.

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

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



                                                    Quarters Ended September 30,              Nine Months Ended September 30,
                                               ---------------------------------------   ---------------------------------------
                                                      2005                  2004                2005                 2004
                                               ------------------    -----------------   ------------------   ------------------
                                                                                                   
Specialty Finance - commercial .............   $33.8        1.09%    $43.5       1.45%   $ 99.1       1.05%   $118.4       1.29%
Specialty Finance - consumer ...............    23.3        0.78%     15.6       1.21%     59.9       0.76%     45.3       1.23%
                                               -----                 -----               ------               ------
   Total Specialty Finance Group ...........    57.1        0.93%     59.1       1.38%    159.0       0.92%    163.7       1.28%
                                               -----                 -----               ------               ------
Commercial Services ........................     6.3        0.36%      7.2       0.46%     18.4       0.37%     17.2       0.37%
Corporate Finance ..........................    (3.1)      (0.14)%    14.8       0.90%      4.6       0.08%     66.2       1.36%
Equipment Finance ..........................     5.9        0.34%     17.5       0.77%     27.6       0.47%     86.5       1.25%
Capital Finance ............................     2.3        0.39%       --         --       2.7       0.15%      7.6       0.58%
                                               -----                 -----               ------               ------
   Total Commercial Finance Group ..........    11.4        0.18%     39.5       0.66%     53.3       0.29%    177.5       1.00%
                                               -----                 -----               ------               ------
   Total ...................................   $68.5        0.56%    $98.6       0.96%   $212.3       0.59%   $341.2       1.11%
                                               =====                 =====               ======               ======



                                       30


      The  changes in managed  portfolio  charge-offs  are  consistent  with the
previously discussed changes in charge-offs on an owned basis.

Past Due Loans and Non-performing Assets

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



                                                                    September 30, 2005          December 31, 2004
                                                                    ------------------          -----------------
                                                                                                
Past due accounts:
   Specialty Finance - commercial ............................        $303.0     3.52%          $283.3      3.22%
   Specialty Finance - consumer ..............................         283.4     2.55%           116.4      2.27%
                                                                      ------                    ------
     Total Specialty Finance Group ...........................         586.4     2.97%           399.7      2.87%
                                                                      ------                    ------
   Commercial Services .......................................          36.6     0.50%            88.0      1.42%
   Corporate Finance(1) ......................................          58.0     0.65%            43.3      0.65%
   Equipment Finance(1) ......................................          48.0     1.08%            50.1      0.79%
   Capital Finance ...........................................          21.6     1.02%            26.9      1.47%
                                                                      ------                    ------
     Total Commercial Finance Group ..........................         164.2     0.72%           208.3      0.99%
                                                                      ------                    ------
     Total ...................................................        $750.6     1.76%          $608.0      1.73%
                                                                      ======                    ======
Non-performing accounts:
   Specialty Finance - commercial ............................        $162.8     1.89%          $165.9      1.88%
   Specialty Finance - consumer ..............................         146.4     1.31%           119.3      2.32%
                                                                      ------                    ------
     Total Specialty Finance Group ...........................         309.2     1.57%           285.2      2.05%
                                                                      ------                    ------
   Commercial Services .......................................           6.4     0.09%            56.8      0.92%
   Corporate Finance(1) ......................................          67.3     0.75%            61.8      0.92%
   Equipment Finance(1) ......................................          67.0     1.50%           131.2      2.06%
   Capital Finance ...........................................          96.7     4.56%             4.6      0.25%
                                                                      ------                    ------
     Total Commercial Finance Group ..........................         237.4     1.03%           254.4      1.21%
                                                                      ------                    ------
     Total ...................................................        $546.6     1.28%          $539.6      1.54%
                                                                      ======                    ======
Non-accrual loans ............................................        $487.6                    $458.4
Repossessed assets ...........................................          59.0                      81.2
                                                                      ------                    ------
     Total non-performing accounts ...........................        $546.6                    $539.6
                                                                      ======                    ======


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

      Delinquency  levels as of September 30, 2005  increased  from December 31,
2004 primarily due to the student  lending  acquisition  in Specialty  Finance -
consumer.  Excluding  these assets,  delinquency  was $619.2 million  (1.62%) at
September  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 higher than
            last quarter and the fourth quarter of 2004 in the vendor program.

      o     Specialty Finance - consumer delinquency increased from December 31,
            2004,  due to the student  lending  acquisition.  Excluding  student
            lending  receivables,  delinquencies  were $152.0  million  (2.26%),
            versus $116.4  million  (2.27%) last  year-end,  reflecting the home
            lending portfolio 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.

      o     Capital  Finance  non-performing  increase is due to two  commercial
            airline  carriers  declaring  bankruptcy  during the current quarter
            (see "Concentrations" section)


                                       31


      Non-performing  assets  increased from the prior quarter mainly in Capital
Finance due to the bankruptcies  and in Specialty  Finance - consumer due to the
home lending growth as mentioned above.  The percentage  trends were impacted by
the  student  lending  acquisition,  which  had no  non-performing  accounts  at
September 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):



                                                                    September 30, 2005         December 31, 2004
                                                                    ------------------         -----------------
                                                                                                
Managed past due accounts:
   Specialty Finance - commercial ............................       $399.4     2.94%          $402.1       2.82%
   Specialty Finance - consumer ..............................        369.2     2.91%           227.8       3.45%
                                                                     ------                    ------
     Total Specialty Finance Group ...........................        768.6     2.92%           629.9       3.02%
                                                                     ------                    ------
   Commercial Services .......................................         36.6     0.50%            88.0       1.42%
   Corporate Finance .........................................         58.7     0.65%            43.3       0.65%
   Equipment Finance .........................................         66.8     0.93%            90.3       0.96%
   Capital Finance ...........................................         21.6     0.97%            26.9       1.47%
                                                                     ------                    ------
     Total Commercial Finance Group ..........................        183.7     0.71%           248.5       1.03%
                                                                     ------                    ------
     Total ...................................................       $952.3     1.83%          $878.4       1.95%
                                                                     ======                    ======


      The trends in the table above  largely  reflect the  previously  discussed
changes 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                    Nine Months Ended
                                                                      September 30,                       September 30,
                                                              ----------------------------        ----------------------------
                                                                 2005              2004              2005              2004
                                                              ----------        ----------        ----------        ----------
                                                                                                        
Salaries and employee benefits ........................       $    177.7        $    148.2        $    508.7        $    450.4
Other general operating expenses ......................            103.4              99.9             305.2             290.1
                                                              ----------        ----------        ----------        ----------
   Salaries and general operating expenses ............            281.1             248.1             813.9             740.5
Provision for restructuring ...........................               --                --              25.2                --
                                                              ----------        ----------        ----------        ----------
   Total ..............................................       $    281.1        $    248.1        $    839.1        $    740.5
                                                              ==========        ==========        ==========        ==========
Efficiency ratio(1) ...................................             42.0%             40.7%             40.9%             40.9%
Salaries and general operating expenses
   as a percentage of AMA(2) ..........................             2.01%             2.10%             2.05%             2.11%
Average Managed Assets ................................       $ 56,012.4        $ 47,166.8        $ 54,468.1        $ 46,737.1


--------------------------------------------------------------------------------
(1)   Efficiency ratio is the ratio of salaries and general  operating  expenses
      to operating margin,  excluding the provision for credit losses. Excluding
      the gain on sale of real  estate  investment,  fair  value  mark-downs  on
      aircraft and  manufactured  housing  receivables,  and  hurricane  related
      estimated losses in the quarter and the restructuring  charge and the gain
      on sale of business  aircraft year to date, the efficiency  ratios for the
      2005 quarter and nine months were 42.1% and 41.4%.

(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 restructuring  charge,  the ratio of salaries
      and general  operating  expenses to managed  assets was 1.99% for the nine
      months ended September 30, 2005.

      Salaries and general  operating  expenses for the quarter ended  September
30, 2005  increased from 2004 due to  incremental  salaries and other  operating
expenses related to recent acquisitions and additions to our sales and marketing
functions,  as well as higher  incentive-based costs (driven primarily by higher
sales  incentive  plans),   consistent  with  the  improved  volume,   fees  and
profitability.  Operating  expenses for student  lending were $18.8  million and
$42.5 million for the quarter and nine months ended September 30, 2005.

      Personnel totaled  approximately 6,165 at September 30, 2005, versus 6,110
last quarter and 5,700 last year.  The increase from 2004 was largely due to the
acquisitions and upfront investments made in our sales and marketing functions.

      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 established last quarter, reflecting the realignment of
Commercial Finance and


                                       32


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 $25 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  29.2%  and  39.0%  for the  quarters  ended
September 30, 2005 and 2004 and 33.3% 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 the
following: (1) improved profitability in our international  operations;  (2) the
relocation  of certain  aerospace  assets in Ireland with offshore  funding,  as
provisions  of the American  Jobs  Creation Act of 2004  provide  favorable  tax
treatment for certain aircraft leasing operations conducted offshore and (3) the
release  of a tax  liability  of $17.6  million  relating  to our  international
operations. The improved profitability in international operations resulted from
our  initiative  to grow our  international  profitability  via better  platform
efficiency  coupled with asset growth.  During the quarter  ended  September 30,
2005 we concluded our  evaluation  with respect to an  international  tax filing
position based on a favorable  opinion  received from the local tax authorities,
resulting  in the release of a previously  provided  for tax  liability of $17.6
million. This reduced the effective tax rate by approximately 5% for the quarter
ended September 30, 2005.

      During the quarter,  we filed our U.S.  federal  income tax return for the
year  ended   December  31,  2004.  The  return   reported   taxable  income  of
approximately $400 million,  which reduced the U.S. federal net operating losses
("NOL's") to  approximately  $1.5  billion.  These NOL's expire in various years
beginning in 2011. In addition,  we have various state NOL's 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 NOL's. As of September 30, 2005,  based on management's
assessment  as to  realizability,  the net  deferred  tax  liability  includes a
valuation allowance of approximately $10 million relating to state NOL's.

      We have 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.


                                       33


Financing and Leasing Assets

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



                                                                                September 30,    December 31,     Percentage
                                                                                    2005             2004           Change
                                                                                -------------    ------------     ----------
                                                                                                               
Specialty Finance Group
   Specialty Finance - commercial
     Finance receivables ....................................................     $ 8,606.5       $ 8,805.7             (2.3)%
     Operating lease equipment, net .........................................       1,116.7         1,078.7              3.5%
     Financing and leasing assets held for sale .............................         994.0         1,288.4            (22.9)%
                                                                                  ---------       ---------
       Owned assets .........................................................      10,717.2        11,172.8             (4.1)%
     Finance receivables securitized and managed by CIT .....................       3,996.2         4,165.5             (4.1)%
                                                                                  ---------       ---------
       Managed assets .......................................................      14,713.4        15,338.3             (4.1)%
                                                                                  ---------       ---------
   Specialty Finance - consumer
     Finance receivables -- home lending ....................................       6,447.5         4,896.8             31.7%
     Finance receivables -- education lending ...............................       4,396.1              --              N/A
     Finance receivables -- other ...........................................         289.9           236.0             22.8%
     Financing and leasing assets held for sale .............................         643.2           241.7            166.1%
                                                                                  ---------       ---------
       Owned assets .........................................................      11,776.7         5,374.5            119.1%
     Home lending finance receivables securitized
       and managed by CIT ...................................................         911.4         1,228.7            (25.8)%
                                                                                  ---------       ---------
       Managed assets .......................................................      12,688.1         6,603.2             92.2%
                                                                                  ---------       ---------
Commercial Finance Group
   Commercial Services
     Finance receivables ....................................................       7,388.9         6,204.1             19.1%
                                                                                  ---------       ---------
   Corporate Finance
     Finance receivables ....................................................       8,978.0         6,702.8             33.9%
     Operating lease equipment, net .........................................          76.1            35.1            116.8%
     Financing and leasing assets held for sale .............................           0.1                               --
                                                                                  ---------       ---------
       Owned assets .........................................................       9,054.2         6,737.9             34.4%
     Finance receivables securitized and managed by CIT .....................          46.1              --              N/A
                                                                                  ---------       ---------
       Managed assets .......................................................       9,100.3         6,737.9             35.1%
                                                                                  ---------       ---------
   Equipment Finance
     Finance receivables ....................................................       4,461.2         6,373.1            (30.0)%
     Operating lease equipment, net .........................................         109.1           440.6            (75.2)%
     Financing and leasing assets held for sale .............................         105.8           110.7             (4.4)%
                                                                                  ---------       ---------
       Owned assets .........................................................       4,676.1         6,924.4            (32.5)%
     Finance receivables securitized and managed by CIT .....................       2,585.7         2,915.5            (11.3)%
                                                                                  ---------       ---------
       Managed assets .......................................................       7,261.8         9,839.9            (26.2)%
                                                                                  ---------       ---------
   Capital Finance
     Finance receivables ....................................................       2,118.5         1,829.7             15.8%
     Operating lease equipment, net .........................................       7,882.5         6,736.5             17.0%
     Financing and leasing assets held for sale .............................         105.3              --              N/A
                                                                                  ---------       ---------
       Owned assets .........................................................      10,106.3         8,566.2             18.0%
                                                                                  ---------       ---------
   Other -- Equity Investments ..............................................          31.1           181.0            (82.8)%
                                                                                  ---------       ---------
   Total
     Finance receivables ....................................................     $42,686.6       $35,048.2             21.8%
     Operating lease equipment, net .........................................       9,184.4         8,290.9             10.8%
     Financing and leasing assets held for sale .............................       1,848.4         1,640.8             12.7%
                                                                                  ---------       ---------
     Financing and leasing assets excl. equity investments ..................      53,719.4        44,979.9             19.4%
     Equity investments (included in other assets) ..........................          31.1           181.0            (82.8)%
                                                                                  ---------       ---------
       Owned assets .........................................................      53,750.5        45,160.9             19.0%
     Finance receivables securitized and managed by CIT .....................       7,539.4         8,309.7             (9.3)%
                                                                                  ---------       ---------
       Managed assets .......................................................     $61,289.9       $53,470.6             14.6%
                                                                                  =========       =========



                                       34


      The  2005  year  to  date  activity   reflects   strong  volumes  and  the
acquisitions in the student lending and healthcare  businesses,  offset by asset
sales and syndications  done largely for risk management and capital  allocation
purposes,  particularly  in the third  quarter.  Additional  trends  by  segment
follow:

      o     Specialty  Finance - commercial  declined despite strong volume,  as
            runoff / liquidations  were higher and the sale of over $300 million
            of liquidating  manufactured  housing assets in the first quarter of
            2005.

      o     Specialty Finance - consumer increased,  reflecting the $4.6 billion
            student  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 due to seasonal growth, as retailers
            build  inventories  ahead of the back to school and holiday  seasons
            and the first quarter 2005 acquisition.

      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 as
            well as approximately  $500 million from the HBCC acquisition in the
            third quarter of 2005.

      o     Equipment Finance,  essentially  unchanged from the June 30 quarter,
            declined from year-end 2004  reflecting  the sale of $923 million in
            business  aircraft assets,  the transfer of the remaining  portfolio
            (approximately $600 million) to Capital Finance, and the transfer of
            approximately $450 million in healthcare assets to Corporate Finance
            in the second quarter of 2005. In addition,  the $400 million sports
            and gaming  portfolio was  transferred  to Corporate  Finance in the
            first quarter of 2005.

      o     Capital  Finance's  increase  reflected  the  growth in our  railcar
            portfolio  as  well  as  commercial  aerospace  deliveries  and  the
            transfer of the remaining business aircraft portfolio from Equipment
            Finance during the second quarter of 2005.

      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                   Nine Months Ended
                                                                    September 30,                      September 30,
                                                             ----------------------------       -----------------------------
                                                               2005               2004             2005               2004
                                                             ---------          ---------       ---------           ---------
                                                                                                        
Specialty Finance - commercial .......................       $2,843.9           $2,504.0        $ 7,866.6           $ 7,433.0
Specialty Finance - consumer .........................        2,434.7            1,319.4          6,103.5             3,244.6
Commercial Services ..................................          108.2              107.6            280.3               361.1
Corporate Finance ....................................        1,196.8              621.8          3,355.9             1,913.2
Equipment Finance ....................................          729.9            1,115.1          2,689.6             3,086.4
Capital Finance ......................................          669.9              299.6          1,562.8               850.5
                                                             --------           --------        ---------           ---------
   Total new business volume .........................       $7,983.4           $5,967.5        $21,858.7           $16,888.8
                                                             ========           ========        =========           =========

      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 as well as strong volume in student lending.

      o     Commercial  Services'  current quarter volume was  essentially  flat
            with the prior year's.

      o     Corporate  Finance's Global Sponsor Finance 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.


                                       35


Concentrations

Ten Largest Accounts

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented 4.5% of our total financing and leasing assets at September 30, 2005
(the  largest  account  being less than 1.0%),  compared to 5.3% at December 31,
2004. The decline is due to asset growth,  including the addition of the student
lending receivables.

Operating Leases

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

                                                   September 30,    December 31,
                                                       2005             2004
                                                   -------------    ------------
Capital Finance -- Aerospace ...................     $4,894.4         $4,461.0
Capital Finance -- Rail and Other ..............      2,988.1          2,275.5
Specialty Finance ..............................      1,116.7          1,078.7
Equipment Finance ..............................        109.1            440.6
Corporate Finance ..............................         76.1             35.1
                                                     --------         --------
   Total .......................................     $9,184.4         $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 $227.2 million
and $118.3  million at September  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:  (1)
commercial aerospace  transactions  (including  tax-optimized  leveraged leases,
which  generally  have increased risk of loss in default for lessors in contrast
to conventional lease structures due to additional  leverage and the third party
lender priority  recourse to the equipment in these  transactions);  (2) project
finance  transactions,  primarily in the power and utility  sectors and (3) rail
transactions. The balances are as follows ($ in millions):

                                                    September 30,   December 31,
                                                        2005            2004
                                                    -------------   ------------
Commercial aerospace -- non-tax optimized ........    $  342.6        $  336.6
Commercial aerospace -- tax optimized ............       182.5           221.0
Project finance ..................................       354.6           334.9
Rail .............................................       209.5           233.9
Other ............................................        87.4           115.4
                                                      --------        --------
   Total leveraged lease transactions ............    $1,176.6        $1,241.8
                                                      ========        ========
As a percentage of finance receivables ...........         2.8%            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  provide Dell with 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 finance
receivables  through January 2010. The joint venture  agreement with Snap-on was
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.


                                       36


      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):

                                                   September 30,   December 31,
                                                        2005           2004
                                                   -------------   ------------
Owned Financing and Leasing Assets
Dell .............................................    $3,551.8       $3,389.4
Snap-on ..........................................     1,052.1        1,114.7
Avaya Inc. .......................................       542.6          620.7
Securitized Financing and Leasing Assets
Dell .............................................    $2,519.8       $2,489.2
Snap-on ..........................................        55.8           64.8
Avaya Inc. .......................................       515.9          599.6
Dell International Financing and Leasing
  Assets included above
Dell -- owned ....................................    $1,437.3       $1,403.6
Dell -- securitized ..............................        39.8            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 approach, 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 $6.9 billion (owned) and $7.8 billion
(managed)  at  September  30,  2005,  representing  12.8% and 12.7% of owned and
managed assets,  respectively.  Selected statistics for our managed home lending
portfolio are as follows:

      o     92% first mortgages.

      o     Average loan size of approximately $112.4 thousand.

      o     Top 5 state concentrations  (California,  Texas, Florida,  Ohio, and
            Pennsylvania) represented an aggregate 42% of the managed portfolio.

      o     47% fixed-rate.

      o     Average loan-to-value of 81%.

      o     Average FICO score of 631.

      o     Delinquencies (sixty days or more) were 3.01% and 3.59% at September
            30, 2005 and December 31, 2004.

      o     Charge-offs  were 1.14% and 1.09% for the quarters  ended  September
            30, and June 30, 2005.

      During the quarter  ended  September 30, 2005, a reserve for credit losses
of $16.9 million and a securitization  retained  interest  impairment  charge of
$4.6 million  pretax related to estimated  hurricane  losses in the home lending
portfolio was recorded.  See Reserve for Credit Losses and Note 3 for additional
information.


                                       37


Student Lending Portfolio (Student Loan Xpress)

      The  Specialty  Finance - consumer  student  lending  portfolio,  which is
marketed as Student  Loan Xpress,  totaled  $4.6 billion at September  30, 2005,
representing 8.5% of owned and 7.4% of managed assets.  Loan origination volumes
for the  September  2005 quarter were $945.1  million,  and $1.5 billion 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 relationship.

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

                                                    September 30,   December 31,
                                                        2005            2004
                                                    -------------   ------------
Finance receivables by product type
Consolidation loans................................   $4,121.8        $3,954.8
Other U.S. Government guaranteed loans.............      414.8           322.6
Private (non-guaranteed) loans and other...........       15.8            14.1
                                                      --------        --------
   Total...........................................   $4,552.4        $4,291.5
                                                      ========        ========

      o     Delinquencies  (sixty  days or more) were $131.4  million,  2.89% of
            finance receivables at September 30, 2005 and $114.3 million,  2.66%
            at June 30, 2005.

      o     Top 5 state  concentrations  (California,  New  York,  Pennsylvania,
            Texas, and Ohio) represented an aggregate 37.5% 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.

                                                  September 30,    December 31,
                                                      2005             2004
                                                  -------------    ------------
State
California ...................................         10.0%          10.3%
Texas ........................................          7.6%           7.8%
New York .....................................          6.7%           6.8%
All other states .............................         55.2%          52.8%
                                                       ----           ----
   Total U.S. ................................         79.5%          77.7%
                                                       ====           ====
Country
Canada .......................................          5.5%           5.5%
England ......................................          3.5%           3.9%
Australia ....................................          1.1%           1.3%
China ........................................          1.1%           1.2%
France .......................................          1.0%           1.4%
Germany ......................................          1.0%           1.2%
All other countries ..........................          7.3%           7.8%
                                                       ----           ----
   Total Outside U.S. ........................         20.5%          22.3%
                                                       ====           ====

      During August and September 2005, hurricanes damaged our customers' places
of  business  and homes  along the Gulf  coast from  Texas to the  panhandle  of
Florida.  Our owned and  securitized  asset  exposure in the three most impacted
states (Louisiana,  Mississippi,  and Alabama) was $925 million and $200 million
at September 30, 2005.  See Reserve for Credit Losses and Note 3 for  additional
information.

Industry Composition

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


                                       38


Aerospace

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

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



                                                                      September 30, 2005              December 31, 2004
                                                                    -----------------------        -----------------------
                                                                       Net                            Net
                                                                    Investment       Number        Investment       Number
                                                                    ----------       ------        ----------       ------
                                                                                                           
By Region:
   Europe ....................................................       $2,217.2           72          $2,160.0           72
   North America .............................................        1,061.4           59           1,057.7           66
   Asia Pacific ..............................................        1,467.6           50           1,242.4           46
   Latin America .............................................          531.7           21             611.3           25
   Africa / Middle East ......................................          255.6            6              54.2            3
                                                                     --------          ---          --------          ---
Total ........................................................       $5,533.5          208          $5,125.6          212
                                                                     ========          ===          ========          ===
By Manufacturer:
   Boeing ....................................................       $2,603.7          124          $2,558.8          133
   Airbus ....................................................        2,886.6           76           2,536.9           70
   Other .....................................................           43.2            8              29.9            9
                                                                     --------          ---          --------          ---
Total ........................................................       $5,533.5          208          $5,125.6          212
                                                                     ========          ===          ========          ===
By Body Type(1):
   Narrow body ...............................................       $4,091.6          163          $3,894.9          168
   Intermediate ..............................................        1,101.8           21             842.7           18
   Wide body .................................................          296.9           16             358.1           17
   Other .....................................................           43.2            8              29.9            9
                                                                     --------          ---          --------          ---
Total ........................................................       $5,533.5          208          $5,125.6          212
                                                                     ========          ===          ========          ===
By Product:
   Operating lease ...........................................       $4,799.2          168          $4,324.6          167
   Leverage lease (other) ....................................          342.6           12             336.6           12
   Leverage lease (tax optimized) ............................          182.5            8             221.0            9
   Capital lease .............................................          126.3            6             137.4            6
   Loan ......................................................           82.9           14             106.0           18
                                                                     --------          ---          --------          ---
Total ........................................................       $5,533.5          208          $5,125.6          212
                                                                     ========          ===          ========          ===
Other Data:
Off-lease aircraft ...........................................              2                              2
Number of accounts ...........................................             97                             92
Weighted average age of fleet (years) ........................              6                              6
Largest customer net investment ..............................       $  279.3                       $  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, which
      consist  primarily of Boeing 747 and 777 series and McDonnell Douglas DC10
      series aircraft.

      The top  five  commercial  aerospace  exposures,  which  totaled  $1,064.3
million at September 30, 2005,  are to carriers  outside of the U.S. The largest
exposure to a U.S.  carrier at  September  30, 2005 was $158.9  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 over
the past 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.

      The regional  aircraft  portfolio at September  30, 2005  consisted of 117
planes and a net  investment  of $291.4  million.  The  carriers  are  primarily
located in North America and Latin America.  Operating  leases account for about
32.7% of the portfolio,  with the balance  capital leases or loans.  At December
31, 2004, the portfolio  consisted of 121 planes with a net investment of $302.6
million.


                                       39


      At September 30, 2005, two commercial  aircraft were off-lease (book value
of $47.6 million). Generally,  commercial aerospace leases are being written for
terms between  three and five years.  There were two aircraft  off-lease  with a
total book value of  approximately  $2.8 million  within the  regional  aircraft
portfolio at September 30, 2005.

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

      o     UAL Corp.  -- United  Airlines  leases  two  CIT-owned  narrow  body
            aircraft  (Boeing  757  aircraft)  with a net  investment  of  $44.9
            million.   We  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 $32.3  million.  Further,  we have an  outstanding
            balance  of  $9.6  million  (with a  commitment  of  $31.3  million)
            relating  to a  debtor-in-possession  facility  in  connection  with
            United Airlines' filing under Chapter 11.

      o     US Airways -- US Airways  exited its second  Chapter 11 filing via a
            merger with America  West.  One CIT-owned  737-300  remains with the
            airline through 2007, for a total net investment of $5.8 million.

      o     Delta Air Lines -- On September 14, 2005,  Delta Air Lines announced
            that it had filed for  reorganization  under  Chapter 11 of the U.S.
            Bankruptcy Code. We are currently in negotiations under Section 1110
            of the Code. We have loans and leases  secured by eight aircraft for
            a total net investment of $88.5 million.

      o     Northwest  Airlines -- On  September  14, 2005,  Northwest  Airlines
            announced that it had filed for  reorganization  under Chapter 11 of
            the U.S.  Bankruptcy  Code. We are currently in  negotiations  under
            Section  1110 of the Code with respect to one aircraft and have been
            notified that two other  aircraft will be returned.  As of September
            30, 2005, we had $49.7 million in finance receivables from Northwest
            Airlines.

      In total,  we have  exposures to U.S.  commercial  airline hub carriers of
approximately  $389  million at  September  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  considers  current  lease  rentals as well as relevant and available
market information (including third party sales for similar equipment, published
appraisal  data  and  other   marketplace   information)   both  in  determining
undiscounted  future cash flows when testing for the existence of impairment and
in  determining  estimated  fair value in  measuring  impairment.  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

      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.


                                       40


Risk Management

      Our risk management process is described in more detail in our 2004 Annual
Report on Form 10-K. Our processes  remained  substantially the same as outlined
in our 2004 Form 10-K.

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

      We evaluate and monitor various risk metrics:

      o     Margin at Risk, 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
                                                         ----------   -------------     ----------    -------------
                                                                                               
                   September 30, 2005
Assets.................................................      49%            51%             49%            51%
Liabilities............................................      49%            51%             43%            57%

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


      Total  interest  sensitive  assets were $49.9 billion and $41.7 billion at
September 30, 2005 and December 31, 2004. Total interest  sensitive  liabilities
were $44.1  billion and $35.9  billion at  September  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 September 30, 2005, as compared to December 31, 2004.

Foreign  Exchange Risk  Management  -- 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  to the
extent local foreign  currency  borrowings are not raised.  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  profile  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).


                                       41


      Outstanding  commercial  paper totaled $5.2 billion at September 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. We also
have a 5-year unsecured  committed line of credit of $750 million, of which $306
million has been drawn as of September 30, 2005. In addition, we have a separate
364-day unsecured  committed line of credit of $152 million,  which supports the
Australian commercial paper program.

      We maintain  registration  statements  with the  Securities  and  Exchange
Commission  ("SEC") covering debt securities that we may sell in the future.  At
September 30, 2005, our registration  statements had $4.5 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 $9.4
billion:  $4.9 billion in  variable-rate  medium-term  notes and $4.5 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  and  student   lending
receivables and trade accounts receivable.  While these are predominately in the
U.S., we also maintain facilities for Canadian domiciled assets. As of September
30, 2005, we had  approximately  $5.0 billion of  availability  in our committed
asset-backed facilities and $5.0 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   September 30, 2005    December 31, 2004
---------------------                                          --------------   ------------------    -----------------
                                                                                                     
Commercial paper to total debt..........................       Maximum of 15%            12%                  11%
Short-term debt to total debt...........................       Maximum of 45%            34%                  31%
Bank lines to commercial paper..........................      Minimum of 100%           134%                 150%
Aggregate alternative liquidity* to short-term debt.....       Minimum of 75%            94%                 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
DBRS.......................................      R-1L          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  defined as total equity of $4.0
billion.


                                       42


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



                                                          Payments and Collections(3) by Twelve Month Period Ending September 30,
                                                       -----------------------------------------------------------------------------
                                                         Total         2006          2007          2008         2009         2010+
                                                       ---------     ---------     ---------     ---------    ---------    ---------
                                                                                                         
Commercial Paper .................................     $ 5,185.1     $ 5,185.1     $      --     $      --    $      --    $      --
Variable-rate senior unsecured notes .............      14,318.1       7,007.2       4,169.8       1,964.5        833.0        343.6
Fixed-rate senior unsecured notes ................      21,473.3       3,107.3       2,585.5       2,457.5      1,660.6     11,662.4
Non-recourse, secured borrowings .................       3,737.7          11.6            --            --           --      3,726.1
Preferred capital security .......................         252.5            --            --            --           --        252.5
Lease rental expense .............................         316.9          54.6          51.8          44.6         25.9        140.0
                                                       ---------     ---------     ---------     ---------    ---------    ---------
   Total contractual obligations .................      45,283.6      15,365.8       6,807.1       4,466.6      2,519.5     16,124.6
                                                       ---------     ---------     ---------     ---------    ---------    ---------
Finance receivables(1) ...........................      42,686.6      13,329.6       4,580.4       3,989.2      2,680.1     18,107.3
Operating lease rental income ....................       3,617.1       1,237.0         882.9         588.8        386.9        521.5
Finance receivables held for sale(2) .............       1,848.4       1,848.4            --            --           --           --
Cash -- current balance ..........................       1,935.4       1,935.4            --            --           --           --
Retained interest in securitizations
   and other investments .........................       1,180.9         864.7         133.2          71.8         81.0         30.2
                                                       ---------     ---------     ---------     ---------    ---------    ---------
   Total projected cash receipts .................      51,268.4      19,215.1       5,596.5       4,649.8      3,148.0     18,659.0
                                                       ---------     ---------     ---------     ---------    ---------    ---------
Net projected cash inflow (outflow) ..............     $ 5,984.8     $ 3,849.3     $(1,210.6)    $   183.2    $   628.5    $ 2,534.4
                                                       =========     =========     =========     =========    =========    =========


--------------------------------------------------------------------------------
(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 September 30,
                                                  --------------------------------------------------------------------------------
                                                    Total           2006          2007          2008          2009         2010+
                                                  ---------      ---------     ---------     ---------     ---------     ---------
                                                                                                       
Credit extensions(1) ........................     $ 9,523.1      $ 1,674.0     $   723.8     $   987.6     $   897.6     $ 5,240.1
Aircraft purchases ..........................       3,091.0          716.0         819.0         687.0         308.0         561.0
Letters of credit ...........................       1,017.0          910.3           3.3          27.8          64.6          11.0
Sale-leaseback payments .....................         464.7           31.0          31.0          31.0          31.0         340.7
Manufacturer purchase commitments ...........         372.8          372.8            --            --            --            --
Guarantees ..................................         213.0          200.9            --          10.5           1.6            --
Acceptances .................................          24.7           24.7            --            --            --            --
                                                  ---------      ---------     ---------     ---------     ---------     ---------
   Total contractual commitments ............     $14,706.3      $ 3,929.7     $ 1,577.1     $ 1,743.9     $ 1,302.8     $ 6,152.8
                                                  =========      =========     =========     =========     =========     =========


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

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):

                                                    September 30,   December 31,
                                                        2005            2004
                                                    -------------   ------------
Securitized Assets:
   Specialty Finance - commercial..................   $3,996.2        $4,165.5
   Specialty Finance - home lending................      911.4         1,228.7
   Equipment Finance...............................    2,585.7         2,915.5
   Corporate Finance...............................       46.1              --
                                                      --------        --------
     Total securitized assets......................   $7,539.4        $8,309.7
                                                      ========        ========
   Securitized assets as a % of managed assets.....       12.3%           15.5%
                                                      ========        ========


                                       43




                                                                       Quarters Ended               Nine Months Ended
                                                                        September 30,                 September 30,
                                                                     --------------------         ---------------------
                                                                       2005        2004             2005         2004
                                                                     --------    --------         --------     --------
                                                                                                   
Volume Securitized:
   Specialty Finance - commercial ........................           $1,036.2    $  458.4         $2,498.5     $1,897.2
   Equipment Finance .....................................              360.3       325.4            879.7        970.2
                                                                     --------    --------         --------     --------
     Total volume securitized ............................           $1,396.5    $  783.8         $3,378.2     $2,867.4
                                                                     ========    ========         ========     ========


      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 September 30, 2005 of $1.1
billion.  Retained  interests are subject to credit and  prepayment  risk. As of
September 30, 2005,  approximately  50% of our outstanding  securitization  pool
balances are in conduit  structures.  Securitized assets are subject to the same
credit granting and monitoring processes which are described in the "Credit Risk
Management" section.

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



                                                           Commercial Equipment
                                                         -----------------------
                                                         Specialty     Equipment
                                                          Finance       Finance
                                                         ---------     ---------
                                                                   
Weighted average prepayment speed.....................     40.04%        12.48%
Weighted average expected credit losses...............      0.38%         0.73%
Weighted average discount rate........................      6.58%         9.00%
Weighted average life (in years)......................      1.26          2.04


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



                                                             Commercial Equipment       Home Lending
                                                           ------------------------          and       Recreational
                                                           Specialty     Equipment      Manufactured     Vehicles
                                                            Finance      Finance(1)        Housing       and Boats
                                                           ---------     ----------     ------------   ------------
                                                                                               
Weighted average prepayment speed......................       21.8%         11.7%           25.7%          21.5%
Weighted average expected credit losses................       0.86%         1.22%           1.52%          1.13%
Weighted average discount rate.........................       7.74%         9.30%          13.10%         15.00%
Weighted average life (in years).......................       1.16          1.49            3.13           2.63


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


                                       44


      The student  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.

      See Profitability and Other Revenue for additional  information  regarding
estimated  hurricane  losses  relating  to  securitized  assets.

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):

                                                  September 30,    December 31,
                                                      2005             2004
                                                  -------------    ------------
Commercial paper and term debt ...............      $44,714.2        $37,471.0
                                                    ---------        ---------
Total common stockholders' equity(1) .........        6,038.3          6,073.7
Preferred stock ..............................          500.0               --
                                                    ---------        ---------
   Total stockholders' equity(1) .............        6,538.3          6,073.7
Preferred capital securities .................          252.5            253.8
                                                    ---------        ---------
   Total stockholders' equity(1) and
     preferred capital securities ............        6,790.8          6,327.5
Goodwill and other intangible assets .........       (1,003.8)          (596.5)
                                                    ---------        ---------
   Total tangible stockholders' equity(1)
     and preferred capital securities ........        5,787.0          5,731.0
                                                    ---------        ---------
Total tangible capitalization ................      $50,501.2        $43,202.0
                                                    =========        =========
Tangible stockholders' equity(1) and
   preferred capital securities to
   managed assets ............................           9.44%           10.72%
Tangible book value per common share(2) ......      $   25.14        $   26.03

--------------------------------------------------------------------------------
(1)   Stockholders'  equity excludes the impact of the changes in fair values of
      derivatives qualifying as cash flow hedges 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."

(2)   Tangible  book  value per  common  share  outstanding  is the sum of total
      common  stockholders'  equity less  goodwill and other  intangible  assets
      divided by outstanding common stock.

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

      During the  September  2005  quarter,  CIT issued $500  million  aggregate
amount of Series A and  Series B  preferred  equity  securities.  Series A has a
stated  value  of  $350  million,  comprised  of  14  million  shares  of  6.35%
non-cumulative  fixed rate preferred stock,  with a liquidation value of $25 per
share.  Series B has a stated  value of $150  million,  comprised of 1.5 million
shares  of  5.189%  non-cumulative  adjustable  rate  preferred  stock,  with  a
liquidation  value of $100 per share.  (See Note 6 --  Stockholders'  Equity for
further detail on preferred stock.)

      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. Both Preferred Stock and 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.


                                       45


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):

                                                         Nine Months Ended
                                                            September 30,
                                                     -------------------------
                                                        2005           2004
                                                     ----------     ----------
Finance income ...................................         9.29%          9.67%
Interest expense .................................         3.84%          3.20%
                                                     ----------     ----------
Net finance income ...............................         5.45%          6.47%
Depreciation on operating lease equipment ........         2.04%          2.53%
                                                     ----------     ----------
Net finance margin ...............................         3.41%          3.94%
Provision for credit losses ......................         0.46%          0.74%
                                                     ----------     ----------
Net finance margin after provision
  for credit losses ..............................         2.95%          3.20%
Other revenue ....................................         2.22%          2.39%
                                                     ----------     ----------
Operating margin .................................         5.17%          5.59%
Salaries and general operating expenses ..........         2.30%          2.58%
Provision for restructuring ......................         0.07%            --
Gain on redemption of debt .......................           --           0.14%
                                                     ----------     ----------
Income before provision for income taxes .........         2.80%          3.15%
Provision for income taxes .......................        (0.94)%        (1.23)%
Minority interest, after tax .....................        (0.01)%           --
                                                     ----------     ----------
   Net income ....................................         1.85%          1.92%
Preferred stock dividends ........................        (0.01)%           --
                                                     ----------     ----------
   Net income available to common stockholders ...         1.84%          1.92%
                                                     ==========     ==========
Average Earning Assets ...........................   $ 47,092.3     $ 38,119.0
                                                     ==========     ==========


                                       46


Non-GAAP Financial Measurements

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

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

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

                                                    September 30,   December 31,
                                                         2005          2004
                                                    -------------   ------------
Managed assets(1):
Finance receivables ..............................    $42,686.6      $35,048.2
Operating lease equipment, net ...................      9,184.4        8,290.9
Financing and leasing assets held for sale .......      1,848.4        1,640.8
Equity and venture capital investments
   (included in other assets) ....................         31.1          181.0
                                                      ---------      ---------
Total financing and leasing portfolio assets .....     53,750.5       45,160.9
Securitized assets ...............................      7,539.4        8,309.7
                                                      ---------      ---------
   Managed assets ................................    $61,289.9      $53,470.6
                                                      =========      =========
Earning assets(2):
Total financing and leasing portfolio assets .....    $53,750.5      $45,160.9
Credit balances of factoring clients .............     (4,267.1)      (3,847.3)
                                                      ---------      ---------
   Earning assets ................................    $49,483.4      $41,313.6
                                                      =========      =========
Total tangible stockholders' equity(3):
Total common stockholders' equity ................    $ 6,074.3      $ 6,055.1
Other comprehensive (income) loss relating
   to derivative financial instruments ...........        (15.5)          27.1
Unrealized gain on securitization investments ....        (20.5)          (8.5)
Goodwill and intangible assets ...................     (1,003.8)        (596.5)
                                                      ---------      ---------
Tangible common stockholders' equity .............      5,034.5        5,477.2
Preferred stock ..................................        500.0             --
Preferred capital securities .....................        252.5          253.8
                                                      ---------      ---------
   Total tangible stockholders' equity ...........    $ 5,787.0      $ 5,731.0
                                                      =========      =========
Debt, net of overnight deposits(4):
Total debt .......................................    $44,966.7      $37,724.8
Overnight deposits ...............................       (962.0)      (1,507.3)
Preferred capital securities .....................       (252.5)        (253.8)
                                                      ---------      ---------
   Debt, net of overnight deposits ...............    $43,752.2      $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 such assets.

(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)   Total tangible stockholders' equity is utilized in leverage ratios, and is
      consistent with certain rating agency  measurements.  Other  comprehensive
      income/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
      which 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.


                                       47


Forward-Looking Statements

      Certain  statements   contained  in  this  document  are  "forward-looking
statements" within the meaning of the U.S. Private Securities  Litigation Reform
Act of 1995. All statements  contained herein that are not clearly historical in
nature are  forward-looking  and the words  "anticipate,"  "believe,"  "expect,"
"estimate,"  "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, including amounts related to
            hurricane losses and U.S. hub-carrier airlines,

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

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

      o     changes in competitive factors, and

      o     future   acquisitions   and  dispositions  of  businesses  or  asset
            portfolios.


                                       48


Item 4. Controls and Procedures

      As 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  September  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.

      These transactional-level  reconciliations cover the balance sheet amounts
at December 31, 2003 and 2004, and certain interim periods therein. In addition,
we initiated the 2005 interim period  transaction-level  reconciliations of book
to tax differences using the validated  methodology.  During the fourth quarter,
we will:  (1) continue  completion  of this  reconciliation  work,  (2) continue
completion of  computations  of other balance sheet tax assets and  liabilities,
including the net operating loss carry  forward,  (3) assess the results of this
work with respect to the previously reported balances of our deferred tax assets
and  liabilities  and other tax assets and  liabilities,  and (4)  proceed  with
testing the internal  controls over tax  reporting in  connection  with our 2005
overall management assessment of internal controls.

      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 in
connection with issuing our 2005 financial statements.

      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 third quarter of 2005 that have materially  affected,
or are reasonably likely to materially  affect,  the Company's  internal control
over financial reporting.


                                       49


                           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
in the Superior Court of New Jersey 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  complaint   alleged  that  NorVergence   misrepresented   the
capabilities  of, and overcharged for, the equipment leased to its customers and
that the  NorVergence  Leases are  unenforceable.  Plaintiffs  seek  rescission,
punitive  damages,  treble  damages and attorneys'  fees. In addition,  putative
class  action  suits in  Illinois  and  Texas,  all  based  upon  the same  core
allegations  and seeking the same relief,  were filed by  NorVergence  customers
against CIT and other financial  institutions  and remain pending.  The Court in
Exquisite  Caterers  certified  a  New  Jersey-only  class,  and  a  motion  for
decertification is pending.

      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 the Attorneys  General in each of
these states,  except for Texas.  Under those  settlements,  lessees have had an
opportunity  to resolve all claims by and against CIT by paying a percentage  of
the remaining balance on their leases.  CIT has also produced  documents related
to  NorVergence  at the  request of the  Federal  Trade  Commission  ("FTC") and
pursuant to a subpoena 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.

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 September 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 June 30, 2005 ......................             2,208,805                                                  3,905,900
                                                           ----------
   July 1 - 31 2005 ...........................               510,800          $44.05            510,800               3,395,100
   August 1 - 31, 2005 ........................               374,503          $45.16            374,503               3,020,597
   September 1 - 30, 2005 .....................               594,600          $45.79            594,600               2,425,997
   Accelerated stock buyback ..................            10,063,467          $44.48         10,063,467                  (1)
                                                           ----------
   Total Purchases ............................            11,543,370
                                                           ----------
Reissuances(2) ................................            (1,736,931)
                                                           ----------
Balance at September 30, 2005 .................            12,015,244
                                                           ==========


--------------------------------------------------------------------------------
(1)   On July 28,  2005,  the Company  paid $500 million and received an initial
      delivery of 8,232,655  shares. On August 12, 2005, the Company received an
      additional  1,830,812  shares under the program.  CIT retains the right to
      receive up to a maximum of 1,232,261  additional  shares at the conclusion
      of the program in the fourth quarter of 2005.  The actual amount  received
      will depend on CIT's common stock price during the  remaining  term of the
      repurchase agreement.

(2)   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.


                                       50


      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 to
purchase shares of the Company's common stock for an aggregate purchase price of
$500 million under an accelerated stock buyback program,  which provided for the
upfront  delivery of $500 million and the initial receipt of 8,232,655 shares by
CIT. The agreement also provides for two subsequent share deliveries,  the first
of which  occurred on August 12, 2005 when the  Company  received an  additional
1,830,812  shares.  The final  delivery to CIT at the  conclusion of the program
during  the  fourth  quarter  of 2005,  which  could be a maximum  of  1,232,261
additional  shares,  will  depend on the price of CIT  common  stock  during the
remaining term of the agreement. The shares received are held in treasury.

Item 3. Default Upon Senior Securities

      None

Item 4. Submission of Matters to a Vote of Security Holders

      None

Item 5. Other Information

      None


                                       51


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-Cumulative  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  (incorporated by reference to Exhibit 10.1
                  to Form 10-Q filed by CIT on August 5, 2005).

            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  to a
      confidential  treatment request filed with the Secretary of the Securities
      and Exchange  Commission  pursuant to rule 24b-2 under the  Securities and
      Exchange Act of 1934, as amended.


                                       52


                                   SIGNATURES

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

                                   CIT GROUP INC.

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

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

      November 4, 2005


                                       53