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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

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

                    For the Quarter Ended September 30, 1997
                                       OR
            ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

             For The Transition Period From __________ to __________

                        Commission File Number 333-11243

                          CAPITA PREFERRED FUNDING L.P.

          A DELAWARE                              I.R.S. EMPLOYER IDENTIFICATION
      LIMITED PARTNERSHIP                               No. 22-3467161

                          c/o AT&T Capital Corporation
               44 Whippany Road, Morristown, New Jersey 07962-1983
                          Telephone Number 201-397-3000

                               ------------------


THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT PURSUANT TO GENERAL INSTRUCTION I(2).

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.......






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                         PART I - FINANCIAL INFORMATION

ITEM 1. Financial statements.

                          CAPITA PREFERRED FUNDING L.P.
                              STATEMENTS OF INCOME
                    FOR THE PERIODS ENDED SEPTEMBER 30, 1997
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                For the Three          For the Nine
                                Months Ended           Months Ended
                                -------------          ------------
<S>                               <C>                     <C>
REVENUES-Interest income          $ 5,361                 $16,079
                                  -------                 -------

Net Income                        $ 5,361                 $16,079
                                  -------                 -------

</TABLE>



The accompanying notes are an integral part of these Financial Statements.









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                         CAPITA PREFERRED FUNDING L.P.
                                 BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                September 30,  December 31,
                                                    1997           1996
                                                (unaudited)
                                                ------------   -----------

<S>                                              <C>            <C>
ASSETS:
  Debentures receivable from Affiliates          $240,146       $240,146
  Other assets                                      2,435          2,426
                                                 --------       --------
Total Assets                                     $242,581       $242,572
                                                 --------       --------
                                                 --------       --------


PARTNERS' CAPITAL:
    General Partner's interest                   $ 36,395       $ 36,386
    Limited Partner's interest                    206,186        206,186
                                                 --------       --------
Total Partners' Capital                          $242,581       $242,572
                                                 --------       --------
                                                 --------       --------

</TABLE>





The accompanying notes are an integral part of these Financial Statements.








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                          CAPITA PREFERRED FUNDING L.P.
                             STATEMENT OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>

<S>                                                       <C>
CASH FLOW FROM OPERATING ACTIVITIES:

Net Income                                                $ 16,079
Increase in other assets                                   (     9)
                                                          --------
Net Cash provided from Operating Activities                 16,070
                                                          --------

CASH FLOW USED FOR FINANCING ACTIVITIES:

Distribution to Limited Partner                            (14,010)
Distribution to General Partner                             (2,060)
                                                          --------
Net Cash used for Financing Activities                     (16,070)
                                                          --------

Net Change in Cash and Cash Equivalents                          0

Cash and Cash Equivalents at Beginning
 of Period                                                       0
                                                          --------
Cash and Cash Equivalents at End
 of Period                                                $      0
                                                          --------
                                                          --------


</TABLE>




The accompanying notes are an integral part of these Financial Statements.










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                          CAPITA PREFERRED FUNDING L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1.  Basis of Presentation

     The accompanying unaudited financial statements have been prepared by
Capita Preferred Funding L.P. (the "Partnership") pursuant to the rules and
regulations of the Securities and Exchange Commission and, in the opinion of
management, reflect all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the results of operations, financial
position and cash flows for each period shown. The results for interim periods
are not necessarily indicative of financial results for the full year. These
unaudited financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996.











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ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS. (Dollars in Thousands)

Results of Operations and Changes in Cash Flows

        On September 30, 1997, Capita Preferred Funding L.P. (the "Partnership")
made its scheduled quarterly cash distributions of $4,670 (annual fixed rate of
9.06%) to Capita Preferred Trust, the Partnership's limited partner. On that
same date, the Partnership received its scheduled debenture interest income
payments (annual fixed rate of 8.88%) from AT&T Capital Corporation (the
"Parent" or "General Partner") and two wholly-owned subsidiaries of the Parent
(the "Subsidiaries") aggregating $5,331. During the third quarter of 1997, the
Partnership earned interest income of approximately $30 on short term
investments. The Partnership distributes the excess of the interest income on
debentures and short term investments over cash distributions to the General
Partner. For the third quarter the Partnership distributed $719 to the General
Partner.

        For the nine months ended September 30, 1997, the Partnership made cash
distributions of $14,010 to Capita Preferred Trust and received debenture
interest income payments from the Parent and Subsidiaries totaling $15,994. The
Partnership earned $85 on short term investments for the first three quarters of
1997. Cash distributions of $2,060 were distributed to the General Partner for
the excess of interest income over cash distributions.











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                                     PART II

                          CAPITA PREFERRED FUNDING L.P.
                           PART II - OTHER INFORMATION

Item 6. Exhibits and reports on Form 8-K.

            a) Exhibits:
                   Exhibit Number

                     27      Financial Data Schedule

            b)  Current Reports on Form 8-K:

                 None








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                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                     CAPITA PREFERRED FUNDING L.P.

                                              By: AT&T Capital Corporation
                                                  General Partner



                                                  RAMON OLIU, JR.
                                                  ________________
                                                  By: Ramon Oliu, Jr.
                                                  Senior Vice President and
                                                  Chief Financial Officer




November 5, 1997








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                                  EXHIBIT INDEX

 EXHIBITS

  Exhibit
   Number             Description

   27.         Financial Data Schedule















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