SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C. 20549
                              FORM 10-K
                                  
  (Mark One)
  [ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
  For the Fiscal Year Ended December 31, 1998 Commission File No. 0-13295
  
  OR
                                  
  [    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
  
  For the transition period from ________________ to________________
  
             CATERPILLAR FINANCIAL SERVICES CORPORATION
       (Exact name of Registrant as specified in its charter)
  
              Delaware                             37-1105865
    (State or other jurisdiction of           (I.R.S. Employer
     incorporation or organization)          Identification Number)
  
           3322 West End Avenue
           Nashville, Tennessee                   37203-0983
    (Address of principal executive offices)     (Zip Code)
  Registrant's telephone number, including area code:  (615) 386-5800
  
  Securities registered pursuant to Section 12(b) of the Act:
  Title of each class            Exchange
  6.19% Notes due April 2000     New York Stock Exchange
  6.40% Notes due August 2001    New York Stock Exchange
  8.96% Notes due March 2005     New York Stock Exchange
  9.50% Notes due February 2007  New York Stock Exchange
                                  
     Securities registered pursuant to Section 12(g) of the Act:
  
               Common Stock, par value $1.00 per share
                          (Title of class)
  
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.  [  ]  Not
Applicable.
  
At December 31, 1998, there was one share of common stock of the
Registrant outstanding, which is owned by Caterpillar Inc.

The Registrant complies with the conditions set forth in General
Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing
this Form with the reduced disclosure format

Documents Incorporated by Reference:  None
                              CONTENTS
ITEM 1. BUSINESS                                                    3
ITEM 2. PROPERTIES                                                  4
ITEM 3. LEGAL PROCEEDINGS                                           4
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS                                                4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS                                           4
   1998 COMPARED WITH 1997                                          4
   1997 COMPARED WITH 1996                                          5
   CAPITAL RESOURCES AND LIQUIDITY                                  6
ITEM 7.A QUANTITATIVE AND QUALITATIVE MARKET RISK                   8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                 9
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K                                                                 9
SIGNATURES                                                         11
REPORT OF INDEPENDENT ACCOUNTANTS                                  12
CONSOLIDATED STATEMENT OF FINANCIAL POSITION                       13
CONSOLIDATED STATEMENT OF PROFIT                                   14
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                        15
CONSOLIDATED STATEMENT OF CASH FLOWS                               16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         17
   NOTE   1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES           17
   NOTE   2 - RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES          18
   NOTE   3 - INVESTMENT IN FINANCING LEASES                       19
   NOTE   4 - EQUIPMENT ON OPERATING LEASES                        20
   NOTE   5 - CONCENTRATION OF CREDIT RISK                         20
   NOTE   6 - CREDIT LINES                                         20
   NOTE   7 - SHORT-TERM BORROWINGS                                21
   NOTE   8 - LONG-TERM BORROWINGS                                 22
   NOTE   9 - DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 22
   NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES                23
   NOTE 11 - INCOME TAXES                                          24
   NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS                   25
   NOTE 13 - TRANSACTIONS WITH RELATED PARTIES                     26
   NOTE 14 - LEASES                                                27
   NOTE 15 - SEGMENT INFORMATION                                   28
   NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)         29
STATEMENT SETTING FORTH COMPUTATION OF RATIO OF PROFIT TO FIXED
CHARGES                                                            30
CONSENT OF INDEPENDENT ACCOUNTANTS                                 31

PART I
  
  ITEM 1. BUSINESS
     Caterpillar Financial Services Corporation is a wholly owned
 finance subsidiary of Caterpillar Inc. (together with its other
 subsidiaries, "Caterpillar").  We provide retail financing
 alternatives to customers and dealers around the world for
 Caterpillar and non-competitive related equipment, provide
 wholesale financing to Caterpillar dealers and purchase short-term
 dealer receivables from Caterpillar.  We emphasize prompt and
 responsive service and offer various financing plans to meet
 customer requirements, increase Caterpillar sales and generate
 financing income.
     
     Retail financial plans include:
           Tax leases which are classified as either operating or finance
       leases for financial accounting purposes, depending on the
       characteristics of the lease.  For tax purposes, we are considered
       the owner of the equipment (15%*).
           Finance (non-tax) leases where the lessee is considered the
       owner of the equipment during the term of the contract and that
       either require or allow the customer to purchase the equipment for a
       fixed price at the end of the term (23%*).
           Installment sale contracts which are equipment loans that enable
       customers to purchase equipment with a down payment or trade-in and
       structure payments over time (20%*).
           Working capital loans that allow customers and dealers to use their
       Caterpillar equipment as collateral to obtain financing for other
       business needs (21%*).
           Governmental lease-purchase plans in the U.S. that offer low interest
       rates and flexible terms to qualified non-federal government
       agencies(2%*).
      
     Wholesale financial plans (19%*) include:
           Inventory/rental programs which provide assistance to dealers by
       financing their inventory, rental fleets and rental facilities.
           Short-term dealer receivables we purchase from Caterpillar at a
       discount.
      
      * indicates the percentage of total portfolio at December 31,1998.
        For more information, please refer to Note 5
      
     The retail financing business is highly competitive, with
 financing for users of Caterpillar equipment available through a
 variety of sources, principally commercial banks and finance and
 leasing companies.  We are largely dependent upon Caterpillar
 dealers' ability to sell equipment and customers' willingness to
 enter into financing or leasing agreements with us.  We also are
 affected by the availability of funds from our financing sources
 and general economic conditions such as inflation and market rates.
     
     We provide financing only when acceptable criteria are met.
 Credit decisions are based on, among other things, the customer's
 credit history, financial strength and intended use of equipment.
 We typically maintain a security interest in retail financed
 equipment and require physical damage insurance coverage on all
 financed equipment.
     
     Our competitive position is improved by marketing programs,
 subsidized by Caterpillar and/or Caterpillar dealers, which allow
 us to offer below market interest rates.  Under these programs,
 Caterpillar, or the dealer, pays us an amount at the outset of the
 transaction which we then recognize as income over the term of the
 financing.
     
     We also have agreements with Caterpillar which are significant
 to our operation.  These agreements provide for financial support,
 certain funding, employee benefits and corporate services among
 other things.  For more information on these agreements please
 refer to Note 13.
  
<PAGE>3  
ITEM 2. PROPERTIES
     
     Our principal executive offices are located in Nashville,
 Tennessee.  We have 37 offices, of which, 7 are located in the
 United States, 19 are in Europe and 11 are in other countries.  All
 offices are leased with the exception of one office in Mexico City,
 Mexico.
     
  
  ITEM 3. LEGAL PROCEEDINGS
     
     We are party to various legal proceedings.  Although the
 outcomes of these proceedings cannot be predicted with certainty,
 we believe the final outcomes will not have a material adverse
 effect on our financial position or results of operations.
     
  
  ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS
      Our stock is not publicly traded, Caterpillar is the owner of
 our one outstanding share.  We have not declared or paid any
 dividends on our common stock.
  
  Part II
  
  ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
     
  
  1998 COMPARED WITH 1997
     
     PORTFOLIO
     The net portfolio balance was $10,542.6 million at December 31,
 1998, an increase of 47% or $3,353.3 million over December 31,
 1997.
     
     In January 1998, we entered into an agreement with Caterpillar
 to purchase certain U.S. dealer receivables from Caterpillar at a
 discount.  Under this agreement, Caterpillar continues to service
 the receivables.  Under this program, we use a portion of
 collections each week to purchase additional receivables in order
 to maintain a consistent balance.  At December 31, 1998, the
 balance of receivables owned by us and serviced by Caterpillar was
 $1,166.4 million, which is classified as wholesale notes
 receivable.
     
     We financed new retail business of $5,818.8 million during 1998
 as compared to $4,375.7 million in 1997.  This 33% increase
 resulted primarily from financing more Caterpillar units at a
 higher average financed amount per unit.
     
     REVENUES
     Total revenues for 1998 were a record  $1,045.7 million.  Of the
 $254.2 million increase over 1997, primarily the result of the
 larger portfolio, $82.9 million resulted from the revenue earned on
 dealer receivables purchased from Caterpillar.
     
     The average interest rate on finance receivables (computed by
 dividing finance income by the average monthly finance receivable
 balance net of unearned income) was 8.75% for 1998 compared with
 8.69% for 1997.  The tax benefits of governmental lease purchase
 contracts and tax-oriented leases are not included in these
 computed interest rates.
     
     Other revenue was $75.1 million for 1998.  The increase of $12.3
 million from 1997 included increased securitization-related revenue
 of $8.2 million, interest income on loans to Caterpillar of $4.1
 million fees, and other miscellaneous revenue.

<PAGE>4     
     EXPENSES
     Interest expense for 1998 increased $135.1 million over 1997.
 This increase was primarily the result of increased borrowings to
 support the larger portfolio.  The average interest rate on
 borrowed funds was 6.00% for 1998 as compared to 5.94% for 1997.
     
     Depreciation expense increased $29.1 million over 1997 due to an
 increase in new operating leases.
     
     General, operating and administrative expenses increased $28.4
 million during 1998 as compared to 1997.  This increase is
 primarily due to staff-related expenses and other expenses incurred
 to increase new business, service the larger managed portfolio and
 support geographic expansion.  The number of full-time employees
 was 821 at December 31, 1998, an increase of 137 from 1997.
     
     The provision for credit losses increased $30.9 million over
 1997 mainly due to the larger portfolio.
     
     PROFIT
     Profit for 1998 was $111.6 million, a $17.4 million increase
 from 1997.  This increase is primarily the result of a larger
 portfolio, partially offset by a higher provision for credit
 losses.
     
     PAST DUE RECEIVABLES
     Receivables that were past due over 30 days were 1.5% of the
 total receivables at December 31, 1998 (1.7% excluding the dealer
 receivables serviced by Caterpillar), as compared to 1.7% at
 December 31, 1997.  We continuously monitor the allowance for
 credit losses to provide for an amount we believe is adequate,
 after considering the value of any collateral, to cover
 uncollectible receivables.  See Note 2 for information on allowance
 for credit losses.
     
  
  1997 COMPARED WITH 1996
  (has been changed to conform with 1998 presentation)
  
     PORTFOLIO
     The net portfolio balance was $7,189.3 million at December 31,
 1997, compared to $6,212.3 million at December 31, 1996.
     
     We financed new retail business transactions totaling $4,375.7
 million during 1997 as compared to $3,619.2 million during 1996.
 This increase resulted primarily from financing an increased
 percentage of deliveries of Caterpillar product.
     
     REVENUES
     Total revenues for 1997 were $791.5 million.  The increase of
 $113.5 million over 1996 was primarily the result of portfolio
 growth.
     
     The average interest rate on finance receivables (computed by
 dividing finance income by the average monthly finance receivable
 balance net of unearned income) was 8.69% for 1997 compared with
 8.90% for 1996.  The tax benefits of governmental lease purchase
 contracts and tax-oriented leases are not included in these
 annualized interest rates.
     
     Other revenue of $62.8 million for 1997 included securitization-
 related revenue, fees and other miscellaneous revenue.  The $16.3
 million increase over 1996 resulted primarily from increases of:
     $6.5 million on sales of used equipment
     $5.6 million in servicing and other securitization related income
     $3.6 million gain on sale of receivables
     
<PAGE>5
     EXPENSES
     Interest expense for 1997 was $366.7 million, an increase of
 $51.3 million over 1996.  This increase was primarily the result of
 increased borrowings to support the larger portfolio, partially
 offset by lower borrowing rates.  The average interest rate on
 borrowed funds was 5.94% for 1997 as compared to 6.08% for 1996.
     
     Depreciation expense increased from $121.0 million in 1996 to
 $139.3 million in 1997 due to an increase in new operating leases.
     
     General, operating and administrative expenses increased $14.0
 million over 1996.  This increase is primarily due to staff-related
 expenses and other expenses incurred due to increased new business
 and geographic expansion.  Full time employment increased from 576
 in 1996 to 684 at December 31, 1997.
     
     The provision for credit losses decreased from $41.3 million in
 1996 to $39.2 million in 1997.
     
     PROFIT
     Profit for 1997 was $94.2 million, compared to $75.6 million in
 1996, primarily the result of the larger portfolio.
     
     PAST DUE RECEIVABLES
     Receivables that were past due over 30 days were 1.7% of the
 total receivables at December 31, 1997 compared to 2.1% at December
 31, 1996.  We continuously monitor the allowance for credit losses
 to provide for an amount we believe is adequate, after considering
 the value of any collateral, to cover uncollectible receivables.
 See Note 2 for information on allowance for credit losses.
  
  CAPITAL RESOURCES AND LIQUIDITY
  
     Operations for 1998 were funded with a combination of bank
 borrowings, commercial paper, equity capital invested by
 Caterpillar, medium-term notes, sales of receivables and retained
 earnings.
     
     At December 31, 1998, we had the following credit lines
 available:
     
Two syndicated revolving credit lines.  Two revolving credit lines,
 used to support our commercial paper and commercial paper
 guarantees totaling $2,900.0 million, are shared with Caterpillar
 under the following allocation:
  
                                          Five-year    364-day
                                          Facility     Facility    Total
    Caterpillar                          $   187.5     $   102.5   $   290.0
    Caterpillar Financial Services Corp.   1,687.5         922.5     2,610.0
    Total                                 $1,875.0      $1,025.0    $2,900.0
  The five year facility expires on Oct. 5, 2002; the 364-day
facility expires on Oct. 5, 1999.
     
     At December 31, 1998, there were no borrowings under these lines.
     
European revolving credit line.  This $1.0 billion credit line
 supports our Euro-commercial paper and certificate of deposit
 program.  Under this program, commercial paper and certificates of
 deposit are issued by us or by our Irish subsidiaries with our
 guarantee.  At December 31, 1998, there were no borrowings under
 this credit line.
     
<PAGE>6
Short-term credit lines from banks.  These credit lines total $628.5
 million and will be eligible for renewal at various dates
 throughout 1999.  They are used for bank borrowings and as support
 for our outstanding commercial paper and commercial paper
 guarantees. We had $188.9 million outstanding against these credit
 lines at December 31, 1998.

Variable amount lending agreements with Caterpillar.  Under these
 agreements, we may borrow up to $831.3 million from Caterpillar,
 and Caterpillar may borrow up to $670.7 million from us.  The
 agreements are in effect for indefinite periods of time and may be
 changed or terminated by either party with 30 days' notice.  We had
 borrowings of $211.7 million and loans receivable of $246.3 million
 outstanding at December 31, 1998 under these agreements.

     Total outstanding borrowings at  December 31, 1998 were $9,561.7
 million, an increase of $3,224.6 million over December 31, 1997.
 Outstanding borrowings primarily include:
     
       $6,201.4 million of medium-term notes
       $2,849.7 million of commercial paper
       $188.9 million of bank borrowings
     
     In July 1998, we securitized $605.7 million of our receivables
 consisting of $417.7 million of installment sale contracts and
 $188.0 million of finance lease contracts and recognized a $6.9
 million pre-tax gain.  We will continue to receive fees in future
 periods for servicing these sold receivables.  In October 1998, we
 increased the balance in our private-placement, revolving, asset-
 backed securitization of wholesale receivables from $600.0 million
 to $750.0 million and recognized a $0.8 million gain.  We used the
 proceeds from both of these transactions to reduce debt.
     
     At December 31, 1998, we serviced $1,637.8 million of sold
 receivables which consist of $750.0 million in wholesale
 receivables under a revolving asset-backed securitization
 agreement, $741.3 million of installment sale contracts and $146.5
 million of finance leases.  These receivables are not available to
 pay our creditors.
     
     Caterpillar contributed an additional $280.0 million of equity
 capital during 1998.  Our debt-to-equity ratio at  December 31,
 1998 was 8.0 to 1 as compared to 7.8 to 1 at December 31, 1997.
 Please refer to Note 6 for information on debt covenants.
     
     
     DERIVATIVES
     
     We use interest rate derivative financial instruments and
 currency derivative financial instruments to manage interest rate
 and foreign currency exchange risks that we encounter as a part of
 our normal business.  We do not use these instruments for trading
 purposes.
     
Interest rate derivatives.  We use interest rate swap agreements to
 manage the risk of changes in interest rates, allowing us to
 maintain our interest rate spreads, regardless of the direction
 interest rates move.  At December 31, 1998, we had interest rate
 swap contracts outstanding with notional amounts totaling $2,183.2
 million and terms of up to ten years.  These contracts change:
     
     $1,373.2 million of floating rate debt to fixed rate debt
     $656.5 million of fixed rate debt to floating rate debt
     $153.5 million of floating rate debt to floating rate debt
            having different characteristics
     
Foreign currency derivatives.  We use foreign exchange contracts to
 manage potential risk of fluctuating exchange rates.  These
 contracts have terms that generally range up to three months.  At
 December 31, 1998, we had foreign exchange contracts totaling
 $1,267.9 million, $3.4 million of which were with Caterpillar.
 They hedge foreign currency denominated receivables and debt of
 international subsidiaries.
  
<PAGE>7
     YEAR 2000 READINESS
     
     The Year 2000 ("Y2K") issue relates to the inability of
 computer applications to distinguish between years with the same
 last two digits in different centuries such as 1900 and 2000.  In
 1997, we began to evaluate this ability in the systems we use.  At
 that time, we evaluated our exposure in key internal systems, key
 external systems and non-critical systems.  During 1998, we have
 continued to increase our preparedness, or "compliance," in each
 area.
     
     Our key internal systems include software and hardware used to
 track our contract, customer and financial information as well as
 internal communications and quoting software.  Most of these
 systems are currently Y2K compliant.  By the end of July 1999, we
 will install software which will upgrade the remaining programs,
 bringing them into compliance.  The failure of systems which are
 not currently compliant would cause only minor business disruption
 as we would perform some tasks manually rather than electronically,
 such as calculating quotes for customers manually instead of by
 computer.
     
     Our key external systems include utilities, banking, and
 facility control hardware and software.  In these areas, we have
 contacted our key business partners and asked them to certify their
 compliance.  In situations where they are not compliant, we are
 closely monitoring their plans to implement the changes necessary
 to become compliant.  If these business partners do not become
 compliant, it could have a significant negative impact on our
 ability to operate.  However, in most cases, we have multiple
 suppliers which could mitigate the adverse impact.  We have
 developed contingency plans that would allow at least a minimal
 level of operation to continue in the event that certain key
 suppliers, such as electric power or data communication systems, do
 not become compliant by 2000.
     
     We are also dependent on the dealers' ability to continue
 selling equipment.  Caterpillar has taken steps to assess the
 dealers' readiness.  Through their communications, we expect that
 substantially all of our dealers will be in a position to service
 customers without significant business disruption from Y2K by June
 1999.
     
     Our non-critical systems include business software used in non-
 critical functions, such as spreadsheets used to report information
 which could be manually reported and office support machines which
 are not vital to daily operations.  If these items failed to become
 compliant, they would cause minimal disruption to particular
 offices.
     
     Our target is to have our critical internal systems Y2K
 compliant by July 1999.  We estimate the cost incurred to become
 Y2K compliant to be less than $1.0 million and not material to our
 financial position or results of operations.  We will also continue
 to communicate with our key business partners to assess their level
 of compliance and adjust our contingency plans as needed.
     
  
  ITEM 7.A QUANTITATIVE AND QUALITATIVE MARKET RISK
     
     We use interest rate swap agreements to manage the effect of
 fluctuating interest rates on our income.  To estimate the impact
 an interest rate change would have on our income, our
 "sensitivity," we use a computer model.  The model measures the re-
 pricing characteristics of interest-sensitive assets, liabilities
 and off-balance sheet derivatives.  The model estimates our
 unhedged interest expense for the next twelve months assuming the
 only changes to our interest sensitive assets or liabilities are
 contractual repayments and there are no changes to equity or market
 rates.  This provides us with a "baseline" interest expense.  Then
 using the same model, we shift the market interest rates 100 basis
 points instantaneously and parallel across the rate curve to create
 a "rate shocked" interest expense.  Our sensitivity is measured as
 the difference between the baseline and rate shocked interest
 expense.
     
     Using our computer modeling, and assuming no new fixed rate
 loans or leases were extended and no action was taken to alter our
 current interest rate sensitivity, the impact to interest expense
 of an immediate hypothetical 100 basis point parallel rise in the
 yield curve on January 1, 1999 would be an estimated $14.4 million
 increase for the twelve months ending December 31, 1999. This

<PAGE>8 
 impact on interest expense primarily reflects our increased
 borrowings and is not materially different from the potential $9.6
 million increase reported last year.  Although we believe that this
 measure provides a  meaningful estimate of our interest rate
 sensitivity, it does not adjust for other dynamic factors that
 impact our interest expense.  Accordingly, no assurance can be
 given that actual results would be consistent with the potential
 outcome simulated by our computer modeling.  Further, our computer
 modeling does not necessarily represent our current view of future
 market interest rate movements.
     
  
  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     
     Information required by Item 8 is incorporated by reference from
 pages 13 through 16.
     
  
  Part IV.
  
  ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
     
     (a)  The following documents are filed as part of this report.
       1.  Financial Statements
              Report of Independent Accountants
              Consolidated Statement of Financial Position
              Consolidated Statement of Profit
              Consolidated Statement of Changes in Equity
              Consolidated Statement of Cash Flows
     
     (b)  Reports on Form 8-K
      No current reports on form 8-K were filed during the fourth quarter.
     
     (c)  Exhibits
     3.1Certificate of Incorporation of the Company (incorporated by
        reference from Exhibit 3.1 to the Company's Form 10, as
        amended, Commission File No. 0-13295).
     
     3.2Bylaws of the Company (incorporated by reference from
        Exhibit 3.2 to the Company's Annual Report on Form 10-K, for
        the year ended December 31, 1990, Commission File No. 0-
        13295).
     
     4.1Indenture, dated as of April 15, 1985, between the Company
        and Morgan Guaranty Trust Company of New York, as Trustee,
        including form of Debt Security (see Table of Contents to
        Indenture)(incorporated by reference from Exhibit 4.1 to the
        Company's Registration Statement on Form S-3, Commission
        File No. 33-2246).
     
     4.2First Supplemental Indenture, dated as of May 22, 1986,
        amending the Indenture dated as of April 15, 1985 between
        the Company and Morgan Guaranty Trust Company of New York,
        as Trustee (incorporated by reference from Exhibit 4.1 to
        the Company's Quarterly Report on Form 10-Q for the quarter
        ended June 20, 1986, Commission File No. 0-13295).
     
     4.3Second Supplemental Indenture, dated as of March 15, 1987,
        amending the Indenture dated as of April 15, 1985 between
        the Company and Morgan Guaranty Trust Company of New York,
        as Trustee (incorporated by reference from Exhibit 4.3 to
        the Company's Current Report on Form 8-K dated April 24,
        1987, Commission File No. 0-13295).
     
<PAGE>9
     4.4Third Supplemental Indenture, dated as of October 2, 1989,
        amending the Indenture dated as of April 15, 1985, between
        the Company and Morgan Guaranty Trust Company of New York,
        as Trustee (incorporated by reference from Exhibit 4.3 to
        the Company's Current Report on Form 8-K, dated October 16,
        1989, Commission File No. 0-13295).
     
     4.5Fourth Supplemental Indenture, dated as of October 1, 1990,
        amending the Indenture dated April 15, 1985, between the
        Company and Morgan Guaranty Trust Company of New York, as
        Trustee (incorporated by reference from Exhibit 4.3 to the
        Company's Current Report on Form 8-K, dated October 29,
        1990, Commission File No. 0-13295).
     
     4.6Indenture, dated as of July 15, 1991, between the Company
        and Continental Bank, National Association, as Trustee
        (incorporated by reference from Exhibit 4.1 to the Company's
        Current Report on Form 8-K, dated July 25, 1991, Commission
        File No. 0-13295).
     
     4.7Support Agreement, dated as of December 21, 1984, between
        the Company and Caterpillar (incorporated by reference from
        Exhibit 4.2 to the Company's Form 10, as amended, Commission
        File No. 0-13295).
     
     4.8First Amendment to the Support Agreement dated June 14,
        1995 between the Company and Caterpillar (incorporated by
        reference from Exhibit 4 to the Company's Current Report on
        Form 8-K dated June 14, 1995, Commission File No 0-13295).
     
     10.1Tax Sharing Agreement, dated as of June 21, 1984,
        between the Company and Caterpillar (incorporated by
        reference from Exhibit 10.3 to the Company's Form 10, as
        amended, Commission File No. 0-13295).
     
     12 Statement Setting Forth Computation of Ratio of Profit to
        Fixed Charges.
     
     23 Consent of Independent Accountants.
  
<PAGE>10  

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.
  
  
                             Caterpillar Financial Services
Corporation
                                       (Registrant)
  
  
  
  
Dated:  February 25, 1999  By  /s/ Paul J. Gaeto
                               Paul J. Gaeto, Secretary
  
  
  Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated.
  
  
         Date                Signature                 Title
                                               President, Director
  February 25, 1999    /s/ James S. Beard       and Principal Executive Officer
                          James S. Beard       
                                               
  February 25, 1999    /s/ James R. English    Executive Vice
                          James R. English      President and Director     
                                               
  February 25, 1999    /s/ James W. Owens      Director
                          James W. Owens       
                                               Controller and
  February 25, 1999    /s/ Kenneth C. Springer  Principal Accounting Officer
                          Kenneth C. Springer  
                                               Treasurer and
  February 25, 1999    /s/ Edward J. Scott      Principal Financial Officer
                          Edward J. Scott      
  
  
<PAGE>11
  
  REPORT OF INDEPENDENT ACCOUNTANTS
  
  
  To the Board of Directors and Stockholder of
  Caterpillar Financial Services Corporation
  
  In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a)(1) on page 9 present fairly, in all
material respects, the financial position of Caterpillar Financial
Services Corporation and its subsidiaries at December 31, 1998, 1997
and 1996 and the results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.  These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on
these financial statements based on our audits.  We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audits provide a
reasonable basis for the opinion expressed above.
  
  
  
  
  
  PRICEWATERHOUSECOOPERS LLP
  
  New York, New York
  January 20, 1999
  

<PAGE>12  

CATERPILLAR FINANCIAL SERVICES CORPORATION
  
  CONSOLIDATED STATEMENT OF FINANCIAL POSITION
  AT DECEMBER 31,  (Millions of dollars, except share data)
  
                                     1998        1997       1996
Assets:
  Cash and cash equivalents      $   49.5     $   41.5    $  27.0
  Finance receivables (Notes 2, 3 and 5):
    Wholesale notes receivable    2,110.2        497.9      465.1
    Retail notes receivable       2,283.0      1,852.1    1,535.9
    Investment in finance 
      receivables                 6,350.3      4,993.6    4,352.5
                                 10,743.5      7,343.6    6,353.5
    Less: Unearned income           851.6        661.8      604.3
          Allowance for 
            credit losses           110.8         83.5       74.4
                                  9,781.1      6,598.3    5,674.8

  Equipment on operating leases,
   less accumulated 
   depreciation (Note 4)            715.9        558.7      511.0
  Deferred income taxes (Note 11)     7.8          4.6        2.9
  Notes receivable from
    Caterpillar (Note 13)           246.3           -          -
  Other assets                      334.2        223.7      148.5
Total assets                    $11,134.8     $7,426.8   $6,364.2


Liabilities and stockholder's equity:
  Payable to dealers and others $   113.3     $   84.9   $   88.1
  Payable to Caterpillar 
    - Borrowings (Note 13)          211.7        243.5      150.0
  Payable to Caterpillar
    - Other (Note 13)                 4.6          4.1        3.1
  Accrued interest payable           85.0         47.3       39.2
  Income taxes payable (Note 11)    106.4         81.4       40.4
  Other liabilities                  31.7         22.2       23.5
  Short-term borrowings (Note 7)  3,113.2      2,731.5    2,678.9
  Current maturities of 
    long-term debt (Note 8)       2,178.9      1,087.9    1,057.8
  Long-term debt (Note 8)         4,057.9      2,274.2    1,545.7
  Deferred income taxes (Note 11)    31.5         38.7       42.2
Total liabilities                 9,934.2      6,615.7    5,668.9

Commitments and contingent liabilities (Note 10)

  Common stock - $1 par value
    Authorized:  2,000 shares
    Issued and outstanding:
      one share                     675.0        395.0      345.0
  Retained earnings                 554.3        442.7      348.5
  Accumulated other comprehensive
    income                          (28.7)       (26.6)       1.8
Total stockholder's equity        1,200.6        811.1      695.3

Total liabilities and
  stockholder's equity          $11,134.8     $7,426.8   $6,364.2
  See Notes to Consolidated Financial Statements

<PAGE>13

CATERPILLAR FINANCIAL SERVICES CORPORATION
  
  CONSOLIDATED STATEMENT OF PROFIT
  FOR THE YEARS ENDED DECEMBER 31,  (Millions of dollars)
                                   
                                      1998           1997        1996
  Revenues:
    Wholesale finance income      $   147.0       $   49.5     $  47.4
    Retail finance income             609.7          499.3       427.2
    Rental income                     213.9          179.9       156.9
    Other income                       75.1           62.8        46.5
          Total revenues            1,045.7          791.5       678.0
  
  Expenses:
    Interest (Notes 7 and 8)          501.8          366.7       315.4
    Depreciation                      168.4          139.3       121.0
    General, operating, and
      administrative                  125.2           96.8        82.8
    Provision for credit losses        70.1           39.2        41.3
    Other expense                       1.6            1.8         1.7
          Total expenses              867.1          643.8       562.2
  
  Profit before income taxes          178.6          147.7       115.8
  
  Provision for income taxes (Note 11) 67.0           53.5        40.2
  
          Net profit              $   111.6       $   94.2    $   75.6
  See Notes to Consolidated Financial Statements
  
<PAGE>14  

CATERPILLAR FINANCIAL SERVICES CORPORATION
  
  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
   FOR THE YEARS ENDED DECEMBER 31,  (Millions of dollars)
  
                              1998                 1997             1996
Retained earnings:
  Balance at January 1  $  442.7              $ 348.5          $ 272.9
     Net profit            111.6  $111.6         94.2  $ 94.2     75.6  $75.6
  Balance at December 31   554.3                442.7            348.5

Accumulated other 
comprehensive income:
  Balance at January 1    (26.6)                  1.8              5.4
  Foreign currency
   translation adjustment  (2.1)    (2.1)       (28.4)  (28.4)    (3.6) (3.6)
  Comprehensive income             $109.5              $ 65.8          $72.0
 Balance at December 31   (28.7)                (26.6)              1.8

Paid-in capital:
  Balance at January 1    395.0                 345.0             325.0
      Equity capital from 
        Caterpillar       280.0                  50.0              20.0
 Balance at December 31   675.0                 395.0             345.0

Total equity           $1,200.6               $ 811.1           $ 695.3
See Notes to Consolidated Financial Statements
  
<PAGE>15  

CATERPILLAR FINANCIAL SERVICES CORPORATION
  
  CONSOLIDATED STATEMENT OF CASH FLOWS
  FOR THE YEARS ENDED DECEMBER 31,  (Millions of dollars)
  
                                     1998        1997        1996
Cash flows from operating activities:
  Net income                        $111.6     $  94.2      $ 75.6
  Adjustments for non-cash items:
    Depreciation                     168.4       139.3       121.0
    Provision for credit losses       70.1        39.2        41.3
    Other                            (28.6)      (40.8)       (6.3)
  Change in assets and liabilities:
    Receivables from customers 
      and others                    (157.2)      (39.6)       (2.0)
    Deferred income taxes            (11.4)       (3.1)       (5.5)
    Payable to dealers and others     28.4        (0.9)       37.1
    Payable to Caterpillar - Other    (1.0)        1.5        (2.0)
    Accrued interest payable          37.6         8.5          -
    Income taxes payable              25.3        41.0        21.9
    Other, net                        (2.7)       (3.2)        5.5
      Net cash provided by operating 
        activities                   240.5       236.1       286.6

Cash flows from investing activities:
  Additions to property and 
    equipment                       (342.5)     (282.3)     (264.2)
  Disposals of equipment             123.7       122.5       105.4
  Additions to finance 
    receivables                  (14,960.8)   (6,643.7)   (5,801.5)
  Collections of finance 
    receivables                    9,958.2     3,604.8     3,406.5
  Proceeds from sales of
    receivables                    1,705.4     1,832.8     1,424.9
  Notes receivable from Caterpillar (243.8)         -           -
  Other, net                          (4.2)       (2.7)        2.3
      Net cash used for investing
        activities                (3,764.0)   (1,368.6)   (1,126.6)

Cash flows from financing activities:
  Additional paid-in capital         280.0       50.0        20.0
  Payable to Caterpillar
    - Borrowings                     (28.8)      93.5      (325.5)
  Proceeds from long-term debt     3,962.4    1,822.3     1,050.0
  Payments on long-term debt      (1,088.0)  (1,059.9)   (1,169.3)
  Short-term borrowings, net         410.9      240.7     1,244.4
 Net cash provided by financing
   activities                      3,536.5    1,146.6       819.6

Effect of exchange rate changes
 on cash                              (5.0)       0.4         3.8

Net change in cash and cash
  equivalents                          8.0       14.5       (16.6)

Cash and cash equivalents at
  beginning of year                   41.5       27.0        43.6

Cash and cash equivalents at end
  of year                         $   49.5    $  41.5     $  27.0
  See Notes to Consolidated Financial Statements
  All short-term investments, which consist primarily of highly liquid
investments with original maturities of less than 3 months, are
considered to be cash equivalents
        
<PAGE>16                          
                                  
  
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  
  NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
  A.   Basis of consolidation
       Caterpillar Financial Services Corporation is a wholly owned
  finance subsidiary of Caterpillar Inc. (together with its other
  subsidiaries, "Caterpillar").  We provide retail financing
  alternatives to customers and dealers around the world for
  Caterpillar and non-competitive related equipment, provide
  wholesale financing to Caterpillar dealers and purchase short-term
  dealer receivables from Caterpillar.
       
       The financial statements include the accounts of Caterpillar
  Financial Services Corporation and its subsidiaries.  Investments
  in companies that are owned 50% or less are accounted for by the
  equity method.  All material intercompany balances have been
  eliminated.  Certain amounts for prior periods have been
  reclassified to conform to the 1998 presentation.
  
  B.   Recognition of earned income
       Retail finance income on finance leases, tax leases, installment
     sale contracts and governmental tax leases is recognized over the
     term of the contract at a constant rate of return on the scheduled
     outstanding principal balance.
       Rental income on operating leases is recorded in the period
     earned.
       Wholesale finance income on dealer inventory, rental fleets,
     rental stores, and on short-term dealer receivables is recognized
     based on the daily balance of wholesale receivables outstanding and
     the applicable effective interest rate.
     Loan origination and commitment fees over five hundred dollars are
     amortized to finance income using the interest method over the life of
     the finance receivables.
       
     Recognition of income is suspended when management determines
 that collection of future income is not probable.  Accrual is
 resumed, and previously suspended income is recognized, when the
 receivable becomes contractually current and collection doubts are
 removed.
  
  C.   Depreciation
     Depreciation on operating leases is recognized using the
 straight-line method over the lease term.  The depreciable basis is
 the original cost of the equipment less the estimated residual
 value of the equipment at the end of the lease term.
  
  D.   Derivative financial instruments
     We use interest rate and currency derivative financial
 instruments to manage risks encountered through the normal course
 of business.  We do not use any of these instruments for
 speculative purposes.  Please refer to Note 9 for more information
 on derivative instruments, including the methods used to account
 for them.
  
  E.   Allowance for credit losses
     On a regular basis, we evaluate the collectibility of receivable
 balances and maintain an allowance for credit losses, which we
 believe is sufficient to cover uncollectible accounts.
 Uncollectible receivable balances are written off against the
 allowance for credit losses when the underlying collateral is
 repossessed or when we determine that it is probable the receivable
 balance is uncollectible.
  
  F.   Income taxes
     We have tax sharing agreements with Caterpillar in the U.S. and
 Australia under which we pay to or receive from Caterpillar our
 allocated share of income taxes or credits.
     
<PAGE>17
  
  G.   Foreign currency translation
     Assets and liabilities of foreign subsidiaries (the majority of
 which use the local currency as their functional currency) are
 translated at current exchange rates, and the effects of
 translation adjustments are reported as a separate component of
 stockholder's equity entitled "Foreign currency translation
 adjustment."
  
  H.   Use of estimates in the preparation of financial statements
     The preparation of financial statements in conformity with
 generally accepted accounting principles requires us to make
 estimates and assumptions that affect the reported amounts.
 Examples include accruals for income taxes and the allowance for
 credit losses.
  
  I.   New accounting standard
     In June 1998, the Financial Accounting Standards Board issued
 Statement of Financial Accounting Standards No. 133, "Accounting
 for Derivative Instruments and Hedging Activities."  This Statement
 requires that an entity recognize all derivatives as either assets
 or liabilities in the statement of financial position and measure
 those instruments at fair value.  We will be required to adopt this
 new accounting standard on or before January 1, 2000.  We do not
 anticipate early adoption.  Due to the complexity of this new
 standard, we have not completed an assessment of the impact it will
 have on our financial position or results of operations.
  
  NOTE 2 - RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES
     
     The contractual maturities of outstanding receivables at
 December 31, 1998 were:
       
  
                    Installment   Finance
  Amounts Due in    Contracts     Leases    Notes       TOTAL
  1999              $ 917.4     $1,220.1   $2,212.2   $4,349.7
  2000                645.2        861.9      552.6    2,059.7
  2001                417.1        581.2      435.7    1,434.0
  2002                220.9        288.1      202.6      711.6
  2003                 78.3        114.6      177.6      370.5
  Thereafter           14.3         95.5      812.5      922.3
                    2,293.2      3,161.4    4,393.2    9,847.8
  Residual value                   895.7                 895.7
  Less:  Unearned
          Income      248.6        529.1       73.9      851.6
  
  Total         $2,044.6   $3,528.0 $4,319.3  $9,891.9
       
       Receivables generally may be repaid or refinanced without
  penalty prior to contractual maturity.  We also sell receivables.
  Accordingly, this presentation should not be regarded as a forecast
  of future cash collections.
       
       In July 1998, we securitized $605.7 million of our receivables
  consisting of $417.7 million of installment sale contracts and
  $188.0 million of finance lease contracts.  In October 1998, we
  increased the balance in our private-placement, revolving, asset-
  backed securitization of wholesale receivables from $600.0 million
  to $750.0 million.
  
<PAGE>18     
     At December 31, 1998, we serviced $1,637.8 million of sold
 receivables which consisted of $750.0 million of wholesale
 receivables under a revolving asset-backed securitization
 agreement, $741.3 million of installment sale contracts and $146.5
 million of finance lease contracts.  We receive fees for servicing
 these receivables.  These receivables are not available to pay our
 creditors.
     
  
  Impaired Loans or leases
     A loan or lease is considered impaired when the investment in
 the contract or equipment exceeds the expected proceeds.
  
                                  1998       1997       1996
 Total investment in impaired 
   loans/leases at December 31,  $ 60.6   $  30.4     $  33.4
   Less:  Fair value of 
          underlying collateral    34.5      18.5        21.4
 Potential loss on impaired 
   loans/leases                 $  26.1   $  11.9     $  12.0
 
 
Average investment in 
   impaired loans/leases        $  73.5   $  46.7     $  42.8
  
  
  
  Allowance for credit loss activity for the year ended December
31,:
                                     1998        1997       1996
  Balance at beginning of year     $  83.5     $  74.4     $ 57.0
  Provision for credit losses         70.1        39.2       41.3
  Receivables written off, net of 
    recoveries                       (37.7)      (19.6)     (20.6)
  Adjustment related to sale of
    receivables                       (4.9)       (6.6)      (3.2)
  Foreign currency translation
    adjustment                        (0.2)       (3.9)      (0.1)
  
  Balance at end of year           $ 110.8     $  83.5    $  74.4
       
       The increase in write-offs during 1998 is primarily
  attributable to losses in southeast Asia, where the economic
  outlook remains uncertain.  We do not anticipate any additional
  material write-offs in the region in the near term but continue to
  monitor the situation very closely.
  
  NOTE 3 - INVESTMENT IN FINANCING LEASES
       
       The components of net investment in financing leases at
  December 31, were as follows:
                                              1998        1997         1996
 Total minimum lease payments receivable    $3,161.4     $2,783.5   $2,383.3
 Estimated residual value of leased assets:
    Guaranteed                                 229.3        206.0      162.5
    Unguaranteed                               666.4        518.9      401.8
                                             4,057.1      3,508.4    2,947.6
   Less:  Unearned Income                      529.1        477.6      429.8
 
 Net investment in financing leases         $3,528.0     $3,030.8   $2,517.8
  
<PAGE>19
  NOTE 4 - EQUIPMENT ON OPERATING LEASES
       
     Components of equipment on operating leases, less accumulated
 depreciation, at December 31, were as follows:
                                             1998    1997    1996
 Equipment on operating leases, at cost   $1,040.4  $827.3  $755.4
     Less:  Accumulated depreciation         324.5   268.6   244.4
 Equipment on operating leases, net       $  715.9  $558.7  $511.0
       
       
     At December 31, 1998, scheduled minimum rental payments for
 operating leases were as follows:
   1999    2000     2001     2002    2003    Thereafter      Total
   $311.0  $236.6   $141.7   $93.7   $13.6   $2.2           $798.8
  
  NOTE 5 - CONCENTRATION OF CREDIT RISK
       
       Our receivables are primarily comprised of receivables under
  installment sale contracts, receivables arising from leasing
  transactions and notes receivable.  Percentages of the total value
  of our portfolio represented by each financing plan at December 31,
  were as follows:
  
                                         1998       1997        1996
  Retail Financing:
      Finance (non-tax) leases             23%        29%         26%
      Installment sale contracts           20%        19%         20%
      Tax leases                           15%        18%         19%
      Customer loans                       15%        18%         19%
      Dealer loans                          6%         7%          6%
      Government lease-purchase contracts   2%         2%          3%
  Wholesale Financing:                     19%         7%          7%
       
       The sharp increase in wholesale financing is primarily due to
  dealer receivables purchased from Caterpillar.  Please refer to
  Note 13 for more information.  Receivables from customers in
  construction-related industries made up approximately one-third of
  total finance receivables at December 31, 1998, 1997 and 1996.
  Dealers guarantee approximately 3.4% of our retail financing
  portfolio.  No single customer or region represents a significant
  concentration of credit risk.
  
  NOTE 6 - CREDIT LINES
  
  At December 31, 1998, we had the following credit lines available:

Two syndicated revolving credit lines.  Two revolving credit lines,
 used to support our commercial paper and commercial paper
 guarantees totaling $2,900.0 million, are shared with Caterpillar
 under the following allocation:
  
<PAGE>20
                                        Five-year   364-day
                                         Facility   Facility       Total
    Caterpillar                          $   187.5  $   102.5   $   290.0
    Caterpillar Financial Services Corp.   1,687.5      922.5     2,610.0
    Total                                 $1,875.0   $1,025.0    $2,900.0
  The five year facility expires on Oct. 5, 2002; the 364-day
facility expires on Oct. 5, 1999.
  
   At December 31, 1998, there were no borrowings under these lines.
  
European revolving credit line.  This $1.0 billion credit line
 supports our Euro-commercial paper and certificate of deposit
 program.  Under this program, commercial paper and certificates of
 deposit are issued by us or by our Irish subsidiaries with our
 guarantee.  At December 31, 1998, there were no borrowings under
 this credit line.
       
Short-term credit lines from banks.  These credit lines total $628.5
 million and will be eligible for renewal at various dates
 throughout 1999.  They are used for bank borrowings and as support
 for our outstanding commercial paper and commercial paper
 guarantees.  We had $188.9 million outstanding against these credit
 lines at December 31, 1998.
  
Variable amount lending agreements with Caterpillar.  Under these
 agreements, we may borrow up to $831.3 million from Caterpillar,
 and Caterpillar may borrow up to $670.7 million from us.  The
 agreements are in effect for indefinite periods of time and may be
 changed or terminated by either party with 30 days' notice.  We had
 borrowings of $211.7 million and loans receivable of $246.3 million
 outstanding at December 31, 1998.  Please refer to Note 13 for more
 information concerning activity under these lines.
     
     The revolving credit facilities require us to maintain a
 consolidated ratio of profit before taxes plus fixed charges to
 fixed charges at no less than 1.15 to 1 for each quarter; total
 debt to total stockholder's equity, as defined by agreement, may
 not exceed 8.0 to 1 at year-end (8.5 to 1 moving six-month average
 at other than year-end); and tangible net worth must be at least
 $20.0 million.  At December 31, 1998, we were in compliance with
 these requirements.
       
  
  NOTE 7 - SHORT-TERM BORROWINGS
       
 At December 31, short-term borrowings were comprised of the following:
                               1998            1997            1996
                       Balance  Avg. Rate  Balance  Avg.Rate  Balance  Avg. Rate
Commercial paper, net $2,849.7  5.2%      $2,536.0  5.2%     $2,382.1  5.2%
Payable to banks, net    188.9  4.8%         145.0  4.5%        257.2  3.7%
Other                     74.6  5.2%          50.5  5.5%         39.6  5.5%
Total                 $3,113.2           $2,731.5            $2,678.9
       
<PAGE>21
Additional information about our short-term debt is as follows for
  the years ended December 31,:
                                        1998          1997         1996
    Average short-term borrowings    $2,874.6     $ 2,654.9     $ 2,240.3
    Weighted average interest rate      5.3%          5.3%          5.3%
    Cash paid for interest             $183.1        $157.6        $160.4
       
  
  NOTE 8 - LONG-TERM BORROWINGS
       
     During 1998, we issued $3,959.8 million of medium-term notes, of
 which $1,508.3 million were at fixed interest rates and $2,451.5
 million were at floating interest rates, primarily indexed to
 LIBOR.  At December 31,1998, the average weighted interest rate on
 outstanding medium-term notes was 5.5%, with maturities ranging
 from 1 to 15 years.  Cash paid for interest on long-term debt in
 1998, 1997 and 1996 was $298.1 million, $198.2 million and $167.5
 million, respectively.
     
     Long-term debt outstanding at December 31, 1998 matures as
  follows:
       
             1999                $2,178.9
             2000                 2,371.1
             2001                   960.0
             2002                   289.0
             2003                   350.0
             Thereafter              87.8
             
             Total               $6,236.8
       
  
  NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
     
     We use interest rate derivative financial instruments and
 currency derivative financial instruments to manage interest rate
 and foreign currency exchange risks that we encounter as a part of
 our normal business.  We do not use these instruments for trading
 purposes.
     
  
  Interest rate derivatives
     We use interest rate swap agreements to manage the risk of
 changes in interest rates.  Under the terms of a swap agreement, we
 exchange with the counterparty the difference between two interest
 rates periodically over the life of the agreement.  At December 31,
 1998, we had interest rate swap contracts outstanding with notional
 amounts totaling $2,183.2 million with terms up to ten years.
 These contracts effectively change:
     
     $1,373.2 million of floating rate debt to fixed rate debt
     $656.5 million of fixed rate debt to floating rate debt
     $153.5 million of floating rate debt to floating rate debt
            having different characteristics
 
<PAGE>22
     Net interest on interest rate swap agreements is recorded as
 either Other assets or Accrued interest payable and recognized as
 an adjustment to Interest expense.  Gains and losses on termination
 of these agreements are deferred and amortized over the remaining
 original life of the agreement, unless the underlying debt to which
 the agreement is designated is disposed of or the hedge is
 terminated because of a loss of correlation, in which case the gain
 or loss is recognized immediately in income.
     
     Our current accounting loss exposure on interest rate swaps
 related to credit risk is a net receivable of $11.7 million at
 December 31, 1998.  In addition, we may incur additional costs in
 replacing at current market rates any contracts for which a
 counterparty fails to perform.  To reduce the risk of credit losses
 being incurred, we enter into contracts only with counterparties
 that have A- or better credit ratings and monitor the credit
 standing of the counterparties.  We do not anticipate
 nonperformance by any of these counterparties.
  
  Foreign currency derivatives
     We use foreign exchange contracts to manage the risk of
 fluctuating exchange rates.  These contracts have terms that
 generally range up to three months.  At December 31, 1998, we had
 foreign exchange contracts totaling $1,267.9 million, $3.4 million
 of which were with Caterpillar.  They hedge foreign currency
 denominated receivables and debt of our international subsidiaries.
     
     Deferred amounts relating to foreign exchange contracts are
 recorded as either Other assets or Other liabilities, and the
 premium/discount is recognized as an adjustment to Interest
 expense.  Exchange gains/losses on these contracts are recorded in
 Other income.
  
  NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
     
     We are contingently liable under guarantees of securities of
 certain parties, including Caterpillar.  These guarantees have
 terms ranging up to two years and are secured.  The total guarantee
 and amounts outstanding at December 31, are as follows:
                                  
                                     1998          1997     1996
    Guarantees with others           $178.7        $210.9   $253.3
    Guarantees with Caterpillar        75.0          50.0       -
    Total guarantees                 $253.7        $260.9   $253.3
    
    Outstanding with others          $ 87.7        $104.6   $158.7
    Outstanding with Caterpillar,      31.6           4.7       -
    Total outstanding                $119.3        $109.3   $158.7
     
     We are party to agreements in the normal course of business with
 selected customers and dealers in which we commit to provide a set
 dollar amount of financing on a pre-approved basis.  We also
 provide lines of credit to selected customers and dealers, of which
 a portion remains unused as of December 31, 1998.  Commitments and
 lines of credit generally have fixed expiration dates or other
 termination clauses.  It has been our experience that not all
 commitments and lines of credit will be used.  Management applies
 the same credit policies when making commitments and granting lines
 of credit as it does for any other financing.  We do not require
 collateral for these commitments/lines, but if credit is extended,
 collateral may be required upon funding.  The amount of the
 commitments and lines of credit outstanding as of December 31, 1998
 was $3.9 billion compared to $2.3 billion at December 31, 1997 and
 $1.6 billion at December 31, 1996.  The increase in 1998 is
 partially related to the purchase of dealer receivables from
 Caterpillar.
<PAGE>23
     
     We are party to various litigation matters and claims, and,
 while the results cannot be predicted with certainty, management
 believes the final outcome of such matters and claims will not have
 a material adverse effect on our consolidated financial position.
  
  NOTE 11 - INCOME TAXES
     
     The components of the provision for income taxes were as follows
 for the years ended December 31,:
                               1998        1997          1996
  Current tax provision:
    U.S. federal taxes       $  54.4     $  47.2       $  32.8
    Foreign taxes               17.5         8.8           8.2
    U.S. state taxes             4.6         4.6           4.3
                                76.5        60.6          45.3
  
  Deferred tax provision (credit):
    U.S. federal taxes          (7.4)       (9.1)         (7.7)
    Foreign taxes               (2.5)        1.6           2.1
    U.S. state taxes             0.4         0.4           0.5
                                (9.5)       (7.1)         (5.1)
  
  Total provision for income
    taxes                    $  67.0     $  53.5       $  40.2
  
  Cash paid for taxes        $  52.4     $  16.1       $  23.9
       
     Current tax provision (credit) is the amount of income taxes
 reported or expected to be reported on our tax returns.
     
     Differences between accounting rules and tax laws cause
 differences between the bases of certain assets and liabilities for
 financial reporting and tax purposes.  The tax effects of these
 differences, to the extent they are temporary, are recorded as
 deferred tax assets and liabilities and consisted of the following
 components at December 31,:
       
                                        1998          1997        1996
 Deferred tax assets:
   Allowance for credit losses         $ 29.9         $ 21.9     $ 20.0
   Alternative fuel tax credit            1.3            1.3        0.7
   Expected foreign tax credit            8.3            9.4       10.4
   Net operating loss carryforwards       6.5            4.9        4.0
                                         46.0           37.5       35.1
 
 Deferred tax liabilities
   - primarily depreciation             (63.2)         (66.7)     (70.4)
 Valuation allowance for deferred 
   tax assets                            (6.5)          (4.9)      (4.0)
                                        (69.7)         (71.6)     (74.4)
 
 Deferred taxes - net                  $(23.7)        $(34.1)    $(39.3)
       
     Of our foreign subsidiaries that are in net operating loss carry
 forward positions, there is not sufficient evidence to substantiate
 recognition of deferred tax assets.  Accordingly, a valuation
 allowance has been recorded for this amount.  It is possible that
 circumstances could change in the near term at one or more of these
 foreign subsidiaries which would allow us to reduce the valuation
 allowance and to record additional net deferred tax assets.
     
<PAGE>24
     The provision for income taxes was different than would result
 from applying the U.S. statutory rate to Profit before income taxes
 for the years ended December 31, for the reasons set forth in the
 following reconciliation:
     
                                            1998     1997     1996
  Taxes computed at U.S. statutory rates   $62.5    $51.7    $40.5
  Increases (decreases) in taxes resulting from:
    Finance income not subject to
      federal taxation                      (3.5)    (3.3)    (3.0)
  State income taxes, net of federal taxes   3.3      3.3      3.0
  Subsidiaries' results subject to tax rates other than
    U.S. statutory rates                     4.7      1.2     (0.3)
  Other, net                                  -       0.6        -
  
  Provision for income taxes               $67.0    $53.5     $40.2
  
       
       
     The domestic and foreign components of Profit before income
 taxes for the years ended December 31, were as follows:
     
                     1998       1997        1996
    Domestic       $148.6      $121.2     $ 89.7
    Foreign          30.0        26.5       26.1
  Total            $178.6      $147.7     $115.8
       
     The foreign component of Profit before income taxes is comprised
 of the profit of all consolidated subsidiaries located outside the
 United States.
  
  NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
     
     We use the following  methods and assumptions to estimate the
 fair value of our financial instruments:
     
Assets and liabilities other than those listed below - carrying
 amount is a reasonable estimate of fair value.

Finance receivables, net - fair value is estimated by discounting the
 future cash flows using current rates for new receivables with
 similar remaining maturities.  Historical bad debts experience is
 also considered.

Long-term debt - fair value is estimated by discounting the future
 cash flows using our current borrowing rates for similar types and
 maturities of debt, except for floating rate notes for which the
 carrying amount is considered a reasonable estimate of fair value.

Interest rate swaps - fair value is estimated based upon the amount
 we would receive or pay to terminate the agreements as of December
 31.

Forward exchange contracts - carrying amount is a reasonable estimate
 of fair value.

The estimated fair values of financial instruments at December 31,
 are as follows:
<PAGE>25
                        1998               1997              1996
                  Carrying  Fair     Carrying  Fair   Carrying   Fair
                   Amount   Value     Amount   Value   Amount    Value 
Finance                                                             
receivables -                                                       
net,            $8,916.3   $8,977.7   $5,845.8   $5,872.9   $4,982.6  $5,008.8
(excluding operating and tax leases (1))
                                                                     
Long-term debt $(6,236.8)$(6,280.2)  $(3,362.1) $(3,419.6) $(2,603.5)$(2,653.4)
                                                                     
Interest rate                                                        
swaps:
  In a net receivable    
    position       $14.0     $18.6        $0.4      $19.5       $0.8      $4.3
  In a net payable
    position      $(2.3)    $(24.1)      $(3.3)    $(12.1)     $(4.1)   $(15.5)
                                                                  
Forward exchange
contracts:
  In a net gain
    position      $20.8      $20.8       $47.7      $47.7       $8.5      $8.5
  In a net loss
    position     $(9.5)      $(9.5)      $(6.0)     $(6.0)    $(13.5)   $(13.5)
                                               
(1) Excluded items have a net carrying value of $865 at December 31,
  1998, $753 at December 31, 1997 and $692 at December 31, 1996.
  
  NOTE 13 - TRANSACTIONS WITH RELATED PARTIES
     
     We have a Support Agreement with Caterpillar which provides that
 Caterpillar will remain, directly or indirectly, our sole owner,
 cause us to maintain a net worth of at least $20.0 million and
 ensure that we maintain a ratio of earnings and interest expense
 (as defined) to interest expense of not less than 1.15 to 1.  In
 1998, Caterpillar made capital contributions of $280.0 million.
 Although this agreement can be modified or terminated by either
 party, any modification or termination which would adversely affect
 holders of our debt is required to be approved by holders of 66-
 2/3% of the aggregate principle of outstanding debt.  Caterpillar's
 obligation under this agreement is not directly enforceable by any
 of our creditors and does not constitute a guarantee of any of our
 obligations.
     
     We have variable amount lending agreements with Caterpillar.
 Under these agreements, we may borrow up to $831.3 million from
 Caterpillar, and Caterpillar may borrow up to $670.7 million from
 us.  The agreements are in effect for indefinite periods of time
 and may be changed or terminated by either party with 30 days'
 notice.  Information concerning these agreements is as follows:
     
                                     1998     1997     1996
 Loans payable at December 31,      $211.7   $243.5   $150.0
 Loans receivable at December 31,   $246.3       -        -
 Interest paid                      $  6.3  $  11.5   $ 20.7
 Interest earned                    $  4.1       -        -
     
     We were contingently liable under guarantees of securities of
 Caterpillar totaling $75.0 million at December 31, 1998 and $50.0
 million at December 31, 1997.  Of these guarantees, the amount
 outstanding was $31.6 million at December 31, 1998 and $4.7 at
 December 31, 1997.
     
     We enter into forward exchange contracts with Caterpillar to
 hedge our U.S. dollar denominated positions in Australia against
 currency fluctuations.  These contracts have terms generally
 ranging up to three months.  These contracts totaled $3.4 million
 at December 31, 1998, $3.1 million at December 31, 1997 and $2.3
 million at December 31, 1996.
     
<PAGE>26
     We have agreements with Caterpillar to purchase, at a discount,
 certain receivables generated by sales of products to Caterpillar
 dealers.  Information pertaining to these purchases is as below:
     
                              1998        1997     1996
  Purchases made             $6,621.9    $444.3      $397.3
  Discounts earned           $   88.5    $  5.6      $  5.4
  Servicing fees paid        $    4.5    $   -       $   -
  Balance at December 31,    $1,388.7    $139.0      $146.4
     
     The marked increase in 1998 is primarily due to a new program
 started in January 1998 to purchase receivables in the U.S.  Under
 this program, we use a portion of collections each week to purchase
 additional receivables in order to maintain a consistent balance.
 The effective interest rate on these receivables was 8.03% at
 December 31, 1998.
     
     We participate in certain marketing programs sponsored by
 Caterpillar by providing financing to customers at rates below
 standard rates.  Under these programs, Caterpillar pays us an
 amount at the outset of the transaction which we then recognize as
 income over the term of the financing.  During 1998, we billed
 $220.5 million to Caterpillar relative to such programs, compared
 with $151.0 million in 1997 and $106.2 million in 1996.
     
     Caterpillar provides us with certain operational and
 administrative support which is integral to the conduct of our
 business.  Our employees are covered by various benefit plans,
 including pension/post-retirement plans, administered by
 Caterpillar.  We reimburse Caterpillar for these charges which
 amounted to $5.6 million during 1998, $4.5 million during 1997 and
 $3.7 million during 1996.  We also reimburse Caterpillar for
 certain other corporate services which amounted to $2.5 million for
 the year ended December 31, 1998 and $2.3 million for the years
 ended December 31, 1997 and 1996.
     
     We have tax sharing agreements with Caterpillar, in the U.S. and
 Australia, under which we pay to or receive from Caterpillar our
 allocated share of income taxes or credits.
  
  NOTE 14 - LEASES
     
     We lease certain offices and other property through operating
 leases.  Rental expense is charged to operations as incurred. Total
 rental expense for operating leases was $12.4 million, $9.7 million
 and $7.6 million for 1998, 1997 and 1996, respectively.  Minimum
 payments for operating leases having initial non-cancelable terms
 in excess of one year are (in millions):
     
          1999                 $ 6.1
          2000                   4.7
          2001                   3.7
          2002                   3.2
          2003                   0.6
          Thereafter             2.8
          Total                $21.1
       
  
<PAGE>27
  NOTE 15 - SEGMENT INFORMATION
     
  
  Basis for segment information
     We have three geographic segments in which we offer primarily
the same types of services (see Note 1).  We account for transactions
between segments in accordance with generally accepted accounting
principles.  We segregate information based on where service is
provided:
   United States:  We have regional offices in the United States
       which serve local dealers and customers.  We also have offices in the
       United States which provide cross-border financing around the world.
   Europe:  We have offices throughout Europe which serve European
       dealers and customers.
   All Other:  Offices in North and Latin America and Asia which
       are not classified elsewhere are included in this segment.

 1998                               U.S       Europe    All Other    Total
 Revenue from external customers $  748.0     151.5       146.2   $ 1,045.7
 Inter-segment revenue           $   26.2       3.8          -    $    30.0
 Net profit                      $   96.6       4.3        10.7   $   111.6
 Interest expense                $  396.3      54.2        81.3   $   531.8
 Depreciation expense            $  104.9      51.9        11.6   $   168.4
 Income tax expense              $   52.0       4.9        10.1   $    67.0
 Assets                          $8,927.5   1,812.2     1,660.9   $12,400.6
 Expenditures for assets         $  232.1      93.1        74.3   $   399.5
       
 1997                               U.S.      Europe    All Other    Total
 Revenue from external customers $  581.0     120.5        90.0   $   791.5
 Inter-segment revenue           $    5.0       1.0          -    $     6.0
 Net profit                      $   78.1       8.6         7.5   $    94.2
 Interest expense                $  284.2      41.5        47.0   $   372.7
 Depreciation expense            $   95.6      38.1         5.6   $   139.3
 Income tax expense              $   43.1       3.4         7.0   $    53.5
 Assets                          $5,779.7   1,310.9     1,133.5   $ 8,224.1
 Expenditures for assets         $  150.2     179.1        20.6   $   349.9
       
 1996                               U.S.      Europe    All Other    Total
 Revenue from external customers $  501.8     104.0        72.2   $   678.0
 Inter-segment revenue           $    4.9        -           -    $     4.9
 Net profit                      $   59.8       7.6         8.2   $    75.6
 Interest expense                $  235.5      40.9        39.0   $   315.4
 Depreciation expense            $   93.5      23.5         4.0   $   121.0
 Income tax expense              $   29.9       4.1         6.2   $    40.2
 Assets                          $4,793.4   1,081.3       803.4   $ 6,678.1
 Expenditures for assets         $  161.4      93.9        10.9   $   266.2
  
  Reconciliation:
 Interest expense                      1998        1997     1996
 Interest expense from segments       $531.8      $372.7   $315.4
 Inter-segment interest expense         30.0         6.0       -
 Total interest expense               $501.8      $366.7   $315.4
  
 Assets                          1998       1997       1996
 Assets from segments         $12,400.6   $8,224.1   $6,678.1
 Investment in subsidiaries       493.6      394.7      299.5
 Inter-segment balances           772.2      402.6       14.4
 Total assets                 $11,134.8   $7,426.8   $6,364.2
  
  Inside and outside the United States:
 Revenue                     1998       1997       1996
 Inside U.S.               $  748.0    $581.0     $501.8
 Outside U.S.                 297.7     210.5      176.2
                           $1,045.7    $791.5     $678.0
    
 Property and Equipment, Net    1998      1997    1996
 Inside U.S.                  $485.3    $402.0    $399.7
 Outside U.S.                  249.4     172.5     124.5
                              $734.7    $574.5    $524.2
  
  
  NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


1998        First quarter   Second quarter   Third quarter   Fourth quarter
Total revenues $222.4          $255.1           $283.0           $285.2
Net profit     $ 23.8          $ 25.5           $ 35.2           $ 27.1

1997        First quarter   Second quarter   Third quarter   Fourth quarter
Total revenues $183.0          $189.4           $205.5           $213.6
Net profit     $ 27.0          $ 21.9           $ 23.0           $ 22.3
<PAGE>29