UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549
                                
                                
                            FORM 10-K
                                
                                
    [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934
                                
           For the fiscal year ended October 31, 1996
                                
                               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 1-4146-1
                        -----------------
                                
                                
                 NAVISTAR FINANCIAL CORPORATION
     (Exact name of Registrant as specified in its charter)

               Delaware                              36-2472404
     (State or other jurisdiction of      (I.R.S. Employer Identification No.)
      incorporation or organization)

            2850 West Golf Road
          Rolling Meadows, Illinois                  60008
     (Address of principal executive offices)      (Zip Code)

 Registrant's telephone number, including area code 847-734-4275
                                
Securities registered pursuant to Section 12(b) of the Act:  None
                                
Securities registered pursuant to Section 12(g) of the Act:  None

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
and (2) has been subject to such filing requirements for the past
90 days.  Yes X       No__


As  of December 31, 1996, the number of shares outstanding of the
registrant's common stock was 1,600,000.


THE   REGISTRANT  IS  A  WHOLLY-OWNED  SUBSIDIARY   OF   NAVISTAR
INTERNATIONAL  TRANSPORTATION CORP. AND MEETS THE CONDITIONS  SET
FORTH IN GENERAL INSTRUCTION J(1) (a) AND (b) OF FORM 10-K AND IS
THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>

                 NAVISTAR FINANCIAL CORPORATION
                        AND SUBSIDIARIES
                                
                            FORM 10-K

                   Year Ended October 31, 1996
<TABLE>
<CAPTION>

                              INDEX
                                                           10-K Page
PART I
<S>          <C>                                              <C>  
Item  1.     Business (A)                                       1
Item  2.     Properties (A)                                     1
Item  3.     Legal Proceedings                                  1
Item  4.     Submission of Matters to a Vote of
             Security Holders (A)                               2

PART II

Item  5.    Market for the Registrant's Common Equity and
            Related Stockholder Matters                         2
Item  6.    Selected Financial Data (A)                         2
Item  7.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations (A)             3
Item  8.    Financial Statements and Supplementary Data         9
            Independent Auditors' Report                       39
Item  9.    Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                40

PART III

Item 10.    Directors and Executive Officers of the
            Registrant (A)                                     40
Item 11.    Executive Compensation (A)                         40
Item 12.    Security Ownership of Certain Beneficial Owners
            and Management (A)                                 40
Item 13.    Certain Relationships and Related
            Transactions (A)                                   40

PART IV

Item 14.    Exhibits, Financial Statement Schedules and
            Reports on Form 8-K                                40

SIGNATURES - Principal Accounting Officer                      41
           - Directors                                         42

POWER OF ATTORNEY                                              42

EXHIBITS                                                      E-1

(A) -  Omitted or amended as the registrant is a wholly-owned
       subsidiary of Navistar International Transportation Corp. and
       meets the conditions set forth in General Instructions J(1) (a)
       and (b) of Form 10-K and is, therefore, filing this Form with
       reduced disclosure format.
</TABLE>
<PAGE>
                             PART I


Item 1.  Business


     The registrant, Navistar Financial Corporation ("NFC"), was
incorporated in Delaware in 1949 and is a wholly-owned subsidiary
of Navistar International Transportation Corp. ("Transportation"),
which is wholly-owned by Navistar International Corporation ("Navistar").
As used herein, the "Corporation" refers to Navistar Financial Corporation
and its wholly-owned subsidiaries unless the context otherwise requires.

     The Corporation  provides  wholesale, retail, and to a lesser
extent, lease financing in the United  States for sales of new and
used  trucks sold by Transportation and  Transportation's dealers.
The Corporation  also  finances  wholesale  accounts  and selected
retail  accounts  receivable  of  Transportation.  Sales  of  new
products  (including  trailers)  of  other  manufacturers are also
financed  regardless  of whether designed  or customarily sold for
use  with  Transportation's  truck  products.    Harco  National
Insurance  Company,  NFC's  wholly-owned  insurance  subsidiary,
provides  commercial  physical  damage  and liability  insurance
coverage to Transportation's dealers and retail customers, and  to
the general public through the independent insurance agency system.


Item 2.  Properties

     The  Corporation's properties principally consist of  office
equipment  and leased office space in Rolling Meadows,  Illinois;
Columbus,  Ohio; Atlanta, Georgia; Plano, Texas; Mt. Laurel,  New
Jersey;  and  San Ramon, California.  The office equipment  owned
and  in use by the Corporation is not significant in relation  to
the total assets of the Corporation.


Item 3.  Legal Proceedings

     During  1992, auditors of the Illinois Department of Revenue
("Department")  began an income tax audit of NFC for  the  fiscal
years  ended  October 31, 1989, 1990 and 1991.   On  February  1,
1994,  the  Department issued a Notice of Deficiency to  NFC  for
approximately  $11.9  million.   The  Department  has  taken  the
position  that  nearly 100% of NFC's income  during  these  years
should  be  attributed to and taxed by Illinois.   NFC  maintains
that  the Department's interpretation and application of the  law
is  incorrect  and  improper, and that the Department's  intended
result is constitutionally prohibited.  Based on discussions with
outside  counsel, NFC's management is of the opinion that  it  is
more  likely than not that NFC's position will prevail such  that
the  Department's action will not have a material impact on NFC's
earnings and financial position.

<PAGE>
                       PART I (Continued)
                                
                                
Item 4.  Submission of Matters to a Vote of Security Holders

    Intentionally omitted.  See the index page of this Report for
explanation.


                             PART II

<TABLE>
<CAPTION>

                                                               Page
<S>      <C>                                                    <C>
Item 5.  Market for the Registrant's Common Equity and
         Related Stockholder Matters                            29


Item 6.  Selected Financial Data

    Intentionally omitted.  See the index page to this Report for
explanation.

</TABLE>
<PAGE>

Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations


Financing Volume

     The  Corporation's  serviced  receivables  portfolio,  which
includes  sold receivables, totaled $3.3 billion at  October  31,
1996,  up from $3.2 billion and $2.5 billion at October 31,  1995
and 1994, respectively.

     In  fiscal 1996 customer demand for Class 5 through 8 trucks
declined  approximately 9% compared with 1995  and  was  slightly
higher  than 1994 demand.  In spite of lower customer demand  and
the  continued  highly competitive commercial  financing  market,
fiscal  1996  acquisitions of retail notes  and  leases  of  $1.1
billion, net of unearned finance income, were equal to 1995.  The
Corporation's finance market share of new trucks manufactured  by
Transportation and sold in the United States increased  to  16.3%
in  1996  from  14.4% in 1995.  Acquisitions  in  1995  were  $.2
billion  higher than 1994 due to increased demand offset in  part
by  lower  finance  market share of 14.4% in 1995  compared  with
15.3%  in  1994.   Serviced  retail  notes  and  lease  financing
balances  were  $2.2 billion at October 31, 1996,  compared  with
$1.9  billion  and  $1.6 billion at October 31,  1995  and  1994,
respectively.

     During  fiscal  1996, the Corporation supplied  94%  of  the
wholesale  financing  of  new  trucks  sold  to  Transportation's
dealers,  slightly higher than the 93% in 1995 and 1994.   During
1996,  Transportation dealers generally reduced inventory  levels
in  response to lower customer demand.  As a result, acquisitions
of  wholesale notes decreased $.3 billion, 9%, to $2.7 billion in
1996  after  a  29% increase to $3.0 billion in 1995  from  1994.
Serviced wholesale note balances were $685 million at October 31,
1996,  compared to $854 million and $577 million at  October  31,
1995 and 1994, respectively.

     Owned  finance receivables balances, including  subordinated
interests in retail and wholesale receivables, decreased to  $1.4
billion  at  October 31, 1996, from $1.5 billion at  October  31,
1995 due primarily to lower wholesale financing. Balances in 1995
were $.2 billion higher than 1994 as a result of the higher level
of  wholesale  and  retail financing.  Receivable  sales  were  a
significant source of funding during fiscal 1996 and 1995 and, as
a  result,  sold  retail receivable balances  increased  to  $1.4
billion at October 31, 1996 from $1.2 billion and $1.0 billion at
October  31,  1995 and 1994, respectively.  Sold  wholesale  note
balances were $500 million at October 31, 1996 and 1995 and  $300
million at October 31, 1994.


Results of Operations

      The  Corporation's after tax return on equity was a  record
18.1%  in  1996 compared with 15.0% and 15.1% in 1995  and  1994,
respectively.  Income before taxes in 1996 was $81 million, a 37%
increase  from  $59 million in 1995, primarily  as  a  result  of
higher gains on sales of retail notes,  higher levels

<PAGE>


            Management's Discussion and Analysis of
        Financial Condition and Results of Operations (Continued)


Results of Operations (Continued)

of  wholesale note balances during the first nine months of  1996
and  higher retail and lease balances offset in part by a  higher
loss provision.  Gains on sales of retail note receivables during
1996  were  $20  million on sales of $985 million  compared  with
gains of $5 million on sales of $740 million in 1995.  The higher
gains  on sales resulted from higher margins on retail notes  due
to  declining market interest rates prior to the sale in November
1995.    During  a  declining  interest  rate  environment,   the
Corporation's  acquisition  spreads  improve  as  NFC's  cost  of
borrowing differs from the time when interest rates are quoted to
borrowers and the time when notes are acquired.  In addition, the
effective  interest  rate for each sale  is  based  on  a  market
interest  rate at the time of the sale, which may be  up  to  six
months  after  the Corporation acquired the retail note.   During
fiscal 1995, the opposite impact was experienced by NFC on a sale
in  November 1994 as market interest rates were rising and a loss
was recorded on that sale.

     Income before taxes of $59 million in 1995 increased 6% from
$55 million in 1994 as a result of higher finance receivables  to
support   the  demand  for  Transportation  truck  products   and
improvement  in  the Corporation's borrowing spread  over  market
interest  rates.   This increase was partially  offset  by  lower
gains on sales of retail notes.  Gains on the $740 million retail
notes  sold in 1995 were $5 million compared with $12 million  on
sales of $1,033 million in 1994.

      The  more  significant  elements  of  revenue  and  expense
impacting  net  income  for  these years  are  discussed  in  the
following paragraphs:

      Retail  note and lease financing revenue for 1996  was  $98
million  compared with $73 million and $71 million  in  1995  and
1994,  respectively.  The 1996 improvement over 1995 is primarily
due  to  higher gains on sold notes and higher average  balances.
The increase in 1995 revenues compared with 1994 is due to higher
financing volume offset in part by lower gains on sold notes.

      Wholesale note revenue increased 5% in 1996 to $57  million
as  a  result of higher average outstanding note balances in  the
first  nine  months of the fiscal year offset in  part  by  lower
average yields relating to a lower prime interest rate.  In  1995
revenue  increased  38%  compared  with  1994  as  the  level  of
wholesale  financing was higher to support increased  demand  for
Transportation truck products and higher average  yields  due  to
higher prime interest rates.

      Revenue from accounts decreased in 1996 to $27 million from
$29  million in 1995 as the decline in customer demand  caused  a
lower  level  of  financing activity.  Revenue in  1995  was  32%
higher than 1994 due to higher outstanding balances in support of
the increased demand for Transportation truck products and higher
average yields due to higher prime interest rates.

<PAGE>

            Management's Discussion and Analysis of
        Financial Condition and Results of Operations (Continued)


Results of Operations (Continued)

      Servicing fee income increased to $20 million in 1996  from
$18 million in 1995 and $17 million in 1994 as a result of higher
levels  of  sold  note receivable balances which the  Corporation
continues to service.

      Insurance  premiums  earned by Harco decreased  6%  to  $42
million  in  1996 from $45 million in 1995 and 12% in  1995  from
1994.   The  decreases  in 1996 and 1995  reflect  reductions  in
written  premiums of truck liability lines in response to adverse
loss experience in those lines and to increased competition.

      Borrowing  costs decreased slightly in 1996 to $82  million
from  $84  million in 1995 after a significant increase  in  1995
compared with $70 million in 1994.  During 1996 the Corporation's
weighted average interest rate on all debt declined to 6.5%  from
7.4%  in  1995 primarily due to the maturity of high  fixed  rate
public  debt  during 1995 and 1996 and also due to  lower  market
interest rates.  The favorable rate impact was offset in part  by
higher  debt  balances  to  support  receivable  balances.    The
increase  in  1995 from 1994 was primarily the result  of  higher
debt  balances  to support increased wholesale note  and  account
balances and higher market interest rates, offset in part  by  an
improvement  in  the Corporation's borrowing spread  over  market
interest rates as a result of the 1995 amendment to the revolving
debt  agreement  and the asset-backed commercial  paper  ("ABCP")
program.  The ratio of debt to equity was 4.7:1, 5.2:1 and  4.8:1
at October 31, 1996, 1995, and 1994, respectively.

      Credit  collection  and administrative  expenses  were  $28
million in 1996 and 1995 compared with $26 million in 1994.   The
$2  million increase in 1995 compared with 1994 was due to retail
marketing efforts and incentive programs.

      The  provision for losses on receivables totaled $9 million
in  1996 compared with $3 million in 1995 and $2 million in 1994.
As  the trucking industry softened during 1996, the high level of
new  truck  purchases  in 1995 caused an  over  capacity  in  the
trucking  sector.   This over capacity coupled  with  competitive
freight  rates  and higher fuel costs impacted  NFC's  customers'
abilities  to  meet  obligations  and  has  resulted  in   higher
delinquencies,  repossessions  and  credit  losses.   Notes   and
account write-offs (recoveries), including sold notes totaled  $5
million  in  1996, $(1) million in 1995 and $1 million  in  1994.
The  Corporation's  allowance  for  losses  as  a  percentage  of
serviced  finance receivables was .74%, .62% and .65% at  October
31, 1996, 1995 and 1994, respectively.

      Insurance claims and underwriting expenses decreased to $44
million  in  1996 from $47 million and $54 million  in  1995  and
1994,  respectively.   The  decline resulted  from  decreases  in
losses  incurred in Harco's truck liability insurance  lines  and
lower  commission costs associated with lower volumes of premiums
written through general agents.

<PAGE>

            Management's Discussion and Analysis of
        Financial Condition and Results of Operations (Continued)


Liquidity and Funds Management

     The  Corporation's  operations are substantially  dependent
upon  the production and sale of Transportation's truck products.
Navistar  Financial  has  traditionally  obtained  the  funds  to
provide   financing  to  Transportation's  dealers   and   retail
customers from sales of receivables, commercial paper, short- and
long-term bank borrowings, medium- and long-term debt issues  and
equity  capital.   The current debt ratings of  the  Corporation,
detailed  below, have made bank borrowings and sales  of  finance
receivables   the   most  economical  sources   of   cash.    The
Corporation's  insurance operation generates  its  funds  through
internal operations and has no external borrowings.

     Operations  used $29 million in cash in 1996  as  the  cash
provided  from net income of $49 million was offset by a decrease
in   accounts  payable  reflecting  the  timing  of  payments  to
Transportation.  Investment activities provided  $95  million  in
cash  primarily  due to a $163 million decline in wholesale  note
and  account  balances,  offset in  part  by  higher  retail  and
equipment leasing activity.  During 1996, the purchase of  $1,108
million  retail notes and lease receivables was funded with  $982
million  proceeds from the sale of the receivables and  principal
collections  of  $125 million.  The cash provided from  investing
activities was used to lower debt funding and to pay dividends of
$26  million.  See also the "Statement of Consolidated Cash Flow"
on page 12.

     Over the last three years, operations provided $103 million
in  cash and proceeds from the sale of retail receivables totaled
$2,704   million.   These  amounts  were  used  mainly  to   fund
receivable  acquisitions of $2,747, net of principal  collections
on the receivables, and dividend payments of $61 million.

     Receivable  sales were a significant source of  funding  in
1996  and  1995.   Through the asset-backed  public  market,  the
Corporation  has  been  able  to  fund  fixed  rate  retail  note
receivables  at rates offered to companies with investment  grade
ratings.  During fiscal 1996 and 1995, the Corporation sold  $985
and $740 million, respectively, of retail notes, through Navistar
Financial  Retail  Receivables Corporation ("NFRRC"),  a  wholly-
owned  subsidiary, to owner trusts which in turn sold  notes  and
certificates  to  investors. At October 31, 1996,  the  remaining
shelf  registration  available to NFRRC for  issuance  of  asset-
backed  securities was $2.4 billion.  The Corporation has a  $500
million  revolving  wholesale note trust that  provides  for  the
continuous  sale of eligible wholesale notes on  a  daily  basis.
The trust is funded by securities sold to the public comprised of
three  $100  million  tranches of investor certificates  maturing
serially from 1997 to 1999 and a $200 million tranche of investor
certificates  maturing in 2004.  See Note 5 to  the  Consolidated
Financial Statements for further discussion.

     The  Corporation  has a $925 million bank revolving  credit
facility  and  a  $400  million  asset-backed  commercial   paper
("ABCP")  program supported by a bank liquidity  facility,  which
mature  in March 2001.  See Note 10 to the Consolidated Financial
Statements for further discussion.

<PAGE>

             Management's Discussion and Analysis of
    Financial Condition and Results of Operations (Continued)


Liquidity and Funds Management (Continued)

     In  March  1995,  ratings  on the Corporation's  debt  were
upgraded   by   Moody's  Investors  Service,  Inc.   ("Moody's").
Moody's raised its ratings for the Corporation's debt from Ba3 to
Ba2 for senior debt and from B2 to B1 for subordinated debt.   In
March  1995, Duff & Phelps confirmed its debt ratings of BB+  for
senior  debt  and  BB for subordinated debt.   In  October  1993,
ratings  on the Corporation's debt were reviewed by Standard  and
Poor's  Corporation ("Standard and Poor's").  Standard and Poor's
raised  its ratings for the Corporation's debt from B- to BB  for
senior  debt  and  from  CCC to B+ for  subordinated  debt.   The
Corporation's commercial paper is rated "not prime" by Moody's.

     In  November  1996, the Corporation sold  $487  million  of
retail notes, net of unearned finance income, through NFRRC to an
owner  trust  which  in  turn  sold  notes  and  certificates  to
investors.  A gain of $6.9 million was recognized on the sale.

     The Corporation manages sensitivity to interest rate changes
by   funding  floating  rate  assets  with  floating  rate  debt,
primarily  borrowings under the bank revolving credit  agreement,
and  fixed rate assets with fixed rate debt, equity and  floating
rate  debt.   Management has limited the  amount  of  fixed  rate
assets   funded  with  floating  rate  debt  by  selling   retail
receivables  on  a fixed rate basis and, to a lesser  extent,  by
utilizing derivative financial instruments.  See notes 1  and  14
to  the  Consolidated  Financial  Statements.   Corporate  policy
prohibits the use of derivatives for speculative purposes.

     On  February  1, 1994, the Illinois Department  of  Revenue
("Department")  issued a Notice of Deficiency to the  Corporation
for  approximately $12 million for the fiscal years 1989  throuth
1991.    The   Corporation   maintains  that   the   Department's
interpretation  and  application of  the  law  is  incorrect  and
improper.   Based  on  discussions with  outside  counsel,  NFC's
management is of the opinion that NFC's position will prevail and
the  Department's action will not have a material impact on NFC's
financial  condition.   See Note 8 to the Consolidated  Financial
Statements for further discussion.

Pending Accounting Standards

     In  June  1996,  the Financial Accounting  Standards  Board
issued Statement of Financial Accounting Standards No. 125 ("SFAS
No.  125"), "Accounting for Transfers and Servicing of  Financial
Assets  and Extinguishments of Liabilities" which the Corporation
must  adopt  for  all  applicable  transactions  occurring  after
December  31, 1996.  The Corporation will apply SFAS No.  125  to
securitization  transactions occurring on  or  after  January  1,
1997.  The new standard is not expected to have a material effect
on the Corporation's net income or financial condition.

<PAGE>

             Management's Discussion and Analysis of
    Financial Condition and Results of Operations (Continued)


Business Outlook

     The  demand  for heavy trucks is forecast  to  continue  to
soften during fiscal 1997 and correspondingly NFC's profitability
and wholesale and retail financing activity are anticipated to be
lower.   Competition  will  continue  to  put  pressure  on   the
Corporation's  retail note acquisition activity and  retail  note
margins.

     Management  believes that collections  on  the  outstanding
receivables  portfolio plus cash available from the Corporation's
various  funding sources will permit Navistar Financial  to  meet
the financing requirements of Transportation's dealers and retail
customers through 1997 and beyond.


<PAGE>
<TABLE>
<CAPTION>

                                                             Page
Item 8.  Financial Statements and Supplementary Data

 Navistar Financial Corporation and Subsidiaries:
  <S>                                                           <C>
  Statement of Consolidated Income and Retained Earnings
    for the years ended October 31, 1996, 1995 and 1994         10
  Statement of Consolidated Financial Condition as of
    October 31, 1996 and 1995                                   11
  Statement of Consolidated Cash Flow for the years ended
    October 31, 1996, 1995 and 1994                             12
  Notes to Consolidated Financial Statements                    13
  Supplementary Financial Data                                  34
  Independent Auditors' Report                                  39
</TABLE>
<PAGE>


           Navistar Financial Corporoation and Subsidiaries
                                                                 
  
        Statement of Consolidated Income and Retained Earnings
                          Millions of Dollars
                                                                 
<TABLE>
<CAPTION>         
  For the years ended October 31                  1996    1995    1994
  <S>                                           <C>     <C>     <C>
  Revenues                                                    
   Retail notes and lease financing             $ 97.7  $ 73.3  $ 71.4
   Wholesale notes                                56.6    54.1    39.2
   Accounts                                       26.6    29.2    22.2
   Servicing fee income                           20.5    18.3    17.3
   Insurance premiums earned                      42.0    44.6    51.1
   Marketable securities                           9.4     8.7     9.6
      Total                                      252.8   228.2   210.8
                                                              
  Expenses                                                    
   Cost of borrowing:                                         
      Interest expense (Notes 9 and 10)           73.2    75.1    62.7
      Other                                        8.4     9.1     7.1
      Total                                       81.6    84.2    69.8
   Credit, collection and administrative          28.2    27.9    25.9
   Provision for losses on receivables (Note 7)    9.3     2.6     2.3
    Insurance claims and underwriting             44.4    46.7    54.0
   Other expense, net                              8.8     8.1     3.6
      Total                                      172.3   169.5   155.6
                                                              
  Income Before Taxes                             80.5    58.7    55.2
                                                              
  Taxes on Income (Note 8)                        31.1    22.5    21.2
                                                              
  Net Income                                      49.4    36.2    34.0
                                                              
  Retained Earnings                                           
   Beginning of year                              84.0    56.8    48.4
   Dividends paid                                             
                                                 (26.0)   (9.0)  (25.6)
   End of year (Note 13)                        $107.4  $ 84.0  $ 56.8

</TABLE>

              See Notes to Consolidated Financial Statements.

<PAGE>

            Navistar Financial Corporation and Subsidiaries
                                                             

             Statement of Consolidated Financial Condition
                          Millions of Dollars
                                                             
<TABLE>
<CAPTION>                                                             
As of October 31                                         1996      1995
<S>                                                  <C>        <C>   
ASSETS                                                       
                                                             
Cash and Cash Equivalents                            $    6.7   $    2.9
Marketable Securities (Note 4)                          128.1      131.8
Receivables                                                  
  Finance receivables (Note 5)                        1,205.2    1,381.3
  Allowance for losses (Note 7)                         (11.6)     (10.4)
     Receivables, net                                 1,193.6    1,370.9
                                                             
Amounts Due from Sales of Receivables (Note 5)          264.3      247.8
Equipment on Operating Leases, Net (Note 6)             101.1       39.3
Repossessions                                            13.2        5.8
Reinsurance Receivables                                  21.2       24.8
Other Assets                                             65.6       51.4
                                                             
Total Assets                                         $1,793.8   $1,874.7
                                                             
                                                             
LIABILITIES AND SHAREOWNER'S EQUITY                          
                                                             
Short-Term Debt (Note 9)                             $   99.4   $   50.5
Accounts Payable                                         66.7      138.8
Other Liabilities                                        19.7       24.1
Senior and Subordinated Debt (Note 10)                1,206.4    1,279.8
Dealers' Reserves                                        22.3       21.0
Unpaid Insurance Claims and Unearned Premiums            99.6      103.8
                                                             
Commitments and Contingent Liabilities (Notes 8, 12 & 15)   -          -
                                                             
Shareowner's Equity (Note 13)                                
  Capital stock (Par value $1.00, 1,600,000 shares           
       issued and outstanding) and paid-in capital      171.0      171.0
   Retained earnings                                    107.4       84.0
  Unrealized gains on marketable                             
       securities (Note 4)                                1.3        1.7
     Total                                              279.7      256.7
                                                             
Total Liabilities and Shareowner's Equity            $1,793.8   $1,874.7
</TABLE>

               See Notes to Consolidated Financial Statements.

<PAGE>

                Navistar Financial Corporation and Subsidiaries
                                       
                                       
                      Statement of Consolidated Cash Flow
                              Millions of Dollars
<TABLE>
<CAPTION>                                                                    
For the years ended October 31                         1996       1995       1994
                                                                    
Cash Flow From Operations                                         
  <S>                                              <C>        <C>        <C>  
  Net income                                       $   49.4   $   36.2   $   34.0
    Adjustments to reconcile net income to                         
      cash provided from operations:                                
    Gains on sales of receivables (Note 5)            (20.2)      (5.2)     (11.8)
    Depreciation and amortization                      15.3       11.1        8.7
    Provision for losses on receivables (Note 7)        9.3        2.6        2.3
    Increase (decrease) in accounts payable                        
      to affiliated companies                         (65.0)      73.2       (0.9)
    Other                                             (17.3)      (6.7)     (12.3)
       Total                                          (28.5)     111.2       20.0
                                                                    
Cash Flow From Investing Activities                               
                                                                    
   Proceeds from sold retail notes                    982.1      726.8      994.8
   Purchase of retail notes and lease receivables  (1,107.6)  (1,099.5)    (915.9)
   Principal collections on retail notes and                        
     lease receivables                                125.4      123.4      180.9
   Acquisitions (over)/under cash collections of                    
     wholesale notes and accounts receivable          163.0      (77.1)    (140.0)
   Purchase of marketable securities                  (63.0)     (61.9)     (51.8)
   Proceeds from sales and maturities of                            
     marketable securities                             67.7       67.3       45.1
   Increase in property and equipment                               
     leased to others                                 (72.8)     (18.7)      (5.3)
       Total                                           94.8     (339.7)     107.8
                                                                    
Cash Flow From Financing Activities                               
                                                                    
   Net increase (decrease) in short-term debt          48.9     (368.7)     344.2
   Net increase (decrease) in bank                                 
     revolving credit facility usage                  (56.0)     405.0     (372.0)
   Net increase in asset-backed commercial paper                    
     facility usage                                    88.1      275.8          -
   Principal payments on long-term debt              (117.5)    (100.0)    (180.0)
   Proceeds from issuance of long-term debt               -          -      100.0
   Dividends paid to Transportation                   (26.0)      (9.0)     (25.6)
       Total                                          (62.5)     203.1     (133.4)
                                                                    
Increase/(Decrease) in Cash and Cash Equivalents        3.8      (25.4)      (5.6)
                                                                    
Cash and Cash Equivalents at Beginning of Year          2.9       28.3       33.9
                                                                     
Cash and Cash Equivalents at End of Year           $    6.7   $    2.9   $   28.3
                                                                    
Supplementary disclosure of cash flow information:
   Interest paid                                   $   76.3   $   74.3   $   64.8
   Income taxes paid                               $   32.2   $   14.6   $   22.1

</TABLE>

               See Notes to Consolidated Financial Statements.

<PAGE>
                                
         NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           FOR THE THREE YEARS ENDED OCTOBER 31, 1996
                                
                       MILLIONS OF DOLLARS



1. SUMMARY OF ACCOUNTING POLICIES


Principles of Consolidation

     The consolidated financial statements include the accounts
of Navistar Financial Corporation ("NFC") and its wholly-owned
subsidiaries ("Corporation").   All significant intercompany
accounts and transactions have been eliminated.   All of the
Corporation's capital stock is owned by Navistar International
Transportation Corp. ("Transportation"), which is wholly owned by
Navistar International Corporation ("Navistar").

Nature of Operations

     The Corporation's primary business is the retail, wholesale,
and to a lesser extent, lease financing of products sold by
Transportation and its dealers within the United States.  The
Corporation also provides commercial physical damage and
liability insurance coverage to Transportation's dealers and
retail customers and to the general public through the
independent insurance agency system.

Estimates

     The preparation of financial statements in conformity with
generally accepted accounting principles requires  management to
make estimates and assumptions that affect the  reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities  at  the date  of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.

Revenue on Receivables

     Finance charges on retail notes and  finance  leases are
recognized as income over the terms of the receivables using the
interest method.   Interest from  interest-bearing  notes and
accounts is taken into income on the accrual basis.  Revenue on
operating leases is recognized on a straight-line basis over the
life of the lease.  Recognition  of revenue on receivables and
leases is suspended when management determines the collection of
future income is not probable.  Income recognition is resumed if
collection doubts are removed.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


1. SUMMARY OF ACCOUNTING POLICIES (Continued)

Allowance for Losses on Receivables

     The allowance for losses on receivables  is established
through a charge to the provision for losses.   The allowance is
an estimate of the amount adequate to absorb losses on existing
receivables that may become uncollectible.    The allowance is
maintained at  an amount management  considers  appropriate in
relation to the outstanding receivables portfolio based on such
factors as overall portfolio quality, historical loss experience
and current economic conditions.

     Under various agreements, Transportation and its dealers may
be liable for a portion of customer losses or may be required to
repurchase the repossessed collateral at the receivable principal
value.  The Corporation's  losses  are  net  of  these benefits.
Receivables are  charged off to the allowance for losses as soon
as the receivable is determined to be uncollectible.

Receivable Sales

     The Corporation securitizes and sells receivables to public
and private  investors with limited  recourse.  The Corporation
continues to service the receivables, for which a servicing fee
is received.  Servicing fees  are earned on a level yield basis
over the terms of the related sold receivables and  are included
in servicing fee income.   In  a  subordinated  capacity, the
Corporation   retains  excess servicing cash  flows, a limited
interest in the principal balances of  the sold receivables and
certain cash deposits provided  as   credit  enhancements for
investors.  Gains or losses on sales of receivables are credited
or charged to financing revenue in the period in which the sales
occur.

Insurance Operations

     Insurance premiums are  earned  on a pro rata basis over the
terms of the policies.  Commission costs and premium taxes incurred
in acquiring business are deferred and amortized on the same basis
as such premiums are  earned.   The liability for unpaid insurance
claims includes provisions for  reported claims and an estimate of
unreported claims based on past experience.  Such provisions include
an estimate of loss adjustment expense.  The estimated liability for
unpaid insurance claims is regularly reviewed and updated.  Any
change in such estimate is reflected in current operations.

     The  Corporation's  wholly-owned  insurance  subsidiary, Harco
National Insurance Company ("Harco"), limits its exposure on any single
loss occurrence by ceding reinsurance to other insurance enterprises.  
Reinsurance  receivables including amounts related to unpaid insurance
claims and prepaid reinsurance  premiums are reported as assets in the
Statement of Consolidated Financial Condition.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


1. SUMMARY OF ACCOUNTING POLICIES (Continued)


Income Taxes

     Navistar and its subsidiaries file a consolidated Federal income
tax return which includes Transportation and the Corporation.  Federal
income taxes for the Corporation are computed on a separate consolidated
return basis and are payable to Transportation.

Cash and Cash Equivalents

     Cash and cash equivalents include money market funds and
marketable securities with original maturities of three months or
less, except for such securities held by the insurance operations
which are included in marketable securities.

Marketable Securities

     Marketable securities are classified as available-for-sale
and are reported at fair value.


Derivative Financial Instruments

     The Corporation uses derivatives to reduce its exposure to
interest rate volatility.  All derivative financial instruments
are held for purposes other than trading, and the Corporation's
policy prohibits the use of derivatives for speculative purposes.
Gains or losses related  to   hedges of  anticipated  sales  of
receivables are deferred and are recognized in income when the
receivables are sold.

Pending Accounting Standards

     In  June 1996,  the  Financial  Accounting Standards Board
issued  Statement   of   Financial Accounting Standards No. 125,
("SFAS  No.  125")  "Accounting  for  Transfers and Servicing of
Financial  Assets and  Extinguishments  of Liabilities" which the
Corporation must adopt for all  applicable transactions occurring
after December 31, 1996.  The Corporation will apply SFAS No. 125
to securitization transactions  occurring  on or after January 1,
1997.  The new standard is not expected to have a material effect
on the Corporation's net income or financial condition.

Reclassification

     Certain amounts for prior years have been reclassified to conform
with the  presentation used in the 1996 financial statements.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS

2. TRANSACTIONS WITH AFFILIATED COMPANIES

Wholesale Notes, Wholesale Accounts and Retail Accounts

     In accordance  with  the agreements between the Corporation
and  Transportation  relating  to financing of  wholesale  notes,
wholesale accounts and retail accounts, the Corporation receives
interest income from Transportation at agreed upon interest rates
applied to the average outstanding balances less interest amounts
paid by dealers on wholesale notes and wholesale accounts.

     The Corporation purchases wholesale notes and  accounts of
dealers  from Transportation  at the  principal  amount  of the
receivables.   An  acquisition  fee applicable to  purchases of
wholesale  notes  secured  by  new   equipment  is  charged  to
Transportation.   The  retail  accounts   are   accounts  of
Transportation customers.  Revenue collected from Transportation
was $49.8 in 1996, $55.7 in 1995 and $50.7 in 1994.

Retail Notes and Lease Financing

     In accordance with agreements between  the Corporation  and
Transportation, Transportation may be liable for  certain losses
on the finance receivables and may be required to repurchase the
repossessed collateral at the receivable principal value.  Losses
recorded by Transportation were $9.5 in 1996 and $.6 in 1995  and
1994.

Support Agreements

     Under provisions of certain public and private  financing
arrangements, agreements with Transportation and Navistar provide
that  the  Corporation's  consolidated  income  before  interest
expense and income taxes will be maintained at not less than 125%
of its consolidated interest expense.  Since 1984, no maintenance
payments have been required under these agreements.

Administrative Expenses

     The  Corporation  pays  a  fee  to Transportation for  data
processing and other administrative services based on the actual
cost of services performed.  The amount of the fee was $2.4   in
1996, $2.4 in 1995 and $2.5 in 1994.

Short-Term Debt

     The Corporation had daily average short-term borrowings from
Transportation of $85 in 1996 and $93 in 1995  on  which interest
accrued at  the  Corporation's  incremental  short-term borrowing
rate.  These borrowings, including $5 and  $6 of interest expense
in 1996 and 1995, respectively,  were repaid  during  each of the
fiscal years.

Accounts Payable

     Accounts  payable  include $24.5  and   $89.5  payable  to
Transportation at October 31, 1996 and 1995, respectively.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS
                                

3. INDUSTRY SEGMENTS

Information by industry segment is summarized as follows:

<TABLE>
<CAPTION>
                                            1996       1995       1994
<S>                                     <C>        <C>        <C>      
Revenues:                                                  
 Finance operations                     $  201.6   $  175.1   $  150.6
 Insurance operations                       51.2       53.1       60.2
   Total revenue                        $  252.8   $  228.2   $  210.8
                                                           
Income before taxes:                                       
 Finance operations                     $   74.2   $   53.1   $   49.9
 Insurance operations                        6.3        5.6        5.3
     Total income before taxes          $   80.5   $   58.7   $   55.2
                                                           
Assets at end of year:                                     
 Finance operations                     $1,626.9   $1,701.9   $1,354.1
 Insurance operations                      166.9      172.8      180.7
   Total assets at end of year          $1,793.8   $1,874.7   $1,534.8
</TABLE>

4. MARKETABLE SECURITIES

     The  fair value of marketable securities is based on quoted
market  prices,  when  available.   If  a  quoted  price  is  not
available, fair value is estimated using quoted market prices for
similar  financial instruments.  The difference between amortized
cost  and  fair value, net of deferred income taxes, is reflected
as  a  separate  component of shareowner's equity.   Shareowner's
equity was increased by net unrealized holding gains of $1.3  and
$1.7  as  of  October  31,  1996  and  1995,  respectively.   The
following  table  sets  forth, by type of  security  issuer,  the
amortized  cost and estimated market values at October  31,  1996
and 1995:
<TABLE>
<CAPTION>
                                 Amortized    Gross Realized      Fair
                                    Cost     Gains     Losses     Value
<S>                               <C>       <C>        <C>      <C>        
U.S. government and                                         
 agency securities                $  41.7   $   .3     $   .5   $  41.5
Corporate debt securities            29.1       .1         .4      28.8
Mortgage- and                                               
 asset-backed securities             42.4       .2         .4      42.2
Foreign governments                   1.5        -          -       1.5
   Total debt securities          $ 114.7   $   .6     $  1.3   $ 114.0
                                                            
Equity securities                    11.3      3.5         .7      14.1
   Total                          $ 126.0   $  4.1     $  2.0   $ 128.1
</TABLE>
<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS
                                

4. MARKETABLE SECURITIES (Continued)

<TABLE>
<CAPTION>
                             Amortized    Gross Unrealized     Fair
October 31, 1995               Cost       Gains     Losses     Value
<S>                           <C>       <C>        <C>       <C>
U.S. government and
 agency securities            $  52.8   $   1.2    $    .1   $  53.9
Corporate debt securities        32.0        .2         .2      32.0
Mortgage- and
 asset-backed securities         32.7        .5         .1      33.1
Foreign governments               1.7         -          -        .7
   Total debt securities      $ 119.2   $   1.9    $    .4   $ 120.7

Equity securities                10.0       1.7         .6      11.1
   Total                      $ 129.2   $   3.6    $   1.0   $ 131.8
</TABLE>

      Contractual  maturities of marketable  debt  securities  at
October 31, 1996, are as follows:

<TABLE>
<CAPTION>
                                                Amortized     Fair
                                                   Cost       Value
<S>                                             <C>         <C>
Due in one year or less                         $  16.1     $  16.0
Due after one year through five years              31.2        31.5
Due after five years through ten years             18.9        18.5
Due after ten years                                 6.1         5.8
                                                   72.3        71.8
Mortgage- and asset-backed securities              42.4        42.2
 Total (Excludes Stocks)                        $ 114.7     $ 114.0
</TABLE>

     Actual maturities may differ from the contractual maturities
because of prepayments by the issuers.

      Proceeds  from sales or maturities of marketable securities
available for sale were $67.7 during 1996 and $67.3 during  1995.
Gross gains of $1.8 and $.8 and gross losses of $.5 and $.6  were
realized on those sales in 1996 and 1995, respectively.

     All marketable securities at October 31, 1996 and 1995, were
held  by  Harco, of which $16.7 and $23.2, respectively, were  on
deposit  with various state departments of insurance or otherwise
restricted as to use.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS
                                


5. FINANCE RECEIVABLES

     Finance receivable balances, net of unearned finance income,
at October 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                     1996       1995
<S>                                              <C>        <C>  
Retail notes and lease financing                 $  733.3   $  747.2
                                                        
Wholesale notes                                     100.5      268.2
                                                        
Accounts:                                               
  Retail                                            314.7      316.7
  Wholesale                                          56.7       49.2
     Total                                          371.4      365.9
       Total finance receivables                 $1,205.2   $1,381.3
</TABLE>

     Contractual  maturities  of finance  receivables  including
unearned  finance income at October 31, 1996, are  summarized  as
follows:

<TABLE>
<CAPTION>
                                      Retail    Wholesale    Accounts
<S>                                   <C>          <C>        <C>
Due in:
 1997                                 $230.7       $ 69.5     $371.4
 1998                                  211.6         31.0          -
 1999                                  186.4            -          -
 2000                                  142.3            -          -
 2001                                   75.5            -          -
Due after 2001                          13.8            -          -
   Gross finance receivables           860.3        100.5      371.4
Unearned finance income                127.0            -          -
   Total finance receivables          $733.3       $100.5     $371.4
</TABLE>

      The  actual cash collections from finance receivables  will
vary   from   the  contractual  cash  flows  because  of   sales,
prepayments,   extensions   and   renewals.    The    contractual
maturities,  therefore, should not be regarded as a  forecast  of
future collections.

     The Corporation's primary business is to provide wholesale,
retail  and  lease  financing for new and  used  trucks  sold  by
Transportation and Transportation's dealers, and as a result  the
Corporation's    receivables   and   leases   have    significant
concentration  in the trucking industry.  On a geographic  basis,
there  is not a disproportionate concentration of credit risk  in
any  area  of  the  United  States.  The Corporation  retains  as
collateral  a security interest in the equipment associated  with
wholesale notes, retail notes and leases other than accounts.

<PAGE>


           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS
                                

5. FINANCE RECEIVABLES (Continued)

     The  Corporation sells finance receivables  to  public  and
private investors with limited recourse provisions.  Outstanding
sold receivable net balances at October 31 are as follows:

<TABLE>
<CAPTION>
                                                 1996        1995
<S>                                          <C>         <C>  
Retail notes                                 $1,366.4    $1,173.2
Wholesale notes                                 500.0       500.0
  Total                                      $1,866.4    $1,673.2
</TABLE>

     Gains or losses from the sales of receivables are recognized
in  the  period  in  which such sales occur.  The  allowance  for
credit  losses  is  adequately provided prior to  the  receivable
sales; therefore, gains from receivable sales are not reduced for
expected  credit  losses.  Included in "Retail  notes  and  lease
financing"  revenue are gains totaling $20.2, $5.2 and  $11.8  on
retail  note  receivable sales of $985, $740 and $1,033  for  the
fiscal years ended October 31, 1996, 1995 and 1994, respectively.
Gains  on  sales of wholesale receivables are not material  as  a
result of their short maturities.

     The Corporation has two wholly-owned subsidiaries, Navistar
Financial  Retail Receivables Corporation ("NFRRC") and  Navistar
Financial  Securities Corporation ("NFSC"), which have a  limited
purpose   of   purchasing   retail  and  wholesale   receivables,
respectively, and transferring an undivided ownership interest in
such  notes to investors in exchange for pass-through  notes  and
certificates.   These subsidiaries have limited recourse  on  the
sold  receivables and their assets are available to  satisfy  the
claims of their creditors prior to such assets becoming available
to  the Corporation or affiliated companies.  During fiscal 1996,
in  two  separate sales, the Corporation sold a total of $985  of
retail  notes, net of unearned finance income, through  NFRRC  to
two  individual owner trusts.  The owner trusts,  in  turn,  sold
$946 of notes and $39 of certificates to investors.  The proceeds
of  $934, net of underwriting fees and credit enhancements,  were
used by the Corporation for general working capital purposes.  At
October  31, 1996, the remaining shelf registration available  to
NFRRC for issuance of asset-backed securities was $2.4 billion.

     NFSC has in place a $500 revolving wholesale note trust that
provides for the continuous sale of eligible wholesale notes on a
daily  basis.   The  issuance  of  a  $200  tranche  of  investor
certificates  during  fiscal  1995  increased  NFSC's   revolving
wholesale  note trust to $500.  The trust is comprised  of  three
$100  tranches  of investor certificates maturing  serially  from
1997 to 1999 and a $200 tranche of investor certificates maturing
in 2004.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS
                                


5. FINANCE RECEIVABLES (Continued)

     The Corporation's retained interest in sold receivables and
other related  amounts are generally restricted and  subject  to
limited recourse provisions.  Holdback reserves were established
pursuant to  the limited recourse provisions of the retail  note
sales  to private  investors.   The  retail   securitized  sales
structure requires the Corporation to maintain cash reserves with
the  trusts as  credit enhancement for public sales.   The  cash
reserves are held by the trusts and restricted for  use  by  the
securitized sales agreements.

     The  following is a summary of amounts included in "Amounts
Due from Sales of Receivables" as of October 31:

<TABLE>
<CAPTION>
                                                   1996      1995
<S>                                              <C>       <C>   
Cash held and invested by trusts                 $ 85.2    $ 66.8
Subordinated retained interests in wholesale       85.4      86.3
receivables
Subordinated retained interests in retail          12.5      12.2
receivables
Holdback reserves                                  31.7      43.7
Excess servicing fee and other                     61.9      48.0
Allowance for credit losses                             
                                                  (12.4)     (9.2)
  Total                                          $264.3    $247.8
</TABLE>

6. INVESTMENT IN OPERATING LEASES

     Operating leases at year-end were as follows:

<TABLE>
<CAPTION>
                                                   1996      1995
<S>                                              <C>       <C>
Investment in operating leases                          
Vehicles and other equipment, at cost            $116.4    $ 49.0
Less:  Accumulated depreciation                         
                                                  (15.3)     (9.7)
Net investment in operating leases               $101.1    $ 39.3
</TABLE>

     Future  minimum rentals on operating leases are as follows:
1997,  $24.7;  1998,  $22.2; 1999, $16.9; 2000,  $11.1  and  $5.3
thereafter.   Each of these assets is depreciated on a  straight-
line  basis over the term of the lease in an amount necessary  to
reduce the leased vehicle to its estimated residual value at  the
end of the lease term.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


7. ALLOWANCE FOR LOSSES

      The  allowance for losses on receivables is  summarized  as
follows:

<TABLE>
<CAPTION>
                                                    1996     1995     1994
<S>                                                <C>      <C>      <C>
Total allowance for losses at beginning of year    $19.6    $16.2    $14.8
Provision for losses                                 9.3      2.6      2.3
Net (losses) recoveries (charged)                        
  credited to allowance                             (4.9)      .8      (.9)
    Total allowance for losses at end of year      $24.0    $19.6    $16.2
                                                         
                                                         
Allowance pertaining to:                                 
  Owned notes                                      $11.6    $10.4    $ 8.2
  Sold notes                                        12.4      9.2      8.0
     Total                                         $24.0    $19.6    $16.2
</TABLE>

8. TAXES ON INCOME

     Taxes on income are summarized as follows:
<TABLE>
<CAPTION>
                                                    1996     1995     1994
<S>                                                <C>      <C>      <C>
Current:                                                 
  Federal                                          $26.4    $18.9    $15.1
  State and local                                    4.4      3.1      3.0
     Total current                                  30.8     22.0     18.1
                                                         
Deferred (primarily Federal)                          .3       .5      3.1
     Total                                         $31.1    $22.5    $21.2
</TABLE>

     The  effective tax rate of 38% differs from  the  statutory
United States Federal tax rate of 35% primarily because of  state
and  local income taxes.  Deferred tax assets and liabilities  at
October 31, comprised the following:

<TABLE>
<CAPTION>
                                                             1996     1995
<S>                                                          <C>      <C>
Deferred tax assets:                                            
  Other postretirement benefits                              $2.9     $2.8
                                                         
Deferred tax liabilities:                                
  Depreciation and other                                      6.9      6.4
  Unrealized gains on marketable securities                    .8      1.0
     Total deferred tax liabilities                           7.7      7.4
     Net deferred tax liabilities                            $4.8     $4.6
</TABLE>
<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS

8.TAXES ON INCOME (Continued)

     During 1992, auditors of the Illinois Department of Revenue
("Department")  began an income tax audit of NFC for  the  fiscal
years  ended  October 31, 1989, 1990 and 1991.   On  February  1,
1994,  the  Department issued a Notice of Deficiency to  NFC  for
approximately  $11.9  million.   The  Department  has  taken  the
position  that  nearly 100% of NFC's income  during  these  years
should  be  attributed to and taxed by Illinois.   NFC  maintains
that  the Department's interpretation and application of the  law
is  incorrect  and  improper, and that the Department's  intended
result is constitutionally prohibited.  Based on discussions with
outside  counsel, NFC's management is of the opinion that  it  is
more  likely than not that NFC's position will prevail such  that
the  Department's action will not have a material impact on NFC's
earnings and financial position.


9. SHORT-TERM DEBT

     Commercial paper is issued by the Corporation with  varying
terms.   The  Corporation  also has  short-term  borrowings  with
various  banks  on  a  non- committed basis.   Compensating  cash
balances  and  commitment  fees  are  not  required  under  these
agreements.   Short-Term  Debt  outstanding  at  October  31  was
comprised  only  of commercial paper.  There were  no  short-term
borrowings outstanding.

     Information regarding short-term debt is as follows:

<TABLE>
<CAPTION>
                                              1996     1995     1994
<S>                                         <C>      <C>      <C>   
Aggregate obligations outstanding:                       
  Daily average                             $ 68.2   $ 37.8   $ 11.7
  Maximum month-end balance                  117.8     81.1    419.2
                                                         
Weighted average interest rate:                          
  On average daily borrowing                   6.0%     6.4%     5.4%
  At October 31                                5.9%     6.3%     5.6%
</TABLE>

     Unused  commitments under the Corporation's bank  revolving
credit facility and bank liquidity facility supporting the asset-
backed   commercial  paper  program  are  used  as   backup   for
outstanding  short-term borrowings.  See  also  Note  10  to  the
Consolidated Financial Statements.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


10. SENIOR AND SUBORDINATED DEBT

     Senior and Subordinated Debt outstanding at October 31 is
summarized as follows:
<TABLE>
<CAPTION>
                                                  1996       1995
<S>                                           <C>         <C>   
Bank revolving credit, at variable rates,              
  due March 2001                              $  704.0    $  760.0
                                                       
Funding under asset-backed commercial                  
   paper program, at variable rates,                   
   due March 2001                                402.4       302.3
                                                       
Senior term debt:                                      
  Notes, medium-term, 9.50%, due 1996                -       117.5
                                                       
Subordinated term debt:                                
  Senior Notes, 8 7/8%, due November 1998        100.0       100.0
       Total senior and subordinated debt     $1,206.4    $1,279.8
</TABLE>

     The weighted average interest rate on total debt, including
short-term   debt  and  the  effect  of  discounts  and   related
amortization,  was 6.5%, 7.4% and 7.1% in 1996,  1995  and  1994,
respectively.   The  aggregate  annual  maturities  and  required
payments  of  debt  are  as  follows:  1999,  $100.0;  and  2001,
$1,106.4.

     Effective  March  29,  1996, the  Corporation  amended  and
restated its $900 million bank revolving credit facility and  its
$300  million  asset-backed  commercial  paper  ("ABCP")  program
supported  by  a bank liquidity facility, extending the  maturity
date of each facility to March 2001.  In addition, the commitment
of  the  bank  revolving credit facility  was  expanded  to  $925
million,  the ABCP facility was increased to $400 million  and  a
new  pricing  and fee structure was established.   The  available
funding under the ABCP program is $414 million which is comprised
of  the $400 million liquidity facility plus $14 million of trust
certificates issued in connection with the formation of the  ABCP
Trust.

     Under  the  terms  of the ABCP program, a  special  purpose
wholly-owned  subsidiary  of NFC purchases  eligible  receivables
from  NFC.  All assets of the subsidiary are pledged to  a  Trust
that funds the receivables with A1/P1 rated commercial paper.  In
addition, the assets may be sold to the Trust.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


10. SENIOR AND SUBORDINATED DEBT (Continued)

     Available  funding  under the amended and  restated  credit
facility  and  the ABCP program was $233, of which  $99  provided
funding backup for the outstanding short-term debt at October 31,
1996.   The  remaining $134 when combined with unrestricted  cash
and  cash  equivalents made $141 available to  fund  the  general
business purposes of the Corporation at October 31, 1996.   Under
the  terms  of the revolving credit facility, the Corporation  is
required to maintain tangible net worth at a minimum of $175  and
a  debt  to tangible net worth ratio of no greater than 7  to  1.
Consistent  with  the  previous revolving credit  agreement,  the
amended agreement grants security interests in substantially  all
of  the  Corporation's  assets to the Corporation's  debtholders.
Compensating  cash balances are not required under  the  restated
revolving  credit  facility.  Facility fees  are  paid  quarterly
regardless of usage.


11. RETIREMENT BENEFITS

     The   Corporation  provides  postretirement  benefits   to
substantially all  of its employees.  Expenses  associated  with
postretirement benefits include pension expense  for  employees,
retirees and surviving spouses, and postretirement  health  care
and life insurance  expense for employees, retirees,  surviving
spouses and dependents.

Pension Benefits

     Generally  pension  benefits  are  non-contributory   with
benefits   related  to  an  employee's  length  of  service   and
compensation  rate.  Plan  assets are  primarily  invested  in  a
dedicated portfolio of long-term fixed income securities with the
remainder invested in high quality equity securities.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


11. RETIREMENT BENEFITS (Continued)

Pension Expense

     Net pension cost includes the following:
<TABLE>
<CAPTION>

                                               1996      1995    1994
   <S>                                        <C>       <C>     <C> 
   Service cost for benefits earned during                     
    the period                                $  .7     $  .5   $ 1.0
   Interest cost on projected benefit                          
    obligation                                  2.9       2.8     2.7
   Return on assets     - actual (gain) loss   (3.2)     (9.1)    3.3
                 - deferred gain (loss)         (.4)      5.8    (6.8)
   Net amortization costs and other costs.       .1         -      .1
       Net pension cost                       $  .1     $   -   $  .3
</TABLE>

Pension Assets and Liabilities

     The plans' funded status and reconciliation to the Statement
of  Consolidated  Financial Condition as of October  31  were  as
follows:

<TABLE>
<CAPTION>
                                 Plan in Which            Plan in Which
                                 Assets Exceed        Accumulated Benefits
                              Accumulated Benefits        Exceed Assets
                                 1996       1995          1996       1995
<S>                            <C>       <C>           <C>        <C>     
Actuarial present value of:                                
  Vested benefits              $(31.5)   $ (31.8)      $  (2.0)   $  (2.2)
  Non-vested benefits            (4.0)      (4.0)          (.1)       (.1)
     Accumulated benefit                                    
       obligation               (35.5)     (35.8)         (2.1)      (2.3)
    Effect of projected future
       compensation levels        (.9)         -             -       (1.0)
         Total projected benefit
           obligation           (36.5)     (36.7)          (2.1)     (2.3)
Plan assets at fair value        42.7       41.5              -         -
   Funded status at October 31    6.2        4.8           (2.1)     (2.3)
Unrecognized net losses (gains)  (5.5)      (4.2)            .4        .6

Unrecognized plan amendments       .5         .5              -         -
Unrecognized net obligation                                
         as of transition date     .1         .1              -         -
     Net asset (liability)    $   1.3    $   1.2        $  (1.7)  $  (1.7)
</TABLE>
<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


11. RETIREMENT BENEFITS (Continued)

     The  weighted average rate assumptions used in determining the 
projected benefit obligation and pension expense were:

<TABLE>
<CAPTION>
                                                    1996     1995     1994
<S>                                                 <C>      <C>      <C>
Discount rate used to determine the present value   7.9%     7.5%     9.2%
  of the projected benefit obligations
Expected long-term rate of return on plan assets    8.9%     9.9%     9.0%
Expected rate of increase in future                        
  compensation levels                               3.5%     3.5%     3.5%
</TABLE>                                                           
                                                           
Other Postretirement Benefits                              
                                                           

     The components of expense for other postretirement benefits that
are included in the Statement  of  Consolidated  Income  and Retained
Earnings include the following:

<TABLE>
<CAPTION>                                                           
                                                   1996     1995     1994
<S>                                               <C>      <C>      <C>
Service cost for benefits earned during the year  $  .4    $  .3    $  .2
Interest cost on the accumulated benefit                   
  obligation                                         .8       .8       .7
Expected return on assets - actual (gain) loss       .8     (1.5)     (.2)
                          - deferred gain (loss)   (1.3)     1.2        -
Total cost of other postretirement benefits       $  .7    $  .8    $  .7
</TABLE>

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


11. RETIREMENT BENEFITS (Continued)

     The funded status of other postretirement benefits as of October 31,
1996 and 1995, were as follows:

<TABLE>
<CAPTION>
                                                    1996     1995
<S>                                               <C>       <C>    
Accumulated other postretirement benefit                  
obligation (APBO):
Retirees and their dependents                     $(4.9)    $(4.9)
Active employees eligible to retire                (2.9)     (2.4)
Other active participants                          (3.4)     (3.3)
                                                          
Total APBO                                        (11.2)    (10.6)
Plan assets at fair value                           3.9       4.5
                                                          
APBO in excess of plan assets                      (7.3)     (6.1)
Unrecognized net loss                               1.5        .4
                                                          
Net liability                                     $(5.8)    $(5.7)
</TABLE>

     The expected return on plan assets was 10.5% for 1996,  10%
for 1995 and 9% for 1994.  The weighted average of discount rates
used   to   determine  the  accumulated  postretirement   benefit
obligation  was  8.1%  and 7.7% at October  31,  1996  and  1995,
respectively.  For 1997, the weighted average rate of increase in
the  per capita cost of covered health care benefits is projected
to  be  8.1%.  The rate is projected to decrease to 5.0%  in  the
year 2004 and remain at that level each year thereafter.  If  the
cost  trend  rate  assumptions were increased by  one  percentage
point  for  each  year,  the accumulated  postretirement  benefit
obligation   would  increase  by  approximately  $1.2   and   the
associated  expense  recognized for the year  ended  October  31,
1996, would increase by an estimated $.1.
                                

12. LEASES

     The  Corporation is obligated under noncancelable operating
leases  for  the majority of its office facilities and equipment.
These  leases  are generally renewable and provide that  property
taxes  and  maintenance costs are to be paid by the  lessee.   At
October   31,  1996,  future  minimum  lease  commitments   under
noncancelable operating leases with remaining terms in excess  of
one year are as follows:
<TABLE>
          <S>                                        <C>
          Year Ended October 31,
          1997                                       $1.7
          1998                                        1.7
          1999                                        1.6
          2000                                        1.3
          2001                                         .3
          Thereafter                                    -
            Total                                    $6.6
</TABLE>                                
<PAGE>                                
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


13. SHAREOWNER'S EQUITY

     The  number  of authorized shares of capital  stock  as  of
October  31,  1996  and 1995, was 2,000,000  of  which  1,600,000
shares  were  issued  and outstanding.  All  of  the  issued  and
outstanding  capital  stock is owned  by  Transportation  and  no
shares  are reserved for officers and employees, or for  options,
warrants, conversions and other rights.


14. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

     The  carrying  amounts and estimated  fair  values  of  the
Corporation's financial instruments were as follows:

<TABLE>
<CAPTION>
                                            1996                  1995
                                    Carrying       Fair   Carrying       Fair
                                     Amount       Value    Amount       Value
<S>                                 <C>        <C>        <C>        <C>
Financial assets:                                        
  Finance receivables:                                   
     Retail notes                   $  662.5   $  672.1   $  680.8   $  707.2
     Wholesale notes                   100.5      100.5      268.2      268.2
     Accounts                          371.4      371.4      365.9      365.9
 Amounts due from sales of                               
     receivables                       264.3      258.1      247.8      234.6
                                                         
Financial liabilities:                                   
    Senior  and  subordinated debt  $1,206.4   $1,207.4   $1,279.8   $1,282.9
</TABLE>
<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


14. FINANCIAL INSTRUMENTS (Continued)

     The methods and assumptions used to estimate the fair value
of each class of financial instruments are summarized as follows:

 Cash and Cash Equivalents

 The  carrying amount approximates fair value as a result of  the
 short maturity of these instruments.
 
 Marketable Securities
 
 Fair  value is estimated based on quoted market price.  The cost
 and fair value of marketable securities is disclosed in Note 4.
 
 Finance Receivables
 
 The   fair   value  of  truck  retail  notes  is  estimated   by
 discounting  the  future cash flows using an estimated  discount
 rate  reflecting  current rates paid to  purchasers  of  similar
 types  of  receivables with similar credit,  interest  rate  and
 prepayment  risks.  For other retail notes, primarily  variable-
 rate notes that reprice frequently, and for wholesale notes  and
 retail  and wholesale accounts, the carrying amounts approximate
 fair  value  as  a  result  of the  short  term  nature  of  the
 receivables.
 
 Amounts Due from Sales of Receivables
 
 The  fair  values  of  excess servicing  cash  flows  and  other
 subordinated   amounts   due   the  Corporation   arising   from
 receivable   sale  transactions  were  derived  by   discounting
 expected  cash  flows at estimated current  market  rates.   The
 fair value of cash deposits approximates their carrying value.
 
 Senior and Subordinated Debt
 
 For  variable-rate  borrowings under the bank  revolving  credit
 agreement   that   reprice  frequently,  the   carrying   amount
 approximates  fair  value.   The  fair  values  of   notes   and
 debentures  are  estimated based on quoted market  prices  where
 available  and, where not available, on quoted market prices  of
 debt with similar characteristics.

<PAGE>
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS
                                
                                
14. FINANCIAL INSTRUMENTS (Continued)

Derivative Financial Instruments

     The  Corporation  manages its exposure to  fluctuations  in
interest rate changes by limiting the amount of fixed rate assets
funded  with  variable  rate debt by selling  fixed  rate  retail
receivables  on  a fixed rate basis and, to a lesser  extent,  by
utilizing  derivative  financial instruments.   These  derivative
financial  instruments may include interest rate swaps,  interest
rate  caps  and forward interest rate contracts.  The Corporation
manages  exposure  to counterparty credit risk by  entering  into
derivative    financial   instruments   with   major    financial
institutions  that  can be expected to fully  perform  under  the
terms  of such agreements.  Notional amounts are used to  measure
the  volume  of  derivative  financial  instruments  and  do  not
represent exposure to credit loss.

     The Corporation enters into forward interest rate contracts
to  manage its exposure to fluctuations in funding costs from the
anticipated  securitization  and  sale  of  retail  notes.    The
Corporation  locks  into  an interest rate  by  entering  into  a
forward  contract  on  a  U.S.  Treasury  security   whose  terms
approximate  those  used to determine the selling  price  of  the
anticipated  sale of receivables.  Gains or losses incurred  with
the  closing  of these agreements are included as a component  of
the gain or loss on sale of receivables.

     During August through October 1996, the Corporation entered
into  $400 of forward interest rate lock agreements on a Treasury
maturing in 1998 related to the anticipated November 1996 sale of
retail  receivables.  See also Note 16. These  hedge  agreements,
which  were closed in conjunction with the pricing of  the  sale,
resulted  in a $1.9 loss which was deferred at October 31,  1996,
and included in the gain on the sale of receivables recognized in
November 1996.

     The  Corporation's  wholly-owned insurance  subsidiary  has
investments  in Collateralized Mortgage Obligations ("CMO's")  of
$42 which are included in the Corporation's marketable securities
at October 31, 1996.  These securities have characteristics which
reduce the Corporation's exposure to prepayment risk.

<PAGE>
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


15. LEGAL PROCEEDINGS

     The Corporation and its subsidiaries are subject to various
other claims arising in the ordinary course of business, and  are
parties  to  various legal proceedings which constitute  ordinary
routine  litigation incidental to the business of the Corporation
and  its  subsidiaries.   In  the opinion  of  the  Corporation's
management,  none of these proceedings or claims are material  to
the business or the financial condition of the Corporation.


16. SUBSEQUENT EVENT

     In November 1996, the Corporation sold $487 of retail notes,
net  of unearned finance income, through NFRRC to an owner  trust
which, in turn, sold notes and certificates to investors.  A gain
of $6.9 was recognized on the sale.

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                       MILLIONS OF DOLLARS


17. QUARTERLY FINANCIAL INFORMATION  (unaudited)

<TABLE>
<CAPTION>
                                               1996
                           1st        2nd         3rd        4th     Fiscal
                         Quarter    Quarter     Quarter    Quarter    Year
<S>                        <C>        <C>         <C>        <C>     <C>
Revenues                   $68.7      $60.7       $67.0      $56.4   $252.8
Interest expense            17.1       19.7        18.8       17.6     73.2
Provision for losses
  on receivables             1.1        1.6         1.7        4.9      9.3
Net income                  16.6        8.7        15.6        8.5     49.4
</TABLE>
<TABLE>
<CAPTION>

                                               1995
                           1st        2nd         3rd        4th      Fiscal
                         Quarter    Quarter     Quarter    Quarter     Year
<S>                        <C>        <C>         <C>        <C>      <C>
Revenues                   $50.9      $56.5       $64.1      $56.7    $228.2
Interest expense            17.1       20.4        19.1       18.5      75.1
Provision for losses
  on receivables              .1         .5          .4        1.6       2.6
Net income                   6.3        7.5        13.3        9.1      36.2
</TABLE>
<PAGE>

                    SUPPLEMENTARY FINANCIAL DATA


           Five Year Summary of Financial and Operating Data
                                   
                      Dollar amounts in millions

<TABLE>
<CAPTION>                                                                                         
                                       1996      1995      1994      1993      1992
<S>                                <C>       <C>       <C>       <C>       <C>     
Revenues and net income retained
  Revenues                         $  252.8  $  228.2  $  210.8  $  231.9  $  228.3
  Provision for losses on                                       
     receivables                        9.3       2.6       2.3       1.5       3.6
  Interest expense                     73.2      75.1      62.7      74.6      82.2
  Other charges, net                   89.8      91.8      90.6     106.8      96.1
  Taxes on income                      31.1      22.5      21.2      17.7      16.9
   Cumulative effect of changes in
     accounting policy, net of                                  
     income taxes                         -         -         -       8.8         -
  Net income                           49.4      36.2      34.0      22.5      29.5
  Dividends paid                       26.0       9.0      25.6      22.6      16.0
  Net income retained              $   23.4     $27.2     $ 8.4     $ (.1) $   13.5
                                                                
   Percent of net income to                                 
     average shareowner's equity       18.1%     15.0%     15.1%     10.3%     13.8%
                                                                
                                                                
Assets at end of year                                           
  Cash and cash equivalents        $    6.7  $    2.9  $   28.3  $   33.9  $   79.2
  Marketable securities               128.1     131.8     130.5     125.6     130.5
  Finance receivables:                                          
     Truck retail notes and
     lease financing                  733.3     747.2     513.9     823.5     955.1
     Wholesale notes                  100.5     268.2     230.6     212.5      81.5
     Accounts                         371.4     365.9     357.7     245.1     204.3
       Total                        1,205.2   1,381.3   1,102.2   1,281.1   1,240.9
     Allowance for losses             (11.6)    (10.4)     (8.2)    (10.9)    (12.4)
       Finance receivables, net     1,193.6   1,370.9   1,094.0   1,270.2   1,228.5
  Other assets                        465.4     369.1     282.0     195.5     170.5
       Total assets                $1,793.8  $1,874.7  $1,534.8  $1,625.2  $1,608.7
                                                                
                                                                
Liabilities and shareowner's                                 
equity at end of year
  Short-term borrowings            $   99.4  $   50.5  $  419.2  $   75.0  $      -
  Bank revolving credit               704.0     760.0     355.0     727.0     727.0
  Asset-backed commercial paper   
    facility                          402.4     302.3         -         -         -
  Medium-term notes                       -     117.5     217.3     222.2     261.1
  Long-term notes and debentures          -         -         -      75.0     135.0
  Subordinated debt                   100.0     100.0     100.0     100.0      94.9
       Total debt                   1,305.8   1,330.3   1,091.5   1,199.2   1,218.0
  Other liabilities                   208.3     287.7     217.7     206.6     171.2
  Shareowner's equity                 279.7     256.7     225.6     219.4     219.5
       Total liabilities and                                    
          shareowner's equity      $1,793.8  $1,874.7  $1,534.8  $1,625.2  $1,608.7
                                                                
                                                                
  Debt to equity ratio                4.7:1     5.2:1     4.8:1     5.5:1     5.5:1
  Senior debt to capital funds ratio  3.2:1     3.4:1     3.0:1     3.4:1     3.6:1

  Gross insurance premiums written $   53.3  $   52.0  $   59.0  $   65.8  $  69.2
                                                                
  Number of employees at Oct. 31        352       360       353       339      364
</TABLE>
<PAGE>

              SUPPLEMENTARY FINANCIAL DATA (Continued)




Gross Finance Receivables and Leases Acquired
<TABLE>
<CAPTION>                                                                  
    Dollar amounts in millions                                    
                                    1996      1995        1994      1993        1992 
                                                             
    <S>                         <C>        <C>        <C>        <C>        <C>     
    Wholesale notes             $2,705.8   $2,979.4   $2,306.6   $1,977.6   $1,547.7
                                                                  
    Retail notes and leases:                                      
      New                        1,064.1    1,075.0      861.9      730.0      591.8
      Used                         281.7      242.3      217.2      168.4      185.9
        Total                    1,345.8    1,317.3    1,079.1      898.4      777.7
                                                                  
      Total                     $4,051.6   $4,296.7   $3,385.7   $2,876.0   $2,325.4
</TABLE>
<TABLE>
<CAPTION>
Analysis of Finance Retail Notes Acquired
                                                                   
                                 Average        Down Payment          
                                Contractual     as a Percent      Average
                                   Term          of Retail        Monthly
                                In Months       Sales Price     Installment
                     Number of                                     
    Year               Units    New  Used       New     Used    New    Used
                                      
    <S>              <C>         <C>   <C>       <C>     <C>    <C>    <C>  
    1996             19,521      55    42        8.0%    15.6%  $1,394 $  918
    1995             18,286      55    39        8.0     16.7    1,514  1,003
    1994             17,331      54    38        6.6     13.9    1,311    921
    1993             15,879      53    34        6.2     17.0    1,248    786
    1992             14,227      52    35        6.6     14.1    1,239    845
</TABLE>
<PAGE>

            SUPPLEMENTARY FINANCIAL DATA (Continued)



Analysis of Gross Retail Notes and Lease Financing
With Installments Past Due Over 60 Days

<TABLE>
<CAPTION>                                                             
At October 31 ($ Millions)     1996     1995     1994     1993     1992
<S>                          <C>      <C>      <C>      <C>     <C>  
Original amount of notes                                  
  and leases                 $  3.2   $  1.2   $  1.3   $  2.6  $   4.3
Balance of notes and leases     2.1       .5       .5       .7      2.1
Balance as a percent of                                   
  total outstanting            .25%     .06%     .09%     .08%     .19%
</TABLE>                                                             

<TABLE>
<CAPTION>                                                             
Analysis of Retail Note Repossessions
                                                             
                               1996     1995     1994     1993     1992
<S>                           <C>       <C>      <C>     <C>      <C>       
Retail note repossessions                                    
  acquired as a percentage                                       
  of average retail note                                         
  gross balance               3.15%     .92%     .97%    1.95%    3.70%
</TABLE>
<PAGE>

            SUPPLEMENTARY FINANCIAL DATA (Continued)



 Analysis of Loss Experience                                      

<TABLE>
<CAPTION>                                                                  
 ($ Millions)                    1996     1995     1994     1993     1992
  <S>                            <C>      <C>      <C>      <C>       <C>
  Net losses (recoveries):                                   
   Retail notes and leases       $5.1     $ .3     $ .6     $(.1)     $2.4
   Wholesale notes                (.2)     (.9)      .1       .8        .8
   Accounts                         -      (.2)      .2        -         -
      Total                      $4.9     $(.8)    $ .9     $ .7      $3.2
                                                             
                                                             
 Percent net losses (recoveries)                             
    to liquidations:
   Retail notes and leases       .48%      .03%    .07%     (.01)%    .27%
   Wholesale notes              (.01)     (.03)    .01       .04      .06
      Total                      .13%     (.02)%   .03%      .03%     .13%
                                                             
                                                             
 Percent net losses (recoveries)                             
    to related average gross
    receivables outstanding:
   Retail notes and leases       .22%      .02%    .04%        -      .17%
   Wholesale notes              (.02)     (.13)    .03       .16      .20
   Accounts                        -      (.05)    .08         -        -
      Total                      .14%     (.03)%   .04%      .03%     .16%
</TABLE> 
 
 
 Includes loss experience on sold notes.


<PAGE>

                                
         Navistar Financial Corporation and Subsidiaries
                                
                                
         Statement of Financial Reporting Responsibility
                                
  
  
       Management  of  Navistar  Financial  Corporation  and  its
  subsidiaries  is responsible for the preparation  and  for  the
  integrity   and  objectivity  of  the  accompanying   financial
  statements and other financial information in this report.  The
  financial  statements  have been prepared  in  accordance  with
  generally  accepted accounting principles and  include  amounts
  that are based on management's estimates and judgments.
  
       The accompanying financial statements have been audited by
  Deloitte  &  Touche LLP, independent auditors.  Management  has
  made  available to Deloitte & Touche LLP all the  Corporation's
  financial  records and related data, as well as the minutes  of
  Directors'    meetings.    Management   believes    that    all
  representations made to Deloitte & Touche LLP during its  audit
  were valid and appropriate.
  
       Management is responsible for establishing and maintaining
  a system of internal  controls throughout its  operations  that
  provides   reasonable  assurance  as  to  the   integrity   and
  reliability  of  the financial statements,  the  protection  of
  assets from unauthorized use and the execution and recording of
  transactions  in  accordance  with management's  authorization.
  The  system of internal controls which provides for appropriate
  division of responsibility is supported by written policies and
  procedures  that are updated by management as  necessary.   The
  system   is  tested  and  evaluated  regularly  by  the  parent
  Company's  internal  auditors as well  as  by  the  independent
  auditors in connection with their annual audit of the financial
  statements.   The independent auditors conduct their  audit  in
  accordance  with  generally  accepted  auditing  standards  and
  perform  such tests of transactions and balances as  they  deem
  necessary.   Management  considers the recommendations  of  its
  internal  auditors  and  independent  auditors  concerning  the
  Corporation's  system  of  internal  controls  and  takes   the
  necessary  actions that are cost-effective in the circumstances
  to  respond  appropriately  to the  recommendations  presented.
  Management  believes that the Corporation's system of  internal
  controls  accomplishes the objectives set forth  in  the  first
  sentence of this paragraph.
  
  
  
  
  John J. Bongiorno
  President and Chief Executive Officer
  
  
  
  
  Phyllis E. Cochran
  Vice President and Controller

<PAGE>

             Navistar Financial Corporation and Subsidiaries
  
                                    
                      Independent Auditors' Report
  
  
  
  Navistar Financial Corporation:
  
  We  have audited the financial statements of Navistar Financial
  Corporation  and  its subsidiaries listed  in  Item  8.   These
  consolidated financial statements are the responsibility of the
  Corporation's management.  Our responsibility is to express  an
  opinion on these consolidated financial statements based on our
  audits.
  
  We  conducted our audits in accordance with generally  accepted
  auditing  standards.  Those standards 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.   An
  audit  also  includes assessing the accounting principles  used
  and  significant  estimates  made by  management,  as  well  as
  evaluating  the  overall financial statement presentation.   We
  believe  that  our audits provide a reasonable  basis  for  our
  opinion.
  
  In   our   opinion,  the  accompanying  consolidated  financial
  statements  present  fairly,  in  all  material  respects,  the
  financial  position of Navistar Financial Corporation  and  its
  subsidiaries  at October 31, 1996 and 1995 and the  results  of
  their  operations  and their cash flow for each  of  the  three
  years  in the period ended October 31, 1996 in conformity  with
  generally accepted accounting principles.
  
  
  
  
  
  /s/DELOITTE & TOUCHE LLP
     Deloitte & Touche LLP
     December 16, 1996
     Chicago, Illinois

<PAGE>

  Item 9.  Changes in and Disagreements With Accountants on
            Accounting and Financial Disclosure
  
      None
  
                             PART III
  
  
  Items 10, 11, 12 and 13
  
      Intentionally omitted.  See the index page of  this  Report
  for explanation.
  
                             PART IV
  
  
  Item  14.  Exhibits, Financial Statement Schedules and  Reports
  on Form 8-K
  
  Financial Statements
  
     See Index to Financial Statements in Item 8.
  
  Financial Statement Schedules
  
      All  schedules  are omitted because of the absence  of  the
  conditions under which they are required or because information
  called  for  is  shown  in the financial statements  and  notes
  thereto.
  
  Exhibits, Including Those Incorporated By Reference
<TABLE>
<CAPTION>  
    Exhibit                                              Form 10-K
    Number  Description                                     Page
     <S>    <C>                                              <C>
     (3)    Articles of Incorporation and By-Laws
              of the Registrant                              E-1
     (4)    Instruments Defining the Rights of Security
            Holders, including Indentures                    E-2
    (10)    Material Contracts                               E-3
    (24)    Power of Attorney                                 42
</TABLE>
  
  Reports on Form 8-K
  
     No reports on Form 8-K were filed for the three months ended
  October 31, 1996.
  
  <PAGE>
  
  
                            SIGNATURE
                                    
  
  
  
      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.
  
  
  
                              NAVISTAR FINANCIAL CORPORATION
                                      (Registrant)
  
  
  
  
  By:  /s/PHYLLIS E. COCHRAN                     January 22, 1997
          Phyllis E. Cochran
          Vice President and Controller
          (Principal Accounting Officer)