UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

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

                 For the quarterly period ended January 31, 1999

                                       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 847-734-4000

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

                       APPLICABLE ONLY TO ISSUERS INVOLVED
                        IN BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of February 28, 1999, 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 INSTRUCTIONS
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE  FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.


<PAGE>










                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES



                                      INDEX

                                                                        Page


PART I.   FINANCIAL INFORMATION

   Item 1.   Financial Statements:

      Statements of Consolidated Income and Retained Earnings --
        Three Months Ended January 31, 1999 and 1998. . . . . . . . . .  2

      Statements of Consolidated Financial Condition --
        January 31, 1999; October 31, 1998; and January 31, 1998. . . .  3

      Statements of Consolidated Cash Flow --
        Three Months Ended January 31, 1999 and 1998. . . . . . . . . .  4

      Notes to Consolidated Financial Statements  . . . . . . . . . . .  5

   Item 2.   Management's Discussion and Analysis of Results of
                Operations and Financial Condition. . . . . . . . . . .  8


PART II.   OTHER INFORMATION

   Item 6.   Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 14

Signaturen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

                 NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
       STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (Unaudited)
                              (Millions of dollars)

<TABLE>
<CAPTION> 
                                                             Three Months Ended
                                                                 January 31
                                                              1999         1998
<S>                                                         <C>          <C>
Revenue
   Retail notes and lease financing . . . . . . . . . . . . $ 39.5       $ 28.9
   Wholesale notes. . . . . . . . . . . . . . . . . . . . .   14.7          8.3
   Accounts . . . . . . . . . . . . . . . . . . . . . . . .    8.3          9.6
   Servicing fee income . . . . . . . . . . . . . . . . . .    6.2          5.7
   Insurance premiums earned. . . . . . . . . . . . . . . .    8.5          7.9
   Marketable securities. . . . . . . . . . . . . . . . . .    2.0          2.2
         Total. . . . . . . . . . . . . . . . . . . . . . .   79.2         62.6

Expense
   Cost of borrowing:
      Interest expense. . . . . . . . . . . . . . . . . . .   22.2         15.7
      Other . . . . . . . . . . . . . . . . . . . . . . . .    1.7          1.9
          Total . . . . . . . . . . . . . . . . . . . . . .   23.9         17.6

   Credit, collection and administrative. . . . . . . . . .   10.1          8.1
   Provision for losses on receivables. . . . . . . . . . .    1.3          0.4
   Insurance claims and underwriting. . . . . . . . . . . .   10.3          9.1
   Depreciation expense and other . . . . . . . . . . . . .    9.9          5.5
          Total . . . . . . . . . . . . . . . . . . . . . .   55.5         40.7

Income Before Taxes on Income . . . . . . . . . . . . . . .   23.7         21.9

Taxes on Income . . . . . . . . . . . . . . . . . . . . . .    9.2          8.5

Net Income  . . . . . . . . . . . . . . . . . . . . . . . .   14.5         13.4

Retained Earnings

   Beginning of period. . . . . . . . . . . . . . . . . . .  109.0        113.1

   Dividends paid . . . . . . . . . . . . . . . . . . . . .  (12.0)       (12.0)

   End of period. . . . . . . . . . . . . . . . . . . . . . $111.5       $114.5
</TABLE>


See Notes to Consolidated Financial Statements.


<PAGE>


                 NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
           STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION (Unaudited)
                              (Millions of dollars)

<TABLE>
<CAPTION>
                                           January 31   October 31   January 31
                                              1999         1998         1998
                    ASSETS
<S>                                        <C>          <C>          <C>
Cash and Cash Equivalents. . . . . . . . . $    9.8     $   14.1     $    6.4

Marketable Securities. . . . . . . . . . .    104.8        108.0        112.5

Finance Receivables
   Retail notes and lease financing. . . .    681.5        915.9        444.0
   Wholesale notes . . . . . . . . . . . .    355.5        224.9        137.8
   Accounts. . . . . . . . . . . . . . . .    396.8        382.9        357.0
                                            1,433.8      1,523.7        938.8
   Allowance for losses. . . . . . . . . .    (11.1)       (12.8)       (10.3)
     Finance Receivables, Net. . . . . . .  1,422.7      1,510.9        928.5

Amounts Due from Sales of Receivables. . .    266.6        245.9        236.5
Equipment on Operating Leases, Net . . . .    230.9        217.7        158.9
Repossessions. . . . . . . . . . . . . . .     17.7         14.4         18.5
Other Assets . . . . . . . . . . . . . . .     88.4        101.9        104.2
Total Assets . . . . . . . . . . . . . . . $2,140.9     $2,212.9     $1,565.5

      LIABILITIES AND SHAREOWNER'S EQUITY

Short-Term Borrowings. . . . . . . . . . . $   14.9     $   21.8     $  115.3
Accounts Payable to Affiliated Companies .    212.3        136.8         99.3
Other Liabilities. . . . . . . . . . . . .     54.7         57.1         52.9
Senior and Subordinated Debt . . . . . . .  1,470.7      1,611.2        903.7
Dealers' Reserves. . . . . . . . . . . . .     24.6         24.0         22.5
Unpaid Insurance Claims
  and Unearned Premiums. . . . . . . . . .     79.9         80.5         82.4

Shareowner's Equity
   Capital stock (Par value $1.00, 1,600,000
      shares issued and outstanding)
      and paid-in capital. . . . . . . . .    171.0        171.0        171.0
   Retained earnings . . . . . . . . . . .    111.5        109.0        114.5
   Accumulated other comprehensive income.      1.3          1.5          3.9
      Total. . . . . . . . . . . . . . . .    283.8        281.5        289.4
Total Liabilities and Shareowner's Equity. $2,140.9     $2,212.9     $1,565.5
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>


                 NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
                STATEMENTS OF CONSOLIDATED CASH FLOW (Unaudited)
                              (Millions of dollars)
<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                  January 31
                                                               1999       1998
<S>                                                          <C>        <C>
Cash Flow From Operations
   Net income. . . . . . . . . . . . . . . . . . . . . . . . $  14.5    $  13.4
   Adjustments to reconcile net income to cash
      provided from operations:
      Gains on sales of receivables  . . . . . . . . . . . .    (5.7)      (7.2)
      Depreciation and amortization. . . . . . . . . . . . .    10.8        6.7
      Provision for losses on receivables. . . . . . . . . .     1.3        0.4
      Increase (decrease) in accounts payable to
          Affiliated Companies . . . . . . . . . . . . . . .    75.5      (32.2)
      Other. . . . . . . . . . . . . . . . . . . . . . . . .    (5.1)     (30.3)
        Total. . . . . . . . . . . . . . . . . . . . . . . .    91.3      (49.2)

Cash Flow From Investing Activities
   Proceeds from sold retail notes . . . . . . . . . . . . .   518.5      468.2
   Purchase of retail notes and lease receivables. . . . . .  (315.6)    (236.7)
   Principal collections on retail notes and
     lease receivables . . . . . . . . . . . . . . . . . . .     0.4       16.6
   Acquisitions (over) under cash collections of wholesale
      notes and accounts receivable. . . . . . . . . . . . .  (134.6)      32.9
   Purchase of marketable securities . . . . . . . . . . . .    (8.5)      (7.9)
   Proceeds from sales and maturities
      of marketable securities . . . . . . . . . . . . . . .    11.7       10.2
   Purchase of equipment leased to others. . . . . . . . . .   (24.3)     (41.5)
   Sale of equipment leased to others  . . . . . . . . . . .     1.1        0.9
        Total. . . . . . . . . . . . . . . . . . . . . . . .    48.7      242.7

Cash Flow From Financing Activities
   Net decrease in short term borrowings . . . . . . . . . .    (6.8)     (25.7)
   Net increase in bank revolving credit
      facility usage  . . .  . . . . . . . . . . . . . . . .       -       37.0
   Net decrease in asset-backed commercial
      paper facility usage. . . . . . . . . . . . . . . . .    (78.8)    (221.7)
   Proceeds from long-term debt  . . . . . . . . . . . . . .    48.5       48.2
   Principal payment of long-term debt . . . . . . . . . . .   (95.2)     (23.6)
   Dividends paid to Transportation. . . . . . . . . . . . .   (12.0)     (12.0)
        Total. . . . . . . . . . . . . . . . . . . . . . . .  (144.3)    (197.8)

Decrease in Cash and Cash Equivalents. . . . . . . . . . . .    (4.3)      (4.3)

Cash and Cash Equivalents at Beginning of Period . . . . . .    14.1       10.7

Cash and Cash Equivalents at End of Period . . . . . . . . . $   9.8    $   6.4


Supplemental disclosure of cash flow information

   Interest paid . . . . . . . . . . . . . . . . . . . . . . $  29.8    $  22.9

   Income taxes paid . . . . . . . . . . . . . . . . . . . . $   2.4    $   7.4
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>


                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   The  consolidated  financial  statements  include the  accounts of Navistar
     Financial   Corporation   ("NFC")   and   its   wholly-owned   subsidiaries
     ("Corporation").     Navistar     International     Transportation    Corp.
     ("Transportation"),   which  is  wholly-owned  by  Navistar   International
     Corporation ("Navistar"), is the parent company of the Corporation.

     The  accompanying  unaudited  financial  statements  have been  prepared in
     accordance with accounting  policies  described in the  Corporation's  1998
     Annual  Report on Form  10-K and  should  be read in  conjunction  with the
     disclosures therein.

     In the opinion of management,  these interim financial  statements  reflect
     all  adjustments,  consisting of normal  recurring  accruals,  necessary to
     present fairly the results of operations, financial condition and cash flow
     for the interim  periods  presented.  Interim  results are not  necessarily
     indicative  of  results to be  expected  for the full  year.  Certain  1998
     amounts have been reclassified to conform with the presentation used in the
     1999 financial statements.

2.   Finance  receivable  balances  do  not  include  receivables  sold  by  the
     Corporation  to  public  and  private   investors  with  limited   recourse
     provisions. Outstanding sold receivables balances are as follows:

<TABLE>
<CAPTION>
                                        January 31    October 31    January 31
                                           1999          1998          1998
                                                     ($ Millions)
<S>                                      <C>           <C>           <C>
     Retail notes. . . . . . . . . . .   $1,757.2      $1,445.4      $1,654.3
     Wholesale notes . . . . . . . . .      639.5         700.0         531.3
           Total . . . . . . . . . . .   $2,396.7      $2,145.4      $2,185.6
</TABLE>

     In November 1998, the Corporation sold $545 million of retail notes, net of
     unearned  finance income,  through Navistar  Financial  Retail  Receivables
     Corporation,   a  wholly  owned  subsidiary  of  the   Corporation,   to  a
     multi-seller  asset-backed  commercial  paper conduit  sponsored by a major
     financial  institution.  A gain of $5.7 million was recognized on the sale.
     The proceeds of $526  million,  net of fees and credit  enhancements,  were
     used by the Corporation for general working capital purposes.


<PAGE>



                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


      The allowance for losses on receivables is summarized as follows:

<TABLE>
<CAPTION>
                                          January 31    October 31    January 31
                                            1999           1998          1998
                                                       ($ Millions)
<S>                                        <C>            <C>           <C>
    Allowance pertaining to:
       Owned notes. . . . . . . . . .      $11.1          $12.8         $10.3
       Sold notes . . . . . . . . . .       15.1           12.6          14.4
           Total. . . . . . . . . . .      $26.2          $25.4         $24.7
</TABLE>

3.   During the fourth  quarter of fiscal  1998 and the first  quarter of fiscal
     1999,  the  Corporation  entered  into a total of $100  million  of forward
     treasury locks in  anticipation  of a May 1999 sale of retail  receivables.
     The Corporation intends to close these positions on the pricing date of the
     sale.  Any  resulting  gain or loss will be included in the gain or loss on
     the sale of receivables recognized in May 1999. As of January 31, 1999, the
     unrealized gain on the outstanding forward treasury locks was not material.

     In November 1998, the Corporation  sold fixed rate retail  receivables on a
     variable  rate basis.  For the  protection of  investors,  the  Corporation
     issued  an  interest  rate  cap.  Under  the  terms of the  agreement,  the
     Corporation will make payments if interest rates exceed certain levels. The
     notional  amount of the cap  amortizes  based on the  expected  outstanding
     principal  balance of the sold retail  receivables.  As of January 31, 1999
     the notional  amount was $517 million and the interest  rate cap had a fair
     value of $1.8 million.

4.   In order to facilitate the  securitization of the Corporation's  retail and
     wholesale  receivables  the Corporation  has  established,  over the years,
     three    special   purpose   corporations  (Navistar  Financial  Securities
     Corporation, Navistar Financial Retail Receivables  Corporation  and  Truck
     Retail  Instalment  Paper  Corporation).    In connection  with  the  sales
     and   leasebacks  of  certain  of  its   leasing   portfolio   assets,  the
     Corporation  and  its  subsidiary,  Harco  Leasing,  Inc.  ("Harco"),  have
     established  Navistar Leasing Company ("NLC"),  a Delaware  business trust.
     NLC holds legal title to leased vehicles and is the lessor on substantially
     all leases originated.  The assets of NLC have been and will continue to be
     allocated into various  beneficial  interests issued by NLC. Harco owns one
     such beneficial  interest in NLC and Harco has transferred other beneficial
     interests  issued by NLC to  purchasers  under  sale/leaseback  agreements.
     Neither the beneficial  interests held by purchasers  under  sale/leaseback
     agreements and the assets  represented  thereby,  nor legal interest in any
     assets  of  NLC,  will  be  available  to  Harco,  the  Corporation  or its
     creditors.

<PAGE>

                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

5.     Effective  November  1,  1998,  the  Corporation   adopted  Statement  of
       Financial Accounting Standards No. 130, "Reporting  Comprehensive Income"
       which  establishes  standards for reporting and display of  comprehensive
       income and its  components.  Financial  statements for prior periods have
       been reclassified as required by the statement.  The Corporation's  total
       comprehensive income was as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended January 31
                                                    1999              1998
                                                         ($ Millions)
<S>                                                <C>               <C>
         Net Income. . . . . . . . . . . . . . .   $14.5             $13.4
         Other Comprehensive Income. . . . . . .     1.3               3.9
            Total Comprehensive Income . . . . .   $15.8             $17.3
</TABLE>

<PAGE>



                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
          AND FINANCIAL CONDITION


Certain  statements under this caption,  which involve risks and  uncertainties,
constitute  "forward-looking   statements"  under  the  Securities  Reform  Act.
Navistar Financial  Corporation's  actual results may differ  significantly from
the results  discussed in such  forward-looking  statements.  Factors that might
cause such a difference  include,  but are not limited to, those discussed under
the headings "Year 2000" and "Business Outlook."


Financing Volume

In the first quarter of fiscal 1999 industry  retail sales for Class 5 through 8
trucks  was  approximately  20%  higher  than  1998.  The  Corporation's  retail
financing  acquisitions in fiscal 1999,  including  retail notes and finance and
operating  leases,  were $339.9  million,  22% higher than 1998. The increase is
primarily the result of the strong truck industry  demand and an increase in the
Corporation's  finance market share of new International trucks sold in the U.S.
from  14.5% in 1998 to 16.3% in fiscal  1999.  Serviced  retail  notes and lease
financing  balances were $2,670  million and $2,258  million at January 31, 1999
and 1998, respectively.

In spite of the continued strong liquidity in the commercial  financing  market,
the  Corporation  provided 96% and 95% of the wholesale  financing of new trucks
sold to  Transportation's  dealers in the first quarter of fiscal 1999 and 1998,
respectively.  Serviced  wholesale  note balances were $1,100 million at January
31, 1999,  a 45% increase  compared to the same period of 1998 due to the strong
industry demand.


Results of Operations

The  components  of net  income  for the three  months  ended  January 31 are as
follows:

<TABLE>
<CAPTION>
                                                            1999      1998
                                                             ($ Millions)
<S>                                                        <C>       <C>
Income before income taxes:
  Finance operations. . . . . . . . . . . . . . . . . . .  $23.6     $20.9
  Insurance operations. . . . . . . . . . . . . . . . . .    0.1       1.0
     Income before taxes. . . . . . . . . . . . . . . . .   23.7      21.9
  Taxes on income . . . . . . . . . . . . . . . . . . . .    9.2       8.5
     Net income . . . . . . . . . . . . . . . . . . . . .  $14.5     $13.4
</TABLE>


<PAGE>


                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

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


Results of Operations (continued)

Pretax income was $23.7 million and $21.9 million in the first quarter of fiscal
1999 and 1998,  respectively.  The  improvement was primarily a result of higher
retail and wholesale  financing  balances in response to strong  industry demand
offset, in part, by higher costs to service the larger portfolio.

Finance Operations:

Retail note and lease  financing  revenue was $39.5 million in the first quarter
of 1999 compared to $28.9 million in 1998.  The increase is primarily the result
of higher retail  financing  activities due to an increase in the  Corporation's
finance  market  share and the shift of the  portfolio  toward  operating  lease
financing,  offset in part by lower  yields.  Included  in retail note and lease
revenue is operating lease revenue of $14.1 million and $8.5 million in 1999 and
1998, respectively.  For operating leases, the Corporation recognizes the entire
lease  payment as revenue and records  depreciation  expense on the assets under
lease.

Wholesale  note  revenue was $14.7  million in the first  quarter of fiscal 1999
compared to $8.3  million in 1998.  The  increase  is  primarily a result of the
higher level of wholesale financing activity,  offset in part by lower yields in
response to the lower average prime interest rate.

Retail and  wholesale  account  revenue was $8.3 million in the first quarter of
1999  compared to $9.6  million in fiscal 1998.  The  decrease is primarily  the
result of lower average  balances and lower average  yields  relating to a lower
prime interest rate.

Borrowing costs increased $6.3 million to $23.9 million during the first quarter
of 1999  due  primarily  to  higher  average  receivable  funding  requirements,
partially  offset by lower average interest rates.  The  Corporation's  weighted
average  interest  rate on all debt  decreased  to 5.9% in 1999 from 6.8% in the
first  quarter of 1998  primarily due to lower  average  interest  rates and the
maturity of high yield subordinated debt.

Credit, collection and administrative expenses increased to $10.1 million in the
first quarter of 1999 compared to $8.1 million in 1998. The increase in 1999 was
primarily  due to  higher  costs to  service  the  larger  portfolio  and  costs
associated with year 2000 initiatives.



<PAGE>


                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

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


Results of Operations (continued)

Finance Operations (continued):

Provision for losses on receivables totaled $1.3 million in the first quarter of
1999 compared with $0.4 million in 1998.  The increase in 1999 was primarily due
to the  increase in serviced  finance  receivable  balances.  The  Corporation's
allowance for losses as a percentage of serviced  finance  receivables was .63%,
 .64% and .73% at January 31, 1999, October 31, 1998 and January 31, 1998.

Depreciation  and other expenses  increased to $9.9 million in the first quarter
of 1999 from $5.5  million in 1998.  The  increase  is  primarily  the result of
depreciation on a larger investment in equipment under operating leases.

Insurance Operations:

Harco National Insurance  Company's pretax income in the first quarter of fiscal
1999  was $0.9  million  lower  than  1998  primarily  due to  unfavorable  loss
experience in the liability lines.


Liquidity and Funds Management

The Corporation  has  traditionally  obtained the funds to provide  financing to
Transportation's dealers and retail customers from sales of finance receivables,
commercial paper, short and long-term bank borrowings, medium and long-term debt
and equity capital.  The  Corporation's  current debt ratings have made sales of
finance  receivables the most economical  source of funding.  The  Corporation's
insurance  subsidiary generates its funds through internal operations and has no
external borrowings.

In January  1998,  Moody's,  Standard  and Poors and Duff and Phelps  raised the
Corporation's  senior debt  ratings  from Ba2, BB and BB+ to Ba1,  BB+ and BBB-,
respectively,  while the subordinated  debt ratings were also raised from B1, B+
and BB to Ba3, BB- and BB+, respectively.

Operations provided $91.3 million in cash in the first quarter of 1999 primarily
as a result of an increase in accounts  payable to affiliated  companies and net
income.  Investing  activities provided $48.7 million in cash during this period
principally  as a result  of the sale of  retail  notes,  offset  in part by the
purchase of finance receivables. The cash generated from operating and investing
activities was used primarily to lower borrowings in the asset-backed commercial
paper  facility by $78.8 million,  make  principal  payments of $95.2 million on
long-term debt balances and pay dividends to Transportation of $12.0 million.


<PAGE>


                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

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


Liquidity and Funds Management (continued)

Receivable  sales  were a  significant  source of funding in both 1999 and 1998.
Through the  asset-backed  markets,  the Corporation has been able to fund fixed
rate retail note receivables at rates offered to companies with investment grade
ratings.  During the first  quarter of fiscal 1999,  the  Corporation  sold $545
million of retail  notes,  net of  unearned  finance  income,  through  Navistar
Financial Retail Receivables  Corporation  ("NFRRC"), a wholly owned subsidiary,
to a multi-seller  asset-backed  commercial  paper conduit  sponsored by a major
financial  institution.  During the first quarter of fiscal 1998 the Corporation
sold $500  million of retail  notes,  net of unearned  finance  income,  through
NFRRC,  to owner trusts which,  in turn,  issued  securities  which were sold to
investors.  At January 31, 1999, the remaining shelf  registration  available to
NFRRC for the public issuance of asset-backed securities was $2,972 million.

As of January 31, 1999, Navistar Financial  Securities  Corporation  ("NFSC"), a
wholly-owned subsidiary of the Corporation, had a revolving wholesale note trust
that  provides  for the  funding of $639  million of eligible  wholesale  notes.
During the next two months $39 million will amortize and the commitment  will be
$600 million.

At January 31, 1999,  available funding under the bank revolving credit facility
and the  asset-backed  commercial  paper program was $219 million,  of which $15
million  provided  funding  backup  for the  outstanding  short-term  debt.  The
remaining  $204  million,   when  combined  with   unrestricted  cash  and  cash
equivalents,  made $214 million  available to fund the general business purposes
of the Corporation.

During the fourth  quarter of fiscal 1998 and the first  quarter of fiscal 1999,
the Corporation  entered into a total of $100 million of forward  treasury locks
in  anticipation  of a May 1999  sale of  retail  receivables.  The  Corporation
intends to close these  positions on the pricing date of the sale. Any resulting
gain or loss  will be  included  in the gain or loss on the sale of  receivables
recognized  in May 1999.  As of January 31,  1999,  the  unrealized  gain on the
outstanding forward treasury locks was not material.

In  November  1998,  the  Corporation  sold fixed rate retail  receivables  on a
variable rate basis. For the protection of investors,  the Corporation issued an
interest rate cap. Under the terms of the agreement,  the Corporation  will make
payments if interest rates exceed certain levels. The notional amount of the cap
amortizes based on the expected outstanding principal balance of the sold retail
receivables. As of January 31, 1999 the notional amount was $517 million and the
interest rate cap had a fair value of $1.8 million.


<PAGE>



                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

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


Year 2000

The  Corporation has identified all significant  information  technology  ("IT")
applications that will require remediation, which in some cases will involve the
replacement of systems,  to ensure Year 2000  compliance.  Internal and external
resources are being used to make the required modifications and to test for Year
2000 compliance. The Corporation plans to complete the modifications and testing
process of all  significant  IT systems  by August  1999,  which is prior to any
anticipated impact on its operating systems.

As of January 31, 1999 the Corporation believes it has remediated  approximately
80% of its non-compliant IT systems.  Total costs connected with the remediation
of the  Corporation's  significant  IT systems  during the first quarter of 1999
totaled $0.8 million, and for fiscal 1998 and 1997 totaled $3.7 million and $1.1
million, respectively.  Estimated future costs total $1.7 million. Approximately
25% of the total  costs,  representing  investment  in new IT  systems,  will be
capitalized and depreciated over three to five years. The total cost of the Year
2000 project has not had nor is it anticipated to have a material  impact on the
Corporation's  financial  position or results of  operations  and will be funded
through operating cash flows.

While certain aspects of the Corporation's  businesses could operate on a manual
basis  for a  period  of  time,  in the  event  Year  2000  compliance  for  its
significant IT systems is not reached,  the Corporation  currently believes that
the most reasonably likely worst case scenario would be the inability to sustain
its  current  level  of  performance  and  customer  service.   Additionally,  a
significant  failure of the banking  systems or key  entities  in the  financial
markets  could  adversely  affect the  Corporation's  ability to access  various
credit and money markets.  The Corporation is therefore  committed to taking all
appropriate  actions to achieve  Year 2000  compliance  for its  significant  IT
systems  before the  millennium  change date.  The  Corporation  has developed a
detailed plan,  which includes an anticipated  remediation  completion  date for
each  significant IT system and a scheduled  overall  completion  date of August
1999.  Management  reviews the progress under the action plan on a weekly basis.
Whenever  management  concludes a material  risk exists  that a  significant  IT
system will not be  remediated  by the  scheduled  overall  completion  date,  a
contingency plan is developed.




<PAGE>



                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES

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


Year 2000 (continued)

The Corporation has initiated formal  communications  with all significant third
party  suppliers  which  provide  operational  support  and  non-IT  systems  to
determine the extent to which the  Corporation  would be vulnerable in the event
that one or more of those third  parties fail to  remediate  their own Year 2000
issues. The Corporation has received  assurances from its significant  suppliers
of cash  management  services that they will be able to operate in the Year 2000
and beyond, without interruption in service. While the Corporation believes that
it does not have significant exposure to other significant  suppliers' Year 2000
problems,  it is  seeking  compliance  assurances  from such  other  significant
suppliers.

The costs of the project and the date on which the Corporation  believes it will
complete the Year 2000  remediation  are based on  management's  best estimates,
which were derived utilizing  numerous  assumptions of future events,  including
the continued availability of certain resources,  third party modification plans
and other factors.  However, there can be no guarantee that these estimates will
be achieved and actual results could differ  materially from those  anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the  availability  and cost of qualified  personnel,  the ability to
locate and correct all relevant computer codes and similar uncertainties.


Business Outlook

The  truck  industry  is  forecasted  to  remain  strong  in  fiscal  1999.  The
competitive  commercial  financing  market will  continue to put pressure on the
Corporation's  retail and wholesale  financing  activity and margins.  Increased
volatility in the capital  markets is likely to put  additional  pressure on the
funding rates offered to the  Corporation  in the  asset-backed  public  market,
commercial paper markets and other debt financing markets.

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 1999 and beyond.




<PAGE>


                           PART II - OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K

No reports on Form 8-K were filed  during the three  months  ended  January  31,
1999.



                                    SIGNATURE


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




                                             Navistar Financial Corporation
                                                     (Registrant)






Date  March 12, 1999                        /s/P. E. Cochran
                                               P. E. Cochran
                                               Vice President and Controller
                                               (Principal Accounting Officer)