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 July 31, 1997

                                       OR

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

                       For the transition period from to
                                   ----------
                        Commission File Number 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 August 31,  1997,  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 and Nine Months Ended July 31, 1997 and 1996..........  2

         Statements of Consolidated Financial Condition --
         July 31, 1997; October 31, 1996; and July 31, 1996.................  3

         Statements of Consolidated Cash Flow --
         Nine Months Ended July 31, 1997 and 1996...........................  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................................... 12


Signature .................................................................. 12





<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          Nine Months Ended
                                                       July 31                    July 31
                                                  1997        1996          1997        1996
<S>                                              <C>         <C>           <C>          <C>
Revenue
   Retail notes and lease financing  . . . . .   $ 28.7      $ 27.8        $ 80.6       $ 75.9
   Wholesale notes . . . . . . . . . . . . . .      9.3        14.6          27.8         46.0
   Accounts  . . . . . . . . . . . . . . . . .      8.7         7.1          23.0         19.9
   Servicing fee income  . . . . . . . . . . .      5.1         5.1          15.2         15.7
   Insurance premiums earned . . . . . . . . .      8.4        10.5          24.9         31.6
   Marketable securities . . . . . . . . . . .      2.3         1.9           6.4          7.3
           Total . . . . . . . . . . . . . . .     62.5        67.0         177.9        196.4


Expense
   Cost of borrowing
       Interest  . . . . . . . . . . . . . . .     16.7        18.8          48.2         55.6
       Other . . . . . . . . . . . . . . . . .      2.2         1.6           5.2          6.9
           Total . . . . . . . . . . . . . . .     18.9        20.4          53.4         62.5

   Credit, collection and administrative . . .      7.9         7.3          22.4         21.1
   Provision for losses on receivables . . . .      0.3         1.7           1.5          4.4
   Insurance claims and underwriting . . . . .      9.2        11.1          26.8         35.6
   Depreciation expense and other. . . . . . .      4.2         0.8          14.7          5.7
           Total . . . . . . . . . . . . . . .     40.5        41.3         118.8        129.3


Income Before Taxes on Income. . . . . . . . .     22.0        25.7          59.1         67.1

Taxes on Income. . . . . . . . . . . . . . . .      8.6        10.1          23.0         26.2

Net Income . . . . . . . . . . . . . . . . . .     13.4        15.6          36.1         40.9

Retained Earnings

   Beginning of period . . . . . . . . . . . .    100.1        99.3         107.4         84.0

   Dividends paid  . . . . . . . . . . . . . .      5.0        10.0          35.0         20.0

   End of period . . . . . . . . . . . . . . .   $108.5      $104.9        $108.5       $104.9

</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>



                 NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES

           STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION (Unaudited)
                              (Millions of dollars)

<TABLE>
<CAPTION>
                                              July 31     October 31    July 31
                                                1997         1996         1996
                              ASSETS

<S>                                           <C>          <C>         <C>
Cash and Cash Equivalents . . . . . . . . . . $    8.9     $    6.7    $   19.5
Marketable Securities . . . . . . . . . . . .    115.6        128.1       123.1

Finance Receivables
     Retail notes and lease financing . . . .    453.3        733.3       535.6
     Wholesale notes  . . . . . . . . . . . .    179.9        100.5       217.6
     Accounts . . . . . . . . . . . . . . . .    336.8        371.4       261.3
                                                 970.0      1,205.2     1,014.5
     Allowance for losses . . . . . . . . . .     (9.3)       (11.6)       (8.5)
         Finance Receivables, Net . . . . . .    960.7      1,193.6     1,006.0

Amounts Due from Sales of Receivables . . . .    219.3        264.3       295.0
Equipment on Operating Leases, Net  . . . . .    116.0        101.1        57.1
Repossessions . . . . . . . . . . . . . . . .     24.5         13.2         9.3
Reinsurance Receivables . . . . . . . . . . .     23.7         21.2        22.5
Other Assets  . . . . . . . . . . . . . . . .     49.1         65.6        52.0
Total Assets  . . . . . . . . . . . . . . . . $1,517.8     $1,793.8    $1,584.5

         LIABILITIES AND SHAREOWNER'S EQUITY


Short-Term Borrowings . . . . . . . . . . . . $  112.3     $   99.4    $  117.8
Accounts Payable
     Affiliated companies . . . . . . . . . .    114.0         24.5       110.4
     Other  . . . . . . . . . . . . . . . . .     32.5         42.2        58.5
         Total  . . . . . . . . . . . . . . .    146.5         66.7       168.9

Dealers' Reserves . . . . . . . . . . . . . .     22.5         22.3        22.9
Unpaid Insurance Claims and
   Unearned Premiums  . . . . . . . . . . . .     89.5         99.6       102.1
Accrued Income Taxes  . . . . . . . . . . . .     13.0         10.8        13.5
Accrued Interest  . . . . . . . . . . . . . .      6.3          8.9         5.6
Senior and Subordinated Debt  . . . . . . . .    844.6      1,206.4       878.1

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  . . . . . . . . . . .    108.5        107.4       104.9
     Unrealized gains (losses) on marketable
         securities . . . . . . . . . . . . .      3.6          1.3        (0.3)
         Total  . . . . . . . . . . . . . . .    283.1        279.7       275.6
Total Liabilities and Shareowner's Equity . . $1,517.8     $1,793.8    $1,584.5

</TABLE>

See Notes to Consolidated Financial Statements.



<PAGE>



                 NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES

                STATEMENTS OF CONSOLIDATED CASH FLOW (Unaudited)
                              (Millions of dollars)
<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                                   July 31
                                                               1997       1996
<S>                                                          <C>        <C>
Cash Flow From Operations
   Net income  . . . . . . . . . . . . . . . . . . . . . . .  $ 36.1     $ 40.9
   Adjustments to reconcile net income to cash
       provided from operations:
       Gains on sales of receivables . . . . . . . . . . . .   (13.4)     (20.2)
       Depreciation and amortization . . . . . . . . . . . .    16.4       10.8
       Provision for losses on receivables . . . . . . . . .     1.5        4.4
       Increase in accounts payable to affiliates  . . . . .    89.5       20.9
       (Decrease) increase in unpaid insurance claims and
         unearned premiums, net of reinsurance receivables .   (12.6)       0.6
       Other . . . . . . . . . . . . . . . . . . . . . . . .    (8.2)      (2.9)
           Total . . . . . . . . . . . . . . . . . . . . . .   109.3       54.5

Cash Flow From Investing Activities
   Net proceeds from sold retail notes . . . . . . . . . . .   938.1      950.0
   Purchase of retail notes and lease receivables  . . . . .  (703.0)    (843.6)
   Principal collections on retail notes and
       lease receivables . . . . . . . . . . . . . . . . . .    69.0       66.2
   Acquisitions (over) under cash collections of wholesale
       notes and accounts receivable . . . . . . . . . . . .   (28.7)     158.2
   Purchase of marketable securities . . . . . . . . . . . .   (67.9)     (47.4)
   Proceeds from sales and maturities
       of marketable securities  . . . . . . . . . . . . . .    86.0       54.5
   Increase in property and equipment leased to others . . .   (29.3)     (24.8)
           Total . . . . . . . . . . . . . . . . . . . . . .   264.2      313.1

Cash Flow From Financing Activities
   Net increase in short-term borrowings   . . . . . . . . .    12.9       67.3
   Net (decrease) in bank revolving credit facility usage. .  (334.0)    (250.0)
   Net (decrease) in asset-backed
       commercial paper facility usage . . . . . . . . . . .  (173.0)     (30.8)
   Proceeds from long-term debt  . . . . . . . . . . . . . .   176.4          -
   Principal payments on long-term debt  . . . . . . . . . .   (18.6)    (117.5)
   Dividends paid to Transportation  . . . . . . . . . . . .   (35.0)     (20.0)
           Total . . . . . . . . . . . . . . . . . . . . . .  (371.3)    (351.0)

Increase in Cash and Cash Equivalents  . . . . . . . . . . .     2.2       16.6

Cash and Cash Equivalents at Beginning of Period . . . . . .     6.7        2.9

Cash and Cash Equivalents at End of Period . . . . . . . . . $   8.9    $  19.5

Supplemental disclosure of cash flow information

     Interest paid . . . . . . . . . . . . . . . . . . . . . $  49.5    $  62.1

     Income taxes paid . . . . . . . . . . . . . . . . . . . $  22.1    $  23.7
</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  and  notes  have  been
     prepared  in  accordance  with the  accounting  policies  set  forth in the
     Corporation's  1996  Annual  Report  on Form  10-K  and  should  be read in
     conjunction  with  the  Notes  to  the  Consolidated  Financial  Statements
     therein.

     In the opinion of management,  these interim financial  statements  reflect
     all  adjustments,  consisting of normal  recurring  accruals,  necessary to
     present fairly the financial position,  results of operations and cash flow
     for the interim  periods  presented.  Interim  results are not  necessarily
     indicative  of  results to be  expected  for the full  year.  Certain  1996
     amounts have been reclassified to conform with the presentation used in the
     1997 financial statements.

2.   Finance  receivable  balances  do  not  include  receivables  sold  by  the
     Corporation  to  public  and  private   investors  with  limited   recourse
     provisions.  Uncollected sold receivables balances, net of unearned finance
     income, are as follows:

<TABLE>
<CAPTION>
                                       July 31       October 31      July 31
                                         1997           1996           1996
                                                    ($ Millions)

     <S>                                 <C>           <C>           <C>
     Retail notes . . . . . . . . . .    $1,634.6      $1,366.4      $1,566.7
     Wholesale notes  . . . . . . . .       400.0         500.0         500.0
         Total  . . . . . . . . . . .    $2,034.6      $1,866.4      $2,066.7
</TABLE>

     During the first three quarters of 1997, the Corporation  sold $987 million
     of retail notes, net of unearned finance income, through Navistar Financial
     Retail Receivables Corporation ("NFRRC"), a wholly-owned subsidiary,  to an
     owner trust which, in turn, sold notes and  certificates to investors.  The
     proceeds,  net of  underwriting  fees and  credit  enhancements,  were $950
     million.

     In  July  1997,  Navistar  Financial  Securities  Corporation  ("NFSC"),  a
     wholly-owned  subsidiary  of the  Corporation,  filed a shelf  registration
     statement  with the Securities  and Exchange  Commission  providing for the
     issuance of up to $400 million of  pass-through  certificates  backed by an
     undivided   ownership   interest  in  wholesale   notes.  The  registration
     statement,  which was declared  effective July 21, 1997,  permitted NFSC to
     offer and sell series of  certificates  backed by  interests  in  wholesale
     notes.  On August 5, 1997,  NFSC sold to the public,  $200 million of asset
     backed certificates issued by Navistar Financial Dealer Note Master Trust.
     The certificates mature in August 2003.

<PAGE>



                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     On  January  1,  1997,  the  Corporation  adopted  Statement  of  Financial
     Accounting  Standards No. 125 ("SFAS No. 125"),  "Accounting  for Transfers
     and Servicing of Financial Assets and Extinguishments of Liabilities",  for
     all applicable transactions.  SFAS No. 125 requires that amounts previously
     classified as excess servicing be reclassified as interest only receivables
     and that such amounts be recorded at estimated  fair value.  Restatement of
     the  financial  statements  of  prior  periods  is not  permitted.  The new
     standard did not have a material effect on the  Corporation's net income or
     financial condition.

     The Corporation's  subordinated  retained interests in sold receivables are
     generally restricted and subject to limited recourse provisions.  The terms
     of retail  receivable  sales  require  the  Corporation  to  maintain  cash
     reserves with the trusts as credit  enhancement for public sales.  The cash
     reserves held by the trusts are restricted for use by the securitized sales
     agreements.  The following is a summary of amounts included in "Amounts Due
     from Sales of Receivables":

<TABLE>
<CAPTION>
                                          July 31     October 31      July 31
                                           1997          1996          1996
                                                     ($ Millions)

    <S>                                    <C>           <C>           <C>
    Cash held and invested by
       trusts  . . . . . . . . . . . .     $ 92.7        $ 85.2        $ 95.6
    Subordinated retained interests
       in wholesale receivables  . . .       69.2          85.4          85.6
    Subordinated retained interests
       in retail receivables . . . . .       61.4          96.0         114.0
    Interest only receivables. . . . .       11.2             -             -
    Excess servicing . . . . . . . . .          -          10.1          14.0
    Allowance for credit losses  . . .      (15.2)        (12.4)        (14.2)
           Total . . . . . . . . . . .     $219.3        $264.3        $295.0
</TABLE>

   The allowance for losses on receivables is summarized as follows:

<TABLE>
<CAPTION>
                                         July 31      October 31     July 31
                                          1997           1996         1996
                                                     ($ Millions)
   <C>                                     <C>           <C>           <C>
   Allowance pertaining to:
       Owned notes . . . . . . . . .       $ 9.3         $11.6         $ 8.5
       Sold notes  . . . . . . . . .        15.2          12.4          14.2
          Total  . . . . . . . . . .       $24.5         $24.0         $22.7
</TABLE>

3.   Average  short-term debt outstanding during the first nine months of fiscal
     1997 and 1996, which included  commercial  paper and bank  borrowings,  was
     approximately  $120  million and $64 million,  respectively,  at an average
     cost,  during each period,  of 6.0%. The weighted  average interest rate on
     all debt, including short-term debt and the effect of discounts and related
     amortization,  was 6.3% and 6.5% for the first nine  months of fiscal  1997
     and 1996, respectively.


<PAGE>



                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


4.   The Corporation  has  $1,325 million of  contractually  committed  support
     facilities, consisting of a $925 million bank revolving credit facility and
     a $400 million asset-backed  commercial paper ("ABCP") program supported by
     a bank liquidity facility.  Each of these facilities has a maturity date of
     March 31, 2001. At July 31, 1997, unused commitments under these facilities
     were $755 million,  of which $112 million  provided  funding backup for the
     outstanding short-term debt. The remaining $643 million, when combined with
     unrestricted cash and cash equivalents, made $652 million available to fund
     the general business purposes of the Corporation at July 31, 1997.

     In May 1997, the Corporation sold $100 million of Senior Subordinated Notes
     due June 2002.  The net  proceeds  from the sale of the Notes  offered were
     approximately   $97.5   million   after   deduction  of  the   underwriting
     compensation and certain other estimated expenses. The Corporation used the
     net  proceeds  to  repurchase  $6.0  million  of  its  outstanding   Senior
     Subordinated Notes due November 1998 and to reduce outstanding indebtedness
     under the bank revolving credit facility.

     In the third  quarter of fiscal  1997,  the  Corporation  entered into $100
     million of forward starting swaps. The swap agreements start on October 31,
     1997 and expire on July 15, 1999.  The  Corporation  also entered into $100
     million of forward interest rate lock agreements  based on a U.S.  Treasury
     Security  maturing  in  July  1999.  The  Corporation  entered  into  these
     agreements in  anticipation  of a November 1997 sale of retail  receivables
     and intends to close these  positions on the pricing date of the sale.  The
     gain or loss  which  will  result  from these  hedge  transactions  will be
     included  in the  gain or loss on the  sale of  receivables  recognized  in
     November 1997.


5.   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 $12 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.  On February  14, 1997, a
     state law was enacted which will negate the Department's  position and will
     relieve NFC of the aforementioned Notice of Deficiency.

     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.


<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 constitute  "forward-looking  statements"
under the Securities Reform Act, which involve risks and uncertainties. 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 heading
"Business Outlook".

Financing Volume
In the first nine  months of fiscal 1997  industry  demand for Class 5 through 8
trucks declined  approximately 4% compared with the same period of 1996.  During
the first nine months of 1997, the Corporation's retail financing  acquisitions,
including  retail notes and finance and operating  leases,  were $703 million or
17% lower than the  comparable  period of fiscal 1996. The decrease is primarily
the result of the lower industry  demand and the highly  competitive  commercial
financing market. The Corporation's  share of the retail financing of new trucks
manufactured by Transportation  and sold in the United States was 13% during the
first nine months of 1997  compared  with 17% during the same period a year ago.
Serviced retail notes and lease financing balances were $2.2 billion at July 31,
1997, October 31, 1996, and July 31, 1996.

During the first nine  months of fiscal 1997 and 1996 the  Corporation  supplied
94% of the wholesale financing of new trucks sold to  Transportation's  dealers.
Serviced  wholesale  note  balances  were $649  million at July 31,  1997,  $686
million at October 31, 1996,  and $803 million at July 31, 1996. The decrease in
wholesale financing is due to lower dealer inventory levels.

Results of Operations

The  components of net income for the three and nine month periods ended July 31
are as follows:

<TABLE>
<CAPTION>
                                              Three Months       Nine Months
                                             Ended July 31      Ended July 31
                                             1997      1996     1997     1996
<S>                                         <C>       <C>      <C>      <C>
Income before income taxes:
  Finance operations. . . . . . . . . . .   $20.5     $24.7    $54.9    $64.4
  Insurance operations. . . . . . . . . .     1.5       1.0      4.2      2.7
     Income before taxes. . . . . . . . .    22.0      25.7     59.1     67.1
  Taxes on income . . . . . . . . . . . .     8.6      10.1     23.0     26.2
     Net income . . . . . . . . . . . . .   $13.4     $15.6    $36.1    $40.9

</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)

During the third  quarter of fiscal 1997,  the  Corporation's  pretax  income of
$22.0  million was $3.7 million  lower than the  corresponding  period of fiscal
1996. The decrease was due primarily to lower wholesale financing activity which
was the result of lower levels of dealer inventory.

Pretax  income  during the first nine months of 1997  decreased  $8.0 million to
$59.1  million  compared  to 1996  primarily  as a  result  of  lower  wholesale
financing  activities and lower gains on sales of retail notes partially  offset
by lower  borrowing  costs due to the  maturity  of high yield  fixed rate debt.
Gains on sales of retail notes  receivable  during the first nine months of 1997
were $13.4  million on $987 million sold compared with gains of $20.2 million on
$985 million  sold in the first nine months of 1996.  The higher gains in fiscal
1996  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  the
Corporation'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 market  interest rates at the
time of the sale,  which may be up to six months after the Corporation  acquired
the retail notes.

Borrowing  costs  declined $9.1 million to $53.4  million  during the first nine
months of 1997 due to lower wholesale  funding  requirements and lower borrowing
rates. The Corporation's  weighted average interest rate on all debt declined to
6.3% from 6.5% in the first nine months of 1996 primarily due to the maturity of
high fixed rate public debt in June 1996.

The provision for losses decreased $2.9 million to $1.5 million during the first
nine months of 1997 as compared  to the same  period of fiscal  1996.  The lower
provision  for losses in 1997 is  primarily a result of lower  retail  financing
activities.  The Corporation's  allowance for losses as a percentage of serviced
finance  receivables was .77%, .74% and .70% at July 31, 1997,  October 31, 1996
and July 31, 1996, respectively.

Depreciation  and other expenses  during the first nine months of 1997 was $14.7
million compared to $5.7 million in the comparable  period of 1996. The increase
is primarily  the result of a larger  investment  in equipment  under  operating
leases.

Harco National  Insurance  Company  ("Harco"),  the  Corporation's  wholly-owned
insurance subsidiary, had pretax income of $4.2 million in the first nine months
of fiscal 1997 up $1.5 million  from the first nine months of fiscal 1996.  This
increase was  primarily due to improved  loss  experience  in Harco's  liability
insurance  lines,  offset in part by lower earned  premiums in Harco's  physical
damage and liability lines.



<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

The Corporation's operations are substantially dependent upon the production and
sale of Transportation's truck products in the United States. 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  have made bank borrowings
and sales of finance  receivables the most economical sources of financing.  The
Corporation's   insurance   operation   generates  its  funds  through  internal
operations and has no external borrowings.

Operations  provided  $109.3  million in cash in the first nine  months of 1997.
Investment  activities  provided  $264.2  million  in cash  during  this  period
principally  as a result of the  proceeds  from sold retail  notes offset by the
purchase of retail notes and the  maturity of one $100  million  tranche of sold
wholesale notes.  The cash generated by operations and investing  activities was
used to pay dividends of $35.0 million to  Transportation  and reduce  financing
activities by $336.3 million during the nine months ended July 31, 1997.

Retail  receivable sales were a significant  source of funding in 1997 and 1996.
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  the  first  nine  months  of  fiscal  1997 and 1996 the
Corporation sold $987 million and $985 million,  respectively,  of retail notes.
At July 31,  1997,  the  remaining  shelf  registration  available  to NFRRC for
issuance of asset-backed securities was $1.5 billion.

The  Corporation  has a 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  maturing  in 2004.  As of July 31,  1997,  $100  million of the tranche
maturing in 1997 has been paid, and the outstanding securities are $400 million.
In July 1997, the Corporation filed a shelf  registration to issue an additional
$400  million  of  investor  certificates.  In August,  the trust  issued a $200
million tranche of investor certificates which matures in August 2003.

In May 1997, the Corporation sold $100 million of Senior  Subordinated Notes due
June  2002.   The  net  proceeds  from  the  sale  of  the  Notes  offered  were
approximately $97.5 million after deduction of the underwriting fees and certain
other expenses.

The  Corporation  has  $1,325  million  of   contractually   committed   support
facilities,  consisting of a $925 million bank revolving  credit  facility and a
$400 million asset-backed  commercial paper ("ABCP") program supported by a bank
liquidity  facility.  Each of these  facilities has a maturity date of March 31,
2001. At July 31, 1997,  unused  commitments  under these  facilities  were $755
million,  of which $112  million  provided  funding  backup for the  outstanding
short-term  debt.  The remaining $643 million,  when combined with  unrestricted
cash and cash  equivalents,  made $652  million  available  to fund the  general
business purposes of the Corporation at July 31, 1997.



<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)


The Corporation manages sensitivity to interest rate changes by funding floating
rate assets with  floating  rate debt,  primarily  by  borrowing  under the bank
revolving credit  agreement.  Fixed rate assets are funded 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. At July 31, 1997, the Corporation was a party to four interest rate
derivative  transactions;  two forward  starting swap agreements and two forward
treasury locks. The Corporation entered into these agreements in anticipation of
a November 1997 sale of retail  receivables and intends to close these positions
on the pricing  date of the sale.  The gain or loss which will result from these
transactions  will  be  included  in the  gain or  loss  on the  sale of  retail
receivables recognized in November 1997.

Under a state law enacted February 14, 1997, the Corporation will be relieved of
any liability under the Notice of Deficiency  issued by the Illinois  Department
of Revenue  ("Department")  to the Corporation for the fiscal years 1989 through
1991.  See  Note  5  to  the  Consolidated   Financial  Statements  for  further
discussion.

Business Outlook

Fiscal 1997 full year demand for combined  class 5-8 trucks is anticipated to be
slightly below fiscal 1996 levels.  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 funds 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>







                         NAVISTAR FINANCIAL CORPORATION
                                AND SUBSIDIARIES



                           PART II - OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K


          The Registrant filed the following reports on Form 8-K during the nine
          months ended July 31, 1997:
<TABLE>
          <S>                    <C>                    <C>
          Date of Report          Date Filed            Items Reported

          May 27, 1997           June 17, 1997               5, 7

</TABLE>


                                    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 September 15, 1997               /s/ P. E. Cochran
                                          P. E. Cochran
                                          Vice President and Controller
                                          (Principal Accounting Officer)