U.S. 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              SEPTEMBER 30, 1998    
                                        ----------------------------------

                                       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   1-14082 
                                  -------

                       SMART CHOICE AUTOMOTIVE GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                   FLORIDA                           59-1469577
      (STATE OR OTHER JURISDICTION OF      (I.R.S. EMPLOYER IDENTIFICATION NO.)
      INCORPORATION OR ORGANIZATION)

              5200 S. WASHINGTON AVENUE, TITUSVILLE, FLORIDA 32780
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                   (ZIP CODE)

                                 (407) 269-9680
                                 --------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                           --------------------------
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                         IF CHANGED SINCE LAST REPORT)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORT(S),  AND (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

YES    X_    NO ______

     INDICATE  NUMBER OR SHARES  OUTSTANDING OF EACH OF THE ISSUER'S  CLASSES OF
     COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:

     AS OF NOVEMBER 13, 1998,  6,597,504 SHARES OF THE REGISTRANT'S COMMON STOCK
     WERE ISSUED AND OUTSTANDING.



<PAGE>

                       SMART CHOICE AUTOMOTIVE GROUP, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS


                                                                      PAGE

PART I  - FINANCIAL STATEMENTS

     Item 1.  Financial Statements                                       3

       Condensed Consolidated Balance Sheets       -
       September 30, 1998 and December 31, 1997                          4

       Condensed Consolidated Statements of Operations  -
       Three and Nine Months Ended September 30, 1998 and 1997           6

       Condensed Consolidated Statements of Cash Flow  -
       Nine Months Ended September 30, 1998 and September 30, 1997       7

       Notes to Condensed Consolidated Financial Statements              9

     Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations                       10

Part II  OTHER INFORMATION                                              31

     Item 1.  Legal Proceedings                                         31

     Item 2.  Changes in Securities                                     31

     Item 4.  Other Information                                         32

     Item 5.  Exhibits and Reports on Form 8-K                          44









                                      -2-


<PAGE>


                                     PART I
                       SMART CHOICE AUTOMOTIVE GROUP, INC.

                              FINANCIAL STATEMENTS


         ITEM 1.  FINANCIAL STATEMENTS.











                                      -3-
<PAGE>

<TABLE>
<CAPTION>



                                                                          SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                        CONDENSED CONSOLIDATED BALANCE SHEETS



---------------------------------------------------------------------------------------------------------
                                       As of September 30, 1998          As of December 31, 1997
---------------------------------------------------------------------------------------------------------
<S>                                                   <C>                            <C>       
                                                 (Unaudited)                     (Audited)
 ASSETS
   Cash and cash equivalents                     $    608,584                    $  1,066,949
   Accounts receivable                              3,785,945                       1,773,124                                      
   Finance receivables
    Principal balances, net                        75,520,203                      40,084,412      
    Less: allowance for credit losses             (11,155,823)                     (6,857,265)
---------------------------------------------------------------------------------------------------------
            Finance receivables, net               64,364,380                      33,227,147
 
   Inventories, at cost                            21,987,960                      15,516,084
   Land held for resale                                    --                       1,050,000
   Property and equipment, net                      9,632,474                       9,214,207
   Notes receivable                                        --                          46,280
   Deferred debt costs, net                           276,455                         426,823
   Deferred stock offering costs                    1,233,864                              --
   Goodwill, net                                   25,074,079                      25,562,162
   Prepaid expenses                                 1,780,740                       1,008,229
   Deposits and other assets                          269,717                         213,986

---------------------------------------------------------------------------------------------------------
                                                $ 129,014,198                    $ 89,104,991

---------------------------------------------------------------------------------------------------------
                                 SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>


                                      -4-

<PAGE>

<TABLE>
<CAPTION>


                                                                       SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                     CONDENSED CONSOLIDATED BALANCE SHEETS

----------------------------------------------------------------------------------------------------------
                                                   As of September 30, 1998      As of  December 31, 1997
                                          
----------------------------------------------------------------------------------------------------------
<S>                                                              <C>                         <C>
                                                              (Unaudited)                (Audited)
 LIABILITIES AND STOCKHOLDERS' EQUITY
   Liabilities:
       Accounts payable                                     $  5,964,215            $   5,259,903
       Accrued expenses                                        3,354,175                4,633,841
       Line of credit, net of discount                        58,541,725               31,229,600
       Floorplans payable                                      6,803,012                8,287,092
       Capital lease obligations                               1,034,390                  940,280
       Notes payable                                          30,720,722               29,197,458
       Other liabilities                                              --                   94,913
---------------------------------------------------------------------------------------------------------
   Total liabilities                                         106,418,239               79,643,087
---------------------------------------------------------------------------------------------------------

   Redeemable convertible preferred stock                         10,000                4,941,834

   Stockholders' equity:
       Preferred stock                                         5,949,812                       --
       Common stock                                               65,976                   48,670
       Additional paid in capital                             30,683,828               24,157,126
       Accumulated deficit                                   (14,113,657)             (19,685,726)
---------------------------------------------------------------------------------------------------------
   Total stockholders' equity                                 22,585,959                4,520,070
---------------------------------------------------------------------------------------------------------

                                                            $129,014,198            $  89,104,991
---------------------------------------------------------------------------------------------------------
      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>




                                      -5-
<PAGE>

<TABLE>
<CAPTION>

                                                                                            SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                    (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------------
                                                                    Three Months Ended                   Nine Months Ended
                                                                      September 30                         September 30
                                                                 1998              1997               1998             1997
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>            <C>                 <C>    
 VEHICLE AND RELATED REVENUES:
    Sales of used vehicles                                    $ 23,306,072      $ 10,941,288     $ 63,908,603      $ 22,730,067
    Income on finance receivables                                4,972,448         2,173,807       11,914,587         4,624,482
    Sales of new vehicles                                        6,231,898         2,624,884       20,581,091         2,624,884
    Income from parts and accessories                            4,284,726         4,419,463       14,696,267        12,391,663
    Income from insurance and training                             635,809           352,347        1,061,841         1,003,603

--------------------------------------------------------------------------------------------------------------------------------
                                                                39,430,953        20,511,789      112,162,389        43,374,699
--------------------------------------------------------------------------------------------------------------------------------
 COST AND EXPENSES:
    Cost of used vehicles sold                                  15,268,886         7,316,758       41,645,117        16,011,303
    Provision for credit losses                                  3,782,525           862,370        8,201,409         2,411,181
    Cost of new vehicles sold                                    5,509,917         2,303,936       18,097,006         2,303,936
    Cost of parts and accessories sold                           2,842,530         2,935,303        9,519,318         7,844,569
    Cost of insurance and training                                  16,758            20,205           76,353            56,919 
    Selling, general and administrative expenses                 8,534,944         5,332,674       23,617,208        15,352,522    
    Compensation expenses related to                                                                       
        employee stock options                                          --            29,848               --         3,244,615
--------------------------------------------------------------------------------------------------------------------------------
                                                                35,955,560        18,801,094      101,156,411        47,225,045
--------------------------------------------------------------------------------------------------------------------------------
 INCOME (LOSS) FROM OPERATIONS                                   3,475,393         1,710,695       11,005,978        (3,850,346)
--------------------------------------------------------------------------------------------------------------------------------
    Interest expense                                             2,183,927         1,710,656        6,216,210         3,459,269
    Other income                                                  (509,771)         (135,689)      (1,133,614)         (249,438)
    Miscellaneous expense                                               --             1,047           14,383            71,265
--------------------------------------------------------------------------------------------------------------------------------
                                                                 1,674,156         1,576,014        5,096,979         3,281,096
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                                1,801,237           134,681        5,908,999        (7,131,442)
PREFERRED STOCK                                                   (173,245)               --         (337,084)               --
DIVIDENDS
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                   $  1,627,992        $  134,681       $5,571,915       $(7,131,442)
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE:
--------------------------------------------------------------------------------------------------------------------------------
                                                  BASIC              $ .25             $ .03            $ .92            $(1.64)
                                             -  DILUTED              $ .23             $ .03            $ .86                --
                                                                               
WEIGHTED AVERAGE NUMBER OF SHARES
 AND SHARE EQUIVALENTS OUTSTANDING:
                                               -  BASIC          6,578,698         4,626,226        6,056,234         4,346,235

                                                DILUTED          7,430,665         5,002,106        7,033,419                --
--------------------------------------------------------------------------------------------------------------------------------
      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>

                                      -6-

<PAGE>

<TABLE>
<CAPTION>


                                                                   SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                           (UNAUDITED)
--------------------------------------------------------------------------------------------------------
                                                               Nine Months Ended     Nine Months Ended
                                                               September 30, 1998    September 30, 1997
--------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                  <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                             $    5,908,999      $   (7,131,442)
   Adjustments to reconcile net loss to 
   Net cash provided by (used for) operating activities:
   Provision for credit losses                                     8,201,409           1,130,195
   Common stock and options issued for consulting fees                36,376             127,806
   Gain on debt extinguishment                                      (165,967)                 --
   (Gain) loss on disposal of fixed assets                           (43,381)             16,649
   Stock option compensation                                              --           3,244,615
   Depreciation and amortization                                    1,816,703          1,257,016
   Cash provided by (used for):
   Accounts receivable                                             (2,240,754)          (627,785)
   Inventory                                                       (6,471,876)        (4,432,309)
   Prepaid expenses                                                  (956,111)           238,579
   Other assets                                                       (33,617)          (423,190)
   Accounts payable                                                   704,312          1,275,522
   Accrued expenses and other liabilities                          (1,368,375)         2,677,352
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities          $     5,387,718      $  (2,646,992)
----------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in finance receivables                                (39,338,642)        (6,220,717)
   Cash for acquisitions, net of cash acquired                             --         (8,100,020)
   Advances to acquired companies prior to acquisition                     --         (3,184,129)
   Increase in deposits                                               (54,015)          (822,200)  
   Increase in deferred acquisition costs                                                (51,717)
   Payment (issuance) of notes receivable                              46,280           (630,167)        
   Purchase of property and equipment                              (1,057,971)          (656,434)
   Proceeds from disposal of property & equipment                   1,093,381            138,293
   Other                                                                   --            (47,047)
---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                         $   (39,310,967)     $ (19,574,138)
---------------------------------------------------------------------------------------------------------------------------------
                             CONTINUED ON NEXT PAGE

</TABLE>


                                      -7-

<PAGE>

<TABLE>
<CAPTION>


                                                                                       SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                                                               (CONTINUED)
                                                                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  --------------------------------------------------------------------------------------------------------------------------
                                                                           Nine Months Ended            Nine Months Ended
                                                                          September 30, 1998           September 30, 1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                          <C> 
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments on notes payable                                           (4,273,648)                  $(2,960,890)
    Proceeds from issuance of notes payable                                        7,082,000                     8,662,812
    Increase in deferred debt costs                                                  (52,530)                     (667,132)
    Increase in deferred stock offering cost                                      (1,233,864)
    Proceeds from issuance of preferred stock                                      5,891,410                       590,000
    Purchase of treasury stock                                                            --                       (13,590)
    Proceeds from issuance of convertible debentures                                      --                     1,350,000
    Bank overdraft                                                                        --                       (82,884)
    Proceeds from issuance of common stock                                           404,350                            --
    Proceeds from line of credit borrowings                                       27,250,000                    13,862,090
    Payments on floor plan notes payable                                          (1,484,080)                    2,378,293
    Payment of dividends                                                            (212,864)                           --
    Proceeds from capital lease obligations                                           94,110                            --
---------------------------------------------------------------------------------------------------------------------------
    Net cash provided by financing activities                                   $ 33,464,884                  $ 23,118,699
---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                (458,365)                      897,569

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   1,066,949                            --
---------------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $  608,584                    $  897,569
---------------------------------------------------------------------------------------------------------------------------
                                 SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>


                                      -8-

<PAGE>



                                          SMART CHOICE AUTOMOTIVE GROUP, INC.
                        NOTES TO CONDENSED CONSOLIDATED  FINANCIAL STATEMENTS
                                                                   (UNAUDITED)
------------------------------------------------------------------------------

NOTE 1  -  BASIS OF PRESENTATION

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements of Smart Choice  Automotive  Group,  Inc. (the  "Company")
reflect  all  adjustments,  consisting  only of  normal  recurring  adjustments,
necessary to present the Company's  financial position and results of operations
for the periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full fiscal year. The
Condensed  Consolidated  Balance  Sheet as of December 31, 1997 was derived from
audited  consolidated  financial statements as of that date but does not include
all of the  information  and notes  required by  generally  accepted  accounting
principles.   It  is  suggested  that  these  condensed  consolidated  financial
statements  be read in  conjunction  with  the  company's  audited  consolidated
financial  statements  included in the Company's  Annual Report on Form 10-K for
the year ended December 31, 1997.

NOTE 2 - FINANCE RECEIVABLES

The Company's finance receivables ("Finance Receivables" or "Finance Contracts")
are automobile retail  installment sales contracts  originated by the Company on
sales of used  cars at its  automobile  dealerships.  The  following  shows  the
principal  balances of the  Company's  Finance  Receivables  as of September 30,
1998:

                                                            SEPTEMBER 30, 1998
------------------------------------------------------------------------------
    Contractually scheduled payments                             $ 107,615,521
    Less: unearned finance charges                                 (33,292,915)
------------------------------------------------------------------------------
    Outstanding principal balances                                  74,322,606
    Add: loan origination costs                                      1,197,597
------------------------------------------------------------------------------
    Principal balances, net                                         75,520,203
    Less:  allowance for credit losses                             (11,155,823)
------------------------------------------------------------------------------
    Finance receivables, net                                     $  64,364,380
------------------------------------------------------------------------------

NOTE 3 - PRESENTATION OF DEALERSHIP REVENUES AND COST OF REVENUES

The Company generates  revenue from sales at used car stores,  income on finance
receivables,  sales  at  new  car  dealerships,  sales  of  Corvette  parts  and
accessories  and income from  insurance and training.  Cost of revenues  include
cost of sales at used cars stores,  the  provision  for credit  losses,  cost of
sales at new car  dealerships,  cost of Corvette parts and accessories and costs
of insurance and training.

The prices at which the  Company  sells its cars and the  interest  rate that it
charges  to  finance  these  sales take into  consideration  that the  Company's
primary customers are high-risk borrowers, some of whom ultimately default.



                                      -9-
<PAGE>


NOTE 4 - EARNINGS PER SHARE

Net earnings per common share amounts are based on the weighted  average  number
of common shares and potential common shares outstanding.

NOTE 5 - SEGMENT INFORMATION

The FASB issued Statement of Financial  Accounting  Standards No. 131(SFAS 131),
"Disclosures about Segments of an Enterprise and Related  Information." SFAS 131
is effective  for fiscal years  beginning  after  December 15, 1997.  Management
elected the early  adoption of this  pronouncement  during the first  quarter of
1998. SFAS 131 requires that public enterprises report certain information about
reporting segments in financial  statements.  It also requires the disclosure of
certain information  regarding services provided,  geographic areas of operation
and major customers.

The Company's operations are classified into four reportable segments.  The used
car stores  segment  operates a network  of 26 used car stores in  Florida.  The
Company primarily sells used vehicles to payment sensitive  non-prime  customers
who,  most  likely,  would be unable to  purchase  a vehicle  without  financing
through the Company's financing services segment. The financing services segment
finances  consumer  purchases of used vehicles  sold in the  Company's  used car
stores.  The new car  dealerships  segment  operates two new car  dealerships in
Florida.  The  Corvette  parts and  accessories  segment  sells and  distributes
Corvette parts and accessories  throughout the United States,  primarily through
its extensive catalog.

The following table shows certain financial information by reportable segment as
of and for the nine months ended September 30, 1998:
<TABLE>
<CAPTION>

                                 USED CAR        FINANCING         NEW CAR         CORVETTE      CORPORATE    CONSOLIDATED
                                  STORES          SERVICES       DEALERSHIPS      PARTS AND      AND OTHER
                                                                                 ACCESSORIES
----------------------------- --------------- ----------------- --------------- --------------- ------------- --------------
        (UNAUDITED)
<S>                                <C>                  <C>             <C>             <C>            <C>         <C>

Sales                            $63,908,603      $ 11,914,587  $  20,581,091      $14,696,267  $  1,061,841   $112,162,389
Operating income (loss)           11,792,510         1,830,688       (316,366)       1,959,477    (4,115,529)    11,150,780
Depreciation and                     279,897            19,271         34,955          110,894     1,371,686      1,816,703
amortization
Identifiable assets               11,486,266        65,398,178      7,238,009       15,178,406    29,713,339    129,014,198
Capital expenditures                 740,246            68,578         35,635           85,789       127,723      1,057,971
Interest expense                      94,798         3,891,763        273,220              --      1,956,429      6,216,210

</TABLE>


ITEM NO. 2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS.

     The following  discussion  contains  certain  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended (the  "Exchange  Act").  The words  "believe",  "expect",  "anticipate",
"estimate", "project", "intend" and similar expressions identify forward-looking
statements,   which  speak  only  as  of  the  date  such  statement  was  made.
Forward-looking  statements may include,  but not be limited to,  projections of
revenues,  income or loss, plans for acquisitions and expansion,  integration of
new operations,  financing needs, industry trends, consumer demand and levels of
competition.  These  statements by their nature  involve  substantial  risks and
uncertainties,  some of which cannot be predicted or  quantified.  Future events
and actual results could differ materially from those expressed in, contemplated
by or underlying any such  forward-looking  statements.  Statements contained in
this "Management's  Discussions and Analysis of Financial  Condition and Results
of  Operations"  and in the notes to the financial  statements  and elsewhere in
this report describe  factors,  among others,  that could contribute to or cause
such differences.

                                      -10-
<PAGE>

     The following discussion and analysis regarding the Company's  consolidated
financial  position and  consolidated  results of  operations  should be read in
conjunction  with the financial  statements  and related notes thereto  included
elsewhere.

OVERVIEW

     Smart Choice  Automotive  Group, Inc. operates 22 locations in Florida that
sell used cars under the "First Choice" brand name.  The Company's  First Choice
cars are three to six years old, have less than 80,000 miles and have  undergone
thorough inspection,  reconditioning and, as necessary, repair. The Company also
sells  used  cars  that may not meet the  First  Choice  criteria  through  four
additional  stores in Florida  that operate  under the "Team" name.  Through its
finance company subsidiary,  the Company provides financing for its customers by
originating retail automobile installment sales contracts secured by the cars it
sells.  The Company's  customers  typically have limited credit  histories,  low
incomes and/or past credit problems.

     The Company also owns two new car dealerships in Florida,  manufactures and
sells Corvette parts and accessories  through its subsidiary Eckler  Industries,
Inc., ("Eckler's"), sells insurance and provides dealership training services.

     THE PREDECESSOR  ACQUISITION.  On January 28, 1997, the Company,  which was
then  named  Eckler  Industries,  Inc.,  and was  operating  exclusively  in the
Corvette parts and accessories  business,  acquired Smart Choice Holdings,  Inc.
("SCHI") the  ("Predecessor  Acquisition")  through a merger between SCHI and an
acquisition  subsidiary  of  Eckler's.  SCHI  was  engaged  in the  business  of
acquiring various automobile sales and finance companies.  After the Predecessor
Acquisition,  the Company's name was changed to Smart Choice  Automotive  Group,
Inc.

     In the  Predecessor  Acquisition,  shareholders  of SCHI were issued Common
Stock  having a majority of the voting  rights of the  Company.  Therefore,  the
Predecessor  Acquisition  was accounted for as a purchase of Eckler's by SCHI (a
reverse  acquisition  in which SCHI was  considered  the acquirer for accounting
purposes).

RESULTS OF OPERATIONS

     COMPARISON  OF THREE MONTHS ENDED  SEPTEMBER 30, 1998 TO THREE MONTHS ENDED
     SEPTEMBER 30, 1997

<TABLE>
<CAPTION>

                                       Three Months Ended               Three Months Ended
                                       September 30, 1998               September 30, 1997
                                     -------------------------       ----------------------
                                                   (Dollars in Thousands)
                                                   ----------------------
<S>                                        <C>            <C>           <C>            <C>

Revenues.......................          $ 39,431       100.0%         $ 20,512      100.0%
Cost of Sales..................            27,422        69.5%           13,438       65.5%
                                           ------        ----            ------       ---- 
     Gross Profit..............            12,009        30.5%            7,074       34.5%
Operating Expenses.............             8,535        21.6%            5,363       26.1%
                                            -----        ----             -----       ---- 
     Operating Income (Loss)...             3,474         8.8%            1,711        8.3% 
</TABLE>


     REVENUES.  The  Company's  revenues were $39.4 million for the three months
ended  September 30, 1998 compared to $20.5 million for the same period in 1997.
The increase for the third quarter of 1998 reflects primarily the increase to 26
used car  stores at  September  30,  1998 as  compared  to 16 used car stores at
September 30, 1997.


                                      -11-
<PAGE>

     COSTS AND EXPENSES.  Cost of sales increased to $27.4 million for the three
months ended September 30, 1998 compared to $13.4 million for the same period in
1997.  The  increase  related  primarily to the opening of  additional  used car
stores referred to above.

     The Company's  selling,  general and  administrative  expenses increased to
$8.5 million for the three months ended September 30, 1998 from $5.3 million for
the same period in 1997 due to the increased operating  activities incurred with
additional car stores.

    
     INTEREST  EXPENSE AND OTHER INCOME.  Interest  expense totaled $2.2 million
for the three months ended  September  30, 1998 compared to $1.7 million for the
same period in 1997, an increase of 28%. The increase  resulted  primarily  from
higher  outstanding  indebtedness  needed to  finance  higher  levels of finance
receivables and inventory as the Company expanded its operations.

     Other income  totaled $.5 million for the three months ended  September 30,
1998  compared  to  $135,689  for the same  period in 1997.  The 1998  amount is
comprised  primarily of  commissions  on  insurance  sales and  additional  fees
generated at the new car dealerships.

     NET  INCOME.  Net income  available  to common  stockholders  totaled  $1.6
million for the three  months ended  September  30, 1998 as compared to $134,681
for the same  period  in  1997.  The  improvement  resulted  primarily  from the
refocusing of the Company's  strategy and the  restructuring  of its  operations
during the last quarter of 1997.

SEGMENT INFORMATION

     The Company is comprised of four  segments:  used car stores,  financing of
used car sales,  new car  dealerships  and Corvette parts and  accessories.  The
Company's  results of operations are most meaningful when analyzed and discussed
by segment.

<TABLE>
<CAPTION>

USED CAR STORES

                                                          THREE MONTHS ENDED         THREE MONTHS ENDED
                                                          SEPTEMBER 30, 1998         SEPTEMBER 30, 1997
                                                        ---------------------      -----------------------
                                                                      (DOLLARS IN THOUSANDS)
                                                                       ---------------------
<S>                                                       <C>            <C>         <C>        <C>  

Sales at used car stores................................  $23,306      100.0%      $10,941     100.0%
Cost of sales at used car stores........................   15,269       65.5         7,317      66.9
                                                           ------      -----       -------     -----
         Gross profits..................................    8,037       34.5         3,624      33.1
Operating expenses......................................    3,322       14.3         2,473      22.6
                                                           ------      -----       -------     -----
          Operating income..............................  $ 4,715       20.2%      $ 1,151      10.5%

</TABLE>

     Sales at used car stores  increased  to $23.3  million for the three months
ended  September 30, 1998 compared to $10.9 million for the same period in 1997.
The increase in sales  reflects the sale of 2,192 cars at the 26 used car stores
that were open during the 1998 period as compared to the sale of 837 cars at the
16 used car stores  that were open  during the 1997  period.  In  addition,  the
average  number of used cars sold per store  increased  to 84 cars for the three
months ended September 30, 1998 as compared to average sales of 52 used cars for
the same period of 1997.

                                      -12-
<PAGE>

     The increase in cost of sales at the used car stores primarily reflects the
opening of additional used car store locations as discussed  above. As a percent
of sales,  the cost of sales at the used car stores declined to 65.5% from 66.9%
in 1997, reflecting  management's focus on increasing gross margins as well as a
higher  average sales volume per store.  

     Gross  profit  increased  to $8.0  million  during the three  months  ended
September 30, 1998 from $3.6 million during the three months ended September 30,
1997.  Gross  profit as a percentage  of sales  increased to 34.5% for the three
months ended  September 30, 1998 as compared to 33.1% for the three months ended
September 30, 1997. The improvement  resulted  primarily from management's focus
on increasing gross margins, as well as a higher average sales volume per store.

     Operating  expenses  relating to sales at used car stores increased to $3.3
million  from $2.5 million as a result of the increase in the number of used car
stores.

FINANCING OF USED CAR SALES
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED       THREE MONTHS ENDED
                                                          SEPTEMBER 30, 1998       SEPTEMBER 30, 1997
                                                         --------------------    -----------------------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                         <C>      <C>             <C>         <C> 
Income on finance receivables............................  $4,972    100.0%       $ 2,174       100.0%
Provision for credit losses..............................   3,783     76.1            862        39.7
Operating expenses.......................................     626     12.6            443        20.4
                                                            -----    -----          -----       -----            ----
       Operating income..................................     563     11.3            869        39.9
Interest expenses on finance receivables.................   1,517     30.5            900        41.4
                                                            -----    -----          -----       -----
       Net income (loss).................................  $ (954)   (19.2)%      $   (31)       (1.5)%

</TABLE>

     Income on  finance  receivables  increased  to $5.0  million  for the three
months ended  September  30, 1998 from $2.2 million for the same period in 1997.
The  increase  reflects  the  increase in the  average  net finance  receivables
outstanding to $70.4 million for the three months ended  September 30, 1998 from
$35.3  million  for the same  period of 1997.  This  increase  results  from the
corresponding  increase  in sales of used cars  during  the three  months  ended
September 30, 1998.

     A high  percentage  of the  Company's  customers  do not  make all of their
contractually  scheduled  payments on their  finance  contracts,  requiring  the
Company to charge off the remaining principal balance and accrued interest,  net
of recoveries on repossessed cars. The Company maintains on its balance sheet an
allowance for credit losses to absorb such losses.  To accrue to the  allowance,
the Company  records an expense  (the  "provision")  based upon its  estimate of
future credit losses on finance receivables originated. The provision for credit
losses for the three months ended  September 30, 1998 was $3.7 million  compared
to $.9  million  for  the  same  period  in  1997.  The  increase  reflects  the
significantly higher amount of finance receivables originated during the period.

     Operating  income  for the  three  months  ended  September  30,  1998  was
approximately $.6 million compared to an operating income of $.9 million for the
same  period in 1997 as a result of a higher  provision  for credit  losses as a
percentage of income on finance receivables.

     Interest expense on finance  receivables  increased to $1.5 million for the
three  months ended  September  30, 1998 from $.9 million for the same period in
1997. The increase reflects the higher level of finance  receivables,  which was
only  partially  offset by the  reduction in the  interest  rate on the borrowed
funds to 11% for the three  months ended  September  30, 1998 from 11.5% for the
three months ended September 30, 1997.


                                     -13-
<PAGE>

NEW CAR DEALERSHIPS
<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED     PERIOD FROM AUGUST 28, 1997
                                                            SEPTEMBER 30, 1998     TO SEPTEMBER 30, 1997
                                                           -------------------     ---------------------------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                                           <C>       <C>           <C>       <C>  
Sales at new car dealerships............................    $6,232     100.0%      $ 2,625     100.0%
Cost of sales at new car dealership.....................     5,510      88.4         2,304      87.8
                                                             -----     -----         -----     -----
     Gross profit.......................................       722      11.6           321      12.2
Operating expenses......................................       798      12.8           418      15.9
                                                             -----     -----         -----     -----
     Operating loss.....................................    $  (76)     (1.2)%     $   (97)     (3.7)%
</TABLE>


     The Company  acquired two new car dealerships in August 1997.  Sales at new
car  dealerships  increased  to $6.2  million  during  the  three  months  ended
September 30, 1998,  compared to $2.6 million for the period ended September 30,
1997.  The  increase in sales  reflects  three months of  operations  versus the
starting  operations  for the period from August 28, 1997 to September 30, 1997.
Gross profit increased to $.7 million during the period ended September 30, 1998
from $.3 million during the period ended  September 30, 1997.  Gross profit as a
percentage of sales  decreased to 11.6% for the three months ended September 30,
1998 as compared to 12.2% for the period ended September 30, 1997.

     Operating  expenses relating to sales at the new car dealerships  increased
to $.8 million from $.4 million.  The increase in expenses reflects three months
of operations versus the starting operations for the period from August 28, 1997
to September 30, 1997.


CORVETTE PARTS AND ACCESSORIES
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED             THREE MONTHS ENDED
                                                                SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                           -----------------------------   -------------------------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                              <C>             <C>             <C>           <C>

Sales of Corvette parts and accessories..................       $ 4,285         100.0%         $4,419         100.0%
Cost of Corvette parts and accessories...................         2,843          66.3           2,935          66.4
                                                                 ------         -----           -----         -----
        Gross profit.....................................         1,442          33.7           1,484          33.6
Operating expenses.......................................         1,110          25.9           1,296          29.3
                                                                 ------         -----           -----         -----
        Operating income (loss).........................        $   332           7.8%         $  188           4.3%
                                                                                                 

</TABLE>

     Sales of Corvette parts and  accessories  decreased to $4.3 million for the
three  months  ended  September  30, 1998  compared to $4.4 million for the same
period in 1997. The decrease in sales reflects  decreased  contract sales versus
the same period in 1997.

     The decrease in operating  expenses to $1.1 million during the three months
ended  September  30, 1998 as compared to $1.3  million  during the three months
ended  September  30, 1997 was due to the  reallocation  of certain  expenses to
corporate overhead.

                                      -14-
<PAGE>

COMPARISON  OF NINE  MONTHS  ENDED  SEPTEMBER  30,  1998 TO  NINE  MONTHS  ENDED
SEPTEMBER 30, 1997

<TABLE>
<CAPTION>

                                       Three Months Ended               Three Months Ended
                                       September 30, 1998               September 30, 1997
                                     -------------------------       ----------------------
                                                   (Dollars in Thousands)
                                                   ----------------------
<S>                                        <C>            <C>           <C>            <C>

Revenues.......................          $112,162       100.0%         $ 43,375      100.0%
Cost of Sales..................            77,538        69.1%           28,628       66.0%
                                           ------        ----            ------       ---- 
     Gross Profit..............            34,624        30.9%           14,747       34.0%
Operating Expenses.............            23,617        21.1%           18,598       42.9%
                                           ------        ----            ------       ---- 
     Operating Income (Loss)...            11,007         9.8%           (3,851)      (8.9%)
</TABLE>


     REVENUES.  The Company's  revenues were $112.2  million for the nine months
ended  September 30, 1998 compared to $43.4 million for the same period in 1997.
The increase for the first nine months of 1998  reflects  primarily the increase
to 26 used car stores at September 30, 1998 as compared to 16 used car stores at
September 30, 1997.  In addition,  the 1997 first nine months  revenues  reflect
less than a full nine months of operations of the Predecessors, whereas the 1998
first nine months  revenues  reflect a full nine months of  operations of all of
the used car  companies  acquired by the Company  during 1997 and of the two new
car  dealerships  acquired in August 1997, as well as an increase in the average
number of used cars sold per store during the period.

     COSTS AND EXPENSES.  Cost of sales  increased to $77.5 million for the nine
months ended September 30, 1998 compared to $28.6 million for the same period in
1997.  The  increase  in the cost of sales  primarily  reflects  the  opening of
additional used car store locations.

     The Company's  selling,  general and  administrative  expenses increased to
$23.6  million for the nine months ended  September  30, 1998 from $15.4 million
for the same period in 1997,  excluding  $1.7 million in settlement  payments to
terminated  employees and consultants of the Predecessors during the nine months
ended  September  30, 1997.  The results  reflect a decrease as a percentage  of
revenues to 30.5% in the first nine months of 1998 from 53.6% in the  comparable
1997 period as a result of better  utilization of the Company's  infrastructure,
including   centralized   marketing,   accounting  and  management   information
functions.

     During the first nine months of 1997, the Company  recognized an expense of
$3.2 million for  compensation  expense  related to employee and director  stock
options.  The Company did not have a comparable  expense  during the  nine-month
period ended September 30, 1998.

     INTEREST  EXPENSE AND OTHER INCOME.  Interest  expense totaled $6.2 million
for the nine months ended  September  30, 1998  compared to $3.5 million for the
same period in 1997, an increase of 80%. The increase  resulted  primarily  from
higher  outstanding  indebtedness  needed to  finance  higher  levels of finance
receivables and inventory as the Company expanded its operations.

     Other income  totaled $1.1 million for the nine months ended  September 30,
1998  compared to $.2  million  for the same period in 1997.  The 1998 amount is
comprised  primarily of additional fees generated at the new car dealerships and
recoupment of prior year's expenses.

                                      -15-
<PAGE>

     NET  INCOME.  Net income  available  to common  stockholders  totaled  $5.6
million for the nine months ended  September  30, 1998 as compared to a net loss
of $7.1 million for the same period in 1997. The improvement  resulted primarily
from  the  refocusing  of  the  Company's  strategy,  the  restructuring  of its
operations  during the last  quarter of 1997 and  increased  levels of  business
activities.

SEGMENT INFORMATION

     There follows a discussion of the Company's  results of operations  for the
nine-month period by segment.

USED CAR STORES
<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED            NINE MONTHS ENDED
                                                                SEPTEMBER 30, 1998           SEPTEMBER 30, 1997
                                                           ------------------------       -----------------------------
                                                                            (DOLLARS IN THOUSANDS)

<S>                                                              <C>          <C>           <C>           <C>

Sales at used car stores...................................   $ 63,909      100.0%         $22,730       100.0%
Cost of sales at used car stores...........................     41,645       65.2           16,011        70.4
                                                                ------      -----           ------        ----
         Gross profits.....................................     22,264       34.8            6,719        29.6
Operating expenses.........................................     10,471       16.4            4,433        19.5
                                                                ------      -----           ------        ----
         Operating income.................................    $ 11,793       18.5%         $ 2,286        10.1%
</TABLE>

     Sales at used car stores  increased  to $64.0  million  for the nine months
ended  September 30, 1998 compared to $22.7 million for the same period in 1997.
The increase in sales  reflects the sale of 6,627 cars at the 26 used car stores
that were open  during the 1998  period as compared to the sale of 2,078 cars at
the 16 used car stores that were open during the 1997 period.  In addition,  the
average  number of used cars sold per store  increased  to 255 cars for the nine
months ended  September  30, 1998 as compared to average  sales of 130 used cars
for the same period of 1997.

     The increase in cost of sales at the used car stores primarily reflects the
opening of  additional  used car store  locations as  discussed  above and, to a
lesser extent, inclusion in the first nine months of 1998, a full nine months of
operations of the Predecessors.  As a percent of sales, the cost of sales at the
used car stores  declined to 65.2% from 70.4% in 1997,  reflecting  management's
focus on increasing gross margins.

     Gross  profit  increased  to $22.3  million  during the nine  months  ended
September 30, 1998 from $6.7 million during the nine months ended  September 30,
1997.  Gross  profit as a  percentage  of sales  increased to 34.8% for the nine
months ended  September  30, 1998 as compared to 29.6% for the nine months ended
September 30, 1997. The improvement  resulted  primarily from management's focus
on increasing gross margins, as well as a higher average sales volume per store.

     Operating  expenses relating to sales at used car stores increased to $10.4
million  from $4.4 million as a result of the increase in the number of used car
stores.  Operating  expenses as a percentage of revenues  decreased to 16.4% for
the nine  months  ended  September  30,  1998 as  compared to 19.5% for the nine
months ended September 30, 1997.

FINANCING OF USED CAR SALES
<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED              NINE MONTHS ENDED
                                                                SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                           ------------------------        -------------------------
                                                                             (DOLLARS IN THOUSANDS)

<S>                                                                 <C>       <C>                <C>          <C>   

Income on finance receivables.............................    $ 11,914        100.0%           $ 4,624       100.0%
Provision for credit losses...............................       8,201        68.8               2,411        52.1
Operating expenses........................................       2,027        17.0               1,226        26.5
                                                                ------        ----               -----        ----
      Operating income....................................       1,686        14.2                 987        21.3
Interest expense on finance receivables...................       3,892        32.7               1,932        41.8
                                                                ------        ----               -----        ----
      Net income (loss)..................................     $ (2,206)      (18.5)%           $  (945)      (20.4)%
                                                                                  
</TABLE>

                                      -16-
<PAGE>

     Income on  finance  receivables  increased  to $11.9  million  for the nine
months ended  September  30, 1998 from $4.6 million for the same period in 1997.
The  increase  reflects  the  increase in the  average  net finance  receivables
outstanding  to $58.5 million for the nine months ended  September 30, 1998 from
$25.0  million  for the same  period of 1997.  This  increase  results  from the
corresponding  increase  in sales of used  cars  during  the nine  months  ended
September 30, 1998.

     A high  percentage  of the  Company's  customers  do not  make all of their
contractually  scheduled  payments on their  finance  contracts,  requiring  the
Company to charge off the remaining principal balance and accrued interest,  net
of recoveries on repossessed cars. The Company maintains on its balance sheet an
allowance for credit losses to absorb such losses.  To accrue to the  allowance,
the Company  records an expense  (the  "provision")  based upon its  estimate of
future credit losses on finance receivables originated. The provision for credit
losses for the nine months ended September 30, 1998 was $8.2 million compared to
$2.4  million  for  the  same  period  in  1997.   The  increase   reflects  the
significantly higher amount of finance receivables outstanding.

     Interest expense on finance  receivables  increased to $3.9 million for the
nine months  ended  September  30, 1998 from $1.9 million for the same period in
1997. The increase reflects the higher level of finance  receivables,  which was
only  partially  offset by the  reduction in the  interest  rate on the borrowed
funds,  to 11.0% for the nine months ended September 30, 1998 from 11.5% for the
nine months ended September 30, 1997.

     The net loss for the nine months ended September 30, 1998 was approximately
$2.2  million  compared to a net loss of $.9 million for the same period in 1997
as a result of a lower  provision for credit losses as a percentage of income on
finance  receivables.  Net losses resulted from the recognition of the provision
for credit losses on the significant increase in finance receivables  originated
during the first nine months of 1998 and 1997 first quarters.

NEW CAR DEALERSHIPS
<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED            PERIOD FROM AUGUST 28, 1997
                                                                SEPTEMBER 30, 1998              TO SEPTEMBER 30, 1997
                                                           -----------------------------   --------------------------------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                              <C>           <C>            <C>            <C>

Sales at new car dealerships...............................     $ 20,581       100.0%      $ 2,625          100.0%
Cost of sales at new car dealerships.......................       18,097        87.9         2,304           87.8
                                                                  ------       -----         -----          -----
        Gross profit.......................................        2,484        12.1           321           12.2
Operating expenses.........................................        2,800        13.6           418           15.9
                                                                  ------       -----         -----          -----
        Operating loss.....................................     $   (316)       (1.5)%     $   (97)          (3.7)%
                                                                
</TABLE>

     The Company  acquired two new car dealerships in August 1997.  Sales at new
car  dealerships  increased  to $20.6  million  compared to $2.6 million for the
period ended  September  30, 1997.  During the nine months ended  September  30,
1998,  the Company  sold 925 cars at its two new car  dealerships. 

     Gross  profit  increased  to $2.5  million  during  the nine  months  ended
September  30, 1998 from $.3 million for the period  ended  September  30, 1997.
Gross  profit as a  percentage  of sales  decreased to 12.1% for the nine months
ended September 30, 1998 as compared to 12.2% for the period ended September 30,
1997.

     Operating  expenses relating to sales at the new car dealerships  increased
to $2.8 million  compared to $.4 million.  The increase in expenses reflect nine
months of operations  versus the starting  operations for the period from August
28, 1997 to September 30, 1997.

                                      -17-
<PAGE>

CORVETTE PARTS AND ACCESSORIES
<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED              NINE MONTHS ENDED
                                                                SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                           ------------------------        ---------------------------
                                                                             (DOLLARS IN THOUSANDS)

<S>                                                           <C>             <C>               <C>           <C>   

Sales of Corvette parts and accessories..................    $14,696       100.0%              $12,392       100.0%
Cost of Corvette parts and accessories...................      9,519        64.8                 7,845        63.3
                                                              ------       -----                 -----       -----
        Gross profit.....................................      5,177        35.2                 4,547        36.7
Operating expenses.......................................      3,217        21.9                 4,112        33.2
                                                              ------       -----                 -----       -----
        Operating income.................................    $ 1,960        13.3%              $   435         3.5%
</TABLE>

     Sales of Corvette parts and accessories  increased to $14.7 million for the
nine months  ended  September  30, 1998  compared to $12.4  million for the same
period in 1997. The increase in sales reflects an additional mailing of Eckler's
mail order catalog in late 1997.

     The cost of sales for the Corvette parts and accessories increased to 64.8%
from 63.3% of sales, reflecting an increase in sales of lower margin items.

     Although  gross profit  increased to $5.2 million for the nine months ended
September  30, 1998 from $4.5  million for the nine months ended  September  30,
1997,  the gross margin on sales of Corvette parts and  accessories  declined to
35.2% during the nine months ended September 30, 1998 from 36.7% during the nine
months  ended  September  30,  1997 as a result of sales of lower  margin  items
during the 1998 period.

     The decrease in operating  expenses to $3.2 million  during the nine months
ended  September  30, 1998 as compared  to $4.1  million  during the nine months
ended  September  30, 1997 was due to the  reallocation  of certain  expenses to
corporate overhead.

CREDIT LOSSES

     GENERAL.  The Company has  established  an allowance  to cover  anticipated
credit  losses  on the  finance  receivables  currently  in its  portfolio.  The
allowance has been established by the recognition in the Company's statements of
operations of the provision for credit losses attributed to finance  receivables
originated by the Company.

     The allowance decreased from 17.1% of outstanding  principal balances as of
December  31,  1997 to 15.0% as of  September  30,  1998.  The  following  table
reflects  activity in the allowance for the nine months ended September 30, 1998
and 1997 and for the year ended December 31, 1997.

<TABLE>
<CAPTION>


                                                               NINE MONTHS ENDED         YEAR ENDED
                                                                 SEPTEMBER 30,          DECEMBER 31,
                                                           1998             1997            1997
                                                           ------------------------    ---------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                         <C>               <C>             <C>

Balance, beginning of period..........................     $ 6,857           --                --
Balance at dates of acquisitions......................          --       $5,628            $5,628
Provision for credit losses...........................       8,201        2,989             4,941
Net charge offs.......................................      (3,903)      (2,506)           (3,712)
                                                           -------       -------           -------
Balance, end of period................................     $11,155       $6,111            $6,857
Allowance as a percentage of finance receivables......        15.0%        17.1%             17.1%
</TABLE>


     NET CHARGE OFFS. The Company's policy is to charge off finance  receivables
when they are  deemed  uncollectible  but in any event at such time as a finance
receivable is delinquent for 90 days. The net charge off amount is the principal
balance of the finance receivable at the time of the charge off plus accrued but
unpaid interest,  less any recovery.  The Company  recognizes  recoveries in the
amount of the wholesale value (typically  "Clean Black Book") of  repossessions.
The following table sets forth information regarding charge off activity for the
Company's  finance  receivables for the nine months ended September 30, 1998 and
1997 and for the year ended December 31, 1997.

                                      -18-
<PAGE>


<TABLE>
<CAPTION>


                                                                NINE MONTHS ENDED           YEAR ENDED
                                                                  SEPTEMBER 30,            DECEMBER 31,
                                                             1998            1997              1998           
                                                            ----------------------      ------------------
                                                                          (Dollars in Thousands)
<S>                                                         <C>                <C>              <C>  
Principal Balances...................................      $ 10,140       $ 5,050           $ 7,920
Collateral repossessed...............................            --            36                37 
Other................................................            --            --               --
                                                           --------       -------           -------
Total principal balances.............................        10,140         5,086             7,957
Recoveries, net......................................        (6,237)       (2,580)           (4,245)
Net charge offs......................................      $  3,903       $ 2,506           $ 3,712
Average principal balances...........................      $ 58,494       $25,031           $27,325
Net charge offs as a percentage of average principal
        balance outstanding.......................              6.7%         10.0%             13.6%
</TABLE>

     DELINQUENCIES.  Analysis  of  delinquency  trends  is  also  considered  in
evaluating  the adequacy of the  allowance.  The  following  table  reflects the
principal  balance of delinquent  finance  receivables  as a percentage of total
outstanding principal balances of the Company's finance receivables portfolio as
of September 30, 1998 and 1997 and as of December 31, 1997.

<TABLE>
<CAPTION>

                                                                                      AS OF
                                                             AS OF SEPTEMBER 30,   DECEMBER 31,
                                                           1998          1997         1997    
                                                           ----          ----         ----
<S>                                                         <C>          <C>           <C>
Aging Percentages:
Principal balances current.............................    91.8%         89.1%        91.1%
Principal balances 31 days to 60 days..................     3.9           5.0          4.0
Principal balances over 60 days........................     4.3           5.9          4.9
Total over 31 days   ..................................     8.2          10.9          8.9
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company requires capital to support  increases in finance  receivables,
car inventory,  parts and  accessories  inventory,  property and equipment,  and
working capital for general  corporate  purposes.  Funding  sources  potentially
available to the Company  include  operating cash flow,  third-party  investors,
financial institution borrowings, borrowings against finance receivables and the
securitization of its finance receivables.

     Net cash provided by (used for) operating activities was approximately $5.4
million and ($2.6)  million for the nine month periods ended  September 30, 1998
and 1997, respectively. Net cash provided from operating activities in the first
nine months of 1998  reflected  the net income for the period which was adjusted
primarily  for the  provision  for  credit  losses  and  increases  in  accounts
receivable  and  inventory.  The increase from the first nine months of 1997 was
primarily a result of the large net loss in the first nine months of 1997.

                                      -19-
<PAGE>


     Cash used in investing activities was approximately $39.3 million and $19.6
million during the nine months ended September 30, 1998 and 1997,  respectively.
The 1998 amount primarily  reflects increases in finance  receivables.  The 1997
amount reflects an increase in finance receivables  associated with acquisitions
during the first nine months of 1997.

     Cash provided by financing  activities was approximately  $33.5 million and
$23.1  million  during  the nine  months  ended  September  30,  1998 and  1997,
respectively.  In the first nine months of 1998, the Company increased its notes
payable on finance  receivables  by $27.2 million and borrowed $7.1 million.  In
the first nine months of 1997,  the Company  raised  approximately  $0.6 million
through a sale of preferred stock and increased its line of credit and floorplan
borrowings by approximately $16.2 million.

     The Company has borrowed, and will continue to borrow,  substantial amounts
to fund its used car sales and financing operations. The Company has a revolving
credit  facility with Finova Capital  Corporation to provide funding for finance
receivables from used car sales originated by the Company (the "Finova Revolving
Facility").  The Finova  Revolving  Facility had a maximum  commitment  of $35.0
million at December 31, 1997 and was increased to a maximum  commitment of $75.0
million,  effective  May 11,  1998.  Under the Finova  Revolving  Facility,  the
Company may borrow up to 55% of the gross balance of eligible finance contracts.
The Finova  Revolving  Facility  expires  in  December  1999,  at which time its
renewal  will be subject to  renegotiation.  The Finova  Revolving  Facility  is
secured  by  substantially  all  of the  Company's  finance  receivables.  As of
September 30, 1998 and December 31, 1997, the principal amount outstanding under
the Finova Revolving Facility was $58.7 million and $31.4 million, respectively.
The Finova Revolving  Facility bears interest at the prime rate plus 2.5% (11.0%
as of September 30, 1998).

     In the first nine months of 1998 and in 1997, the Company financed its used
car  inventory  through  a line of  credit  with  Manheim  Automotive  Financial
Services, Inc. (the "Manheim Facility") which had an outstanding balance of $2.8
million at September 30, 1998 and $2.7 million at December 31, 1997. The maximum
commitment under the Manheim Facility is $3.75 million.  The Manheim Facility is
secured by the Company's  used car inventory and bears interest at 1.5% over the
prime rate (10.0% as of September 30, 1998).  Amounts outstanding are payable on
the  earlier  of the day  after a car is sold or 180 days  after  the  floorplan
advance.

     The Company finances its new car inventory through  manufacturer  floorplan
facilities.  The Company's  floorplan facility with Volvo Finance North America,
Inc. has a maximum commitment of $3.3 million,  bears interest at 1.0% above the
prime rate (9.5% as of  September  30,  1998),  and at  September  30,  1998 and
December 31, 1997 had  outstanding  balances of $2.3  million and $3.3  million,
respectively.  The Company's  floorplan  facility  with Nissan Motor  Acceptance
Corporation has a $3.0 million maximum commitment,  bears interest at 1.0% above
prime (9.5% as of September  30,  1998),  and at September 30, 1998 and December
31,  1997  had   outstanding   balances  of  $1.7  million  and  $2.3   million,
respectively.

     In December  1997,  the  Company  completed  an  offering to  institutional
investors of 400 units of Series A Redeemable  Convertible  Preferred  Stock and
warrants at $10,000 per unit. Proceeds from the offering, net of offering costs,
were  approximately  $3.9 million.  Each unit consisted of one share of Series A
Redeemable  Convertible Preferred Stock and a five-year warrant to acquire 1,200
shares of Common Stock for each preferred share  purchased.  The exercise prices
of the warrants are $8.10 for 90,000 shares and $5.23 for 30,000  shares.  As of
September  30,  1998 all but one share of the  Series A  Redeemable  Convertible
Preferred Stock had been converted into Common Stock.

     In May 1998, the Company sold to a private  investment  group 220 shares of
the Company's Series B Convertible  Preferred Stock for $10,000 per share for an
aggregate of $2.2 million. The Series B Convertible Preferred Stock has an 11.0%
dividend per year and is convertible  into Common Stock at a conversion  rate of
$5.00 per share. After November 5, 1999, the Company may, at its option,  redeem
the Series B Convertible  Preferred  Stock for $10,000 per share.  In connection
with the  issuance  of the Series B  Convertible  Preferred  Stock,  the Company
agreed to certain  limitations on the issuance of additional shares of preferred
stock by the Company.

                                      -20-
<PAGE>

     In June 1998, the Company sold to a private  investment  group 24.98 shares
of the Company's Series C Convertible  Preferred Stock for $10,000 per share for
an aggregate of $249,800.  The Series C Convertible Preferred Stock has an 11.0%
dividend per year and is convertible  into Common Stock at a conversion  rate of
$5.59 per share. After December 2, 1999, the Company may, at its option,  redeem
the Series C Convertible  Preferred  Stock for $10,000 per share.  In connection
with the  issuance  of the Series C  Convertible  Preferred  Stock,  the Company
agreed to certain  limitations on the issuance of additional shares of preferred
stock by the Company.

     In June 1998, the Company sold to a private  investment group 350 shares of
the Company's Series D Convertible  Preferred Stock for $10,000 per share for an
aggregate of $3,500,000.  The Series D Convertible  Preferred Stock has an 11.0%
dividend  until  September 2003 when the dividend rate increases to 20% per year
and is  convertible  into Common Stock at a conversion  rate of $6.00 per share.
After  September 22, 2001,  the Company may, at its option,  redeem the Series D
Convertible  Preferred  Stock for  $10,000  per share.  In  connection  with the
issuance of the Series D  Convertible  Preferred  Stock,  the Company  agreed to
certain  limitations on the issuance of additional  shares of preferred stock by
the Company.

     Upon the closing of various  acquisitions during 1997, the Company incurred
debt to  certain  shareholders  of the  acquired  companies.  The  balance as of
September 30, 1998 for the  acquisition  debt was $5.9 million.  Of this amount,
$4.5  million  requires  aggregate  monthly  principal  payments of $27,112 plus
interest and matures on June 27, 1999.

 SEASONALITY.

     Historically,  the  Company's  used car  business  has  experienced  higher
revenues in the first two quarters of the calendar  year than in the latter half
of the year.  Management  believes that these results are due to seasonal buying
patterns  resulting  in part from the fact that  many of its  customers  receive
income tax refunds during the first half of the year, which are a primary source
of down payments on used car purchases.

     Eckler's business is also subject to seasonal  fluctuations.  Historically,
Eckler's has  realized a higher  portion of its revenues in the second and third
quarters  of the  calendar  year and the lowest  portion of its  revenues in the
fourth  quarter.  Eckler's  is  particularly  dependent  on  sales  to  Corvette
enthusiasts during the spring and summer months.

INFLATION.

     Increases in inflation  generally  result in higher interest rates.  Higher
interest rates on the Company's  borrowings  would increase the interest expense
related to the Company's  existing  debt.  The Company cannot seek to limit this
risk by  increasing  interest  rates earned on its finance  contracts  since the
interest charged is at or near the maximum permitted under Florida law. To date,
inflation has not had a significant impact on the Company's operations.

                                     -21-
<PAGE>

YEAR 2000

     At the  beginning  of the third  quarter  of 1996,  the  Company's  primary
operating  system  and its  peripherals  were made Year 2000  compliant.  All of
Eckler's  existing core applications are to be modified and tested for Year 2000
compliance no later than the last quarter of 1998. All new computer  systems and
software  installations,   including  the  computer  systems  of  the  Company's
subsidiaries other than Eckler's,  are currently Year 2000 compliant.  All other
systems including the Company's local and wide area networks, telephone systems,
uninterruptible  power  supply  systems and  historical  information  are or are
expected  to be in  compliance  no later  than the fourth  quarter of 1998.  The
Company continues to evaluate other  computerized  equipment to include security
systems,  fire control systems and power control systems,  to determine  whether
they are Year 2000  compliant.  To date, the Company has incurred  approximately
$25,000 on Year 2000 compliance matters, and anticipates incurring up to $50,000
additional  expenses on these matters.  The anticipated  expense associated with
the year 2000 compliance  project will not include  additional  hardware cost or
external staffing. The Company is taking into account whether third parties with
which  the  Company  has  material  relationships  are Year 2000  compliant.  In
addition, the Company will develop contingency  strategies,  as appropriate,  in
the event the Company  encounters a Year 2000 compliance  problem in its own, or
in a third party vendor's, software applications.

RECENT ACCOUNTING PRONOUNCEMENT

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive  Income" ("FAS
130") and No.  131,  "Disclosure  about  Segments of an  Enterprise  and Related
Information"  ("FAS 131").  FAS 130  establishes  standards  for  reporting  and
displaying  comprehensive income, its components and accumulated  balances.  FAS
131 establishes  standards for the way that public companies report  information
about operating  segments in annual financial  statements and requires reporting
of selected information about operating segments in interim financial statements
issued  to the  public.  Both  FAS 130 and FAS  131 are  effective  for  periods
beginning after December 15, 1997. Adoption of FAS 130 is not expected to have a
material  adverse  effect on the  Company's  financial  statements.  The Company
elected  early  adoption of FAS 131 during the three months ended  September 30,
1998.

     In June 1998,  the Financial  Accounting  Standards  Board issued SFAS 133,
Accounting for Derivative  Instruments and Hedging Activities ("SFAS 133"). SFAS
133 requires  companies to recognize all derivatives  contracts as either assets
or  liabilities  in the  balance  sheet and to measure  them at fair  value.  If
certain  conditions  are met, a derivative may be  specifically  designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging  derivative  with the  recognition of (I) the changes in the fair
value of the hedged asset or liability that are  attributable to the hedged risk
or  (ii)  the  earnings  effect  of the  hedged  forecasted  transaction.  For a
derivative  not  designated  as a  hedging  instrument,  the  gain  or  loss  is
recognized  in income in the period of  change.  SFAS 133 is  effective  for all
fiscal   quarters  of  fiscal  years   beginning   after   September  15,  1999.
Historically,  the Company has not entered into derivatives  contracts either to
hedge existing risks or for speculative purposes.  Accordingly, the Company does
not  expect  adoption  of the new  standard  on  January  1, 2000 to affect  its
financial statements.

MARKET RISK

     The  Company  does not invest or trade in  foreign  currency  or  commodity
transactions which would ordinarily be subject to market risk. The interest rate
on the Company's borrowings is generally based on the prime rate. Accordingly, a
significant  increase or decrease in the prime rate could  affect the  Company's
earnings  in the future.  The  Company  believes,  however,  that its  financial
instruments are disclosed at their fair values. Fair value estimates are made at
a  specific  point in time and are  based on  relevant  market  information  and
information  about the financial  instrument;  they are subjective in nature and
involve  uncertainties  and  matters  of  judgment  and,  therefore,  cannot  be
determined  with  precision.  These  estimates  do not  reflect  any  premium or
discount  that could  result from  offering  for sale at one time the  Company's
entire  holdings  of a  particular  instrument.  Changes  in  assumptions  could
significantly  affect these  estimates.  Since fair value  estimates are as of a
particular  date,  the  amounts  that  will  actually  be  realized  or  paid in
settlement of the instruments could be significantly different.


                                     -22-
<PAGE>


     The carrying amount of cash and cash  equivalents is assumed to be the fair
value due to the  liquidity of these  instruments.  The  carrying  amount of the
finance  receivables  is assumed to be the fair value due to the relative  short
maturity  and   repayment   terms  of  the  portfolio  as  compared  to  similar
instruments.  The  carrying  amount of accounts  payable  and  accrued  expenses
approximates  fair value due to the short  maturity  of these  instruments.  The
terms of the Company's  notes payable  approximate the terms in the market place
at which they could be  replaced.  Therefore,  the fair value  approximates  the
carrying value of these financial instruments.

FACTORS AFFECTING COMPANY'S PROSPECTS

     The future operating  results of the Company may be affected by a number of
factors, including the matters discussed below:

LIMITED COMBINED OPERATING HISTORY

     The Company has been a self-financed  used car retailer since January 1997.
Thus, the Company has only a limited  history of operations as a combined entity
upon which to base its results of operations  or  prospects.  Its results may be
affected by the risks,  expenses  and  difficulties  frequently  encountered  by
similar companies in early stages of operations.

 HISTORY OF LOSSES

     The Company  incurred a net loss of  approximately  $18.6 million for 1997,
reflecting the costs of integration  of the acquired  companies,  development of
the Company's  infrastructure,  compensation  expense  related to stock options,
restructuring  charges  related  to the  settlement  of various  employment  and
consulting agreements and costs related to acquisitions that were not completed.
Although  the Company has  experienced  growth in revenues  since  January  1997
subsequent to the  Predecessor  Acquisition and recorded net income for the nine
months  ended  September  30, 1998,  there can be no  assurance  that growth and
profitability can be sustained.  The Company's ability to maintain profitability
and positive cash flow while implementing its business strategy will depend on a
number of factors,  including its ability to: (i) assimilate and manage past and
future  expansion,   (ii)  expand  revenue   generating   operations  while  not
proportionately  increasing its administrative overhead, (iii) originate finance
contracts  with an  acceptable  level of credit  risk,  (iv)  obtain  sufficient
financing with acceptable terms to fund expansion, (v) adapt to the increasingly
competitive  market in which it  operates,  (vi)  obtain and  purchase  adequate
supplies of cars,  and (vii)  collect its finance  receivables. 

ABILITY  TO MANAGE  GROWTH;  RISKS  ASSOCIATED  WITH  EXPANSION  AND  CHANGES IN
BUSINESS

     The  Company's  future  growth  will depend in large part on its ability to
open  additional  used  car  stores,  manage  expansion,  control  costs  in its
operations,  integrate  acquisitions  into existing  operations,  underwrite and
collect  finance  receivables  without  significant  losses,  develop  the human
resources  necessary  to support  rapid  growth and  establish  and maintain the
infrastructure  necessary  to execute its  business  plan.  While the Company is
presently focusing on internal expansion, a significant portion of the Company's
growth  historically  has  resulted  from  acquisitions  of  existing  used  car
dealerships and related  businesses,  including used car finance  companies that
lend  primarily  to  credit-impaired  customers.  The Company  will  continue to
consider selected acquisitions under appropriate circumstances.

                                     -23-
<PAGE>


     The Company's growth has placed  significant  demands on all aspects of the
Company's  business,  including  its  management,  administrative,  operational,
financial  reporting  and  other  systems  personnel.  Additional  growth by the
Company may further strain the Company's systems and resources, and there can be
no assurance that the Company's systems, resources, procedures and controls will
be adequate to support further expansion of the Company's operations.  As growth
continues,  the Company will review its management  infrastructure,  systems and
financial  controls,  new store  locations and any acquired used car  dealership
operations and make  adjustments  or complete  reorganizations  as  appropriate.
Additionally,  from time to time,  the Company may consider the  disposition  of
certain non-core  operating units.  Unforeseen  capital and operating  expenses,
liabilities, barriers to entry in the markets in which the Company has little or
no prior experience, or other difficulties,  complications and delays frequently
encountered in connection with the expansion and integration of operations could
inhibit the  Company's  growth.  In order for the Company to recognize  the full
benefits of a significant acquisition, it will need to integrate the acquisition
with its administrative, finance, sales, personnel and marketing organizations.

     The  Company's  ability to continue to grow its used car business will also
be dependent  upon,  among other things,  the  Company's  ability to attract and
retain competent  management,  the availability of capital to fund expansion and
the  availability of suitable store locations and, to a lesser extent,  suitable
acquisition  candidates.  The  Company  intends to finance  expansion  through a
combination  of  its  available  cash   resources,   borrowings  from  financial
institutions  and, in appropriate  circumstances,  the issuance of equity and/or
debt  securities.  Expansion  will have a  significant  effect on the  Company's
financial  position and could cause  substantial  fluctuations  in the Company's
quarterly and yearly operating  results.  Acquisitions are also likely to result
in the recording of significant  goodwill and intangible assets on the Company's
financial  statements,  the amortization of which would reduce reported earnings
in subsequent  years. In addition,  the issuance of additional  shares of Common
Stock in connection with acquisitions may substantially  dilute the interests of
existing shareholders.

     The  Company's  finance  receivables  portfolio has grown rapidly since the
Company's inception and such growth is expected to continue. This growth creates
the risk that the  Company's  provision for credit losses will not be sufficient
to cover actual losses on the  portfolio.  The  Company's  failure to maintain a
sufficient  provision for credit losses could have a material  adverse effect on
the Company's financial condition, results of operations or cash flows.

     The diversion of  management's  attention  required by the  integration  of
multiple stores, as well as any other  difficulties  which may be encountered in
the transition and integration process,  could have a material adverse effect on
the  financial  condition,  results of  operations or cash flows of the Company.
There can be no assurance  that the Company will  successfully  open  additional
used  car  stores,   or  identify  suitable   acquisition   candidates  or  that
acquisitions will be consummated on acceptable terms or that the Company will be
able to integrate  successfully  the expanded  operations  or manage the related
increase in personnel.

HIGH RISK OF DEFAULTS ON RECEIVABLES PORTFOLIO

     The self-financed  used car business sells to customers that typically have
limited credit  histories,  low incomes and/or past credit  problems  (generally
referred  to herein as  "credit-impaired  customers").  Such  customers  cannot,
generally,  obtain a loan from a local financial  institution or from the credit
facilities of a major automobile  manufacturer (e.g.,  General Motors Acceptance
Corporation or Ford Motor Credit  Company).  One industry report  estimated that
between 5% and 40% of any group of loans made to credit-impaired  customers will
default during the life of that particular  group.  Consequently,  the Company's
finance contracts have a higher probability of delinquency and default and, as a
result,  greater  servicing  costs than loans made to consumers  who pose lesser
credit risks.  The Company's  profitability  depends in part upon its ability to
properly  evaluate  the   creditworthiness  of  credit-impaired   customers  and
efficiently  service  its loans.  There can be no  assurance  that  satisfactory
credit  performance  of the Company's  customers  will be maintained or that the
rate of future defaults  and/or losses will be consistent with prior  experience
or at levels  that  will  allow  the  Company  to  achieve  profitability.  Most
borrowers' ability to remit payments in accordance with the terms of their loans
is dependent on their continued  employment.  An economic downturn  resulting in
increased  unemployment  could cause a  significant  rise in  delinquencies  and
defaults,  which could have a material adverse effect on the Company's financial
condition,  results of  operations  or cash flows.  Moreover,  increases  in the
delinquency  and/or loss rates in the Company's loan portfolio  could  adversely
affect the Company's ability to obtain or maintain its financing sources.

                                     -24-
<PAGE>


UNSEASONED LOAN PORTFOLIO

     Due to the growth of the Company's  loan  portfolio  during the last twelve
months, a significant portion of the loan portfolio is unseasoned.  Accordingly,
delinquency  and  loss  rates  in  the  portfolio  will  most  likely  fluctuate
unpredictably.  Cars that serve as collateral will, in most cases, be worth less
than the unamortized  principal and interest charges.  The resale prices of used
cars will  affect the amount  realized  following  repossession  of  collateral.
Further,   the  Company  may  also  incur   significant  legal  costs  prior  to
repossessing a financed  vehicle or reselling  such vehicle after  repossession.
The  Company  does not intend to  purchase  insurance  to protect  against  loan
defaults or make up the difference  between the principal  amount remaining on a
defaulted  loan and the net  proceeds  realized  on the resale of a  repossessed
vehicle that secured such defaulted loan.  There is no assurance that loans made
by the Company to its customers will ultimately be repaid, which would result in
the Company  having to write off such loans and would  materially  and adversely
affect the Company's financial condition, results of operations or cash flows.

HIGH LEVERAGE

     The Company is highly leveraged. On September 30, 1998, the Company's total
indebtedness  was  approximately  $106 million,  or 82% of its total  assets.  A
substantial  portion of such debt is  collateralized  by the  Company's  finance
contracts,  automobile inventory and certain property,  plant and equipment. The
Company's substantial leverage could have adverse consequences,  including:  (i)
limiting its ability to obtain additional financing,  (ii) requiring the Company
to use  substantial  portions  of  operating  cash  flow  to meet  interest  and
principal  repayment  obligations,  (iii)  exposing the Company to interest rate
fluctuations  due  to  floating  interest  rates  on  certain  borrowings,  (iv)
increasing the Company's vulnerability to changes in general economic conditions
and competitive  pressures and (v) limiting the Company's  ability to capitalize
on potential growth  opportunities.  In addition,  the Company's loan agreements
contain certain covenants that limit,  among other things, the Company's ability
to engage in certain mergers and acquisitions,  incur additional indebtedness or
further  encumber its assets,  pay  dividends or make other  distributions.  The
covenants  also require the Company to meet certain  financial  tests. A default
under the Company's borrowing agreements could have a material adverse effect on
the Company's financial condition, results of operations or cash flows.

SUBSTANTIAL NEED FOR ADDITIONAL CAPITAL

     The Company will require additional capital in order to fund its expansion.
If adequate  funds are not  available on terms  acceptable  to the Company,  the
Company  may  be  required  to   significantly   curtail  its  expansion  plans.
Historically,  the Company has funded most of its capital  expenditures  for the
opening of new stores through the issuance of debt and preferred  stock,  which,
in many cases, is convertible into shares of Common Stock. The Company's ability
to fund the  planned  expansion  of its store  base is  directly  related to the
continued availability of these and other funding sources.

     The  operation  of used car  dealerships  and finance  companies is capital
intensive. The Company requires capital to: (i) acquire and maintain inventories

                                     -25-
<PAGE>

of cars and parts, (ii) originate finance contracts, (iii) purchase and maintain
service  equipment and (iv) maintain its  facilities.  The Company  finances the
purchase of all of its used car inventory  and leases most of the  properties on
which  it  conducts  business.  Consequently,  the  Company  incurs  significant
operating,  borrowing and fixed occupancy costs.  Should the Company's expansion
plans  require  additional  funding or should its  capital  requirements  exceed
current estimates, the Company could be required to seek additional financing in
the future.  There can be no  assurance  that the Company  will be able to raise
such financing when needed or on acceptable terms. As a result,  the Company may
be forced to reduce or delay additional expenditures or otherwise delay, curtail
or discontinue some or all of its operations. Further, if the Company is able to
access  additional  capital  through  borrowings,  such debt will  increase  the
already substantial debt obligations of the Company, which could have a material
adverse effect on the Company's  financial  condition,  results of operations or
cash flows.

     The terms of the Company's financing  transactions are affected by a number
of other  factors which are beyond the control of the Company,  including  among
others,  conditions in the securities and finance markets generally,  prevailing
interest  rates and  prevailing  economic  conditions.  If additional  funds are
raised by issuing equity securities, dilution to the holders of Common Stock may
result.

HIGHLY COMPETITIVE MARKET AND INDUSTRY CONSOLIDATION

     The market for financing  credit-impaired  customers is highly competitive.
The  Company's  competitors  include  local,  regional and  national  automobile
dealers,  used  car  finance  companies  and  other  sources  of  financing  for
automobile  purchases,  many of which are larger and have greater  financial and
marketing resources than the Company.  Historically,  commercial banks,  savings
and loan associations, credit unions, captive finance subsidiaries of automobile
manufacturers  and other  consumer  lenders,  many of which  have  significantly
greater  resources  than  the  Company,  have not  competed  for  financing  for
credit-impaired  used car buyers.  To the extent that such lenders  expand their
activities in the  credit-impaired  market, the Company's  financial  condition,
results of operations or cash flows could be materially and adversely  affected.
During the past two years, several companies,  including large, well-capitalized
public  companies,  have devoted  considerable  resources to acquisitions in the
Company's market for credit-impaired customers.

     The Company also  competes with  franchised  dealers,  individual  used car
dealerships,  as well as  individual  buyers and sellers of used cars.  Industry
wide gross profit margins on sales of cars generally  have been  declining,  and
the used car market faces increasing  competition from  non-traditional  sources
such as  independent  leasing  companies,  brokers,  buying  services,  Internet
companies and used car  superstores.  Some of the recent market  entrants may be
capable of operating on smaller gross margins than the Company.  There can be no
assurance  that  the  Company  will be able to  maintain  or  increase  its size
relative to that of its competitors or to increase profit margins in the face of
increased  competition.  The  Company  expects  that  there  will be  increasing
competition  in the  acquisition  of other  used  car  dealerships  as  industry
participants become larger.

     The Company  continues to manufacture  and sell parts and  accessories  for
Corvettes,  certain of which are  manufactured  pursuant to a  Reproduction  and
Service Part Tooling License Agreement (the "GM Agreement")  between the Company
and General Motors  Corporation  ("GM").  The GM Agreement does not prohibit the
Company's  competitors from  manufacturing and selling parts that are comparable
to those  manufactured  and sold by the Company.  In addition,  the GM Agreement
expires in December 2001 and there can be no assurance  that it will be renewed,
or if renewed, that the terms of such renewal will be favorable to the Company.

     The used car industry is undergoing considerable  consolidation,  which the
Company  believes  will  continue  during the next  several  years.  The Company
expects  that, in response to such  consolidation  and in light of the Company's
financial resources, it will consider from time to time additional strategies to


                                     -26-
<PAGE>

enhance  shareholder  value.  These  include,  among  other  things,   strategic
alliances and joint ventures;  purchase, sale and merger transactions with large
corporations;  and  other  similar  transactions.  In  considering  any of these
strategies,  the Company will  evaluate  the  consequences  of such  strategies,
including changes in management  control or operation or acquisition  strategies
of the Company.  There can be no assurance that any one of these strategies will
be  undertaken,  or that,  if  undertaken,  any such  strategy will be completed
successfully.

SENSITIVITY TO INTEREST RATES

     A substantial portion of the Company's finance contract income results from
the difference  between the rate of interest it pays on the funds it borrows and
the  rate  of  interest  it  earns  pursuant  to the  finance  contracts  in its
portfolio.  While the finance  contracts that the Company services bear interest
at fixed rates, the Company's  indebtedness generally bears interest at floating
rates. In the event the Company's interest expense increases,  the Company would
seek to compensate  for such  increases by raising the interest rates on its new
finance  contracts  or by raising the retail  sales  prices of its cars.  To the
extent the Company is unable to do so because of legal limitations or otherwise,
the net margins on the  Company's  finance  contracts  would  decrease,  thereby
adversely affecting the Company's financial condition,  results of operations or
cash flows.

FLUCTUATIONS IN OPERATING RESULTS

     The  Company's  operating  results  have  varied  in the  past and may vary
significantly in the future.  Factors causing  fluctuations in operating results
include,  among other things,  seasonality in car purchases,  changes in pricing
policies by the  Company and its  competitors,  changes in  operating  expenses,
changes in the Company's  strategy,  personnel changes,  the failure,  delay and
expense  in making  the  Company's  software,  systems  and  networks  Year 2000
compliant, the effect of acquisitions and general economic factors. In addition,
the  Company's  sales of used  cars  and  Corvette  parts  and  accessories  are
seasonal. The Company has limited or no control over many of these factors. As a
result, the Company believes that period-to-period comparisons of its results of
operations  are not  necessarily  meaningful  and should  not be relied  upon as
indicative of future performance. Due to all of these factors, it is likely that
in some future period the Company's results of operations will fall below market
expectations.  This  would  likely  negatively  impact the  Company's  financial
condition, results of operations or cash flows and cause the price of the Common
Stock to decline.

BUSINESS CYCLES

     Sales of motor vehicles  historically have been cyclical,  fluctuating with
general economic cycles.  During economic  downturns,  the automotive  retailing
industry  tends to experience the same periods of decline and recession as those
experienced in the general  economy.  The Company  believes that the industry is
influenced  by  general   economic   conditions  and  particularly  by  consumer
confidence,  employment  rates,  the level of personal  discretionary  spending,
interest  rates and  credit  availability.  There can be no  assurance  that the
industry will not experience  sustained  periods of declines in car sales in the
future.  Any such declines would have a material adverse effect on the Company's
financial condition, results of operations or cash flows.

                                     -27-
<PAGE>


POTENTIAL ADVERSE EFFECT OF ECONOMIC SLOWDOWN

     The Company's business is directly related to sales of used cars, which are
affected  by  employment  rates,  prevailing  interest  rates and other  general
economic  conditions.  A future  economic  slowdown or  recession  could lead to
increased  delinquencies,  repossessions and credit losses that could hinder the
Company's  business  and  planned  expansion.  Due to  the  Company's  focus  on
credit-impaired  customers, its actual rate of delinquencies,  repossessions and
credit losses on finance contracts could be higher under adverse conditions than
those  experienced  in the  automobile  finance  industry in  general.  Economic
changes are uncertain and weakness in the economy could have a material  adverse
effect on the  Company's  financial  condition,  results of  operations  or cash
flows.

GEOGRAPHIC CONCENTRATION

     The Company's car sales and financing operations are presently concentrated
in the  central  and  southeast  regions of  Florida.  An  economic  slowdown or
recession, a change in the regulatory or legal environment, natural disasters or
other adverse  conditions in Florida could have a material adverse effect on the
Company's financial condition, results of operations or cash flows.

SOURCING USED CARS

     The Company acquires a significant amount of its used car inventory through
auctions and, to a lesser extent, from other sources,  including wholesalers and
trade-ins at the Company's  franchised new car stores.  Some of the auctions for
cars  are  open  only  to the  franchised  dealers  of  specific  manufacturers.
Accordingly,  there can be no assurance that sufficient  inventory will continue
to be  available  to the  Company  or will be  available  at  comparable  costs,
particularly if changes occur in the type of used cars that are sold in auctions
closed to the Company or if  competitive  pressures  increase as a result of new
entrants into the  Company's  market.  Any  reduction in available  inventory or
increase in inventory  wholesale costs that cannot be reflected in retail market
prices  could  have  a  material  adverse  effect  on  the  Company's  financial
condition, results of operations or cash flows.

RISKS RELATED TO GOODWILL

     As of September  30, 1998,  the Company's  total assets were  approximately
$129 million,  of which approximately $25 million, or approximately 19% of total
assets,  was goodwill.  Goodwill is the excess of cost over fair market value of
net assets  acquired.  There can be no assurance that the value of such goodwill
will ever be realized by the Company.  The Company's goodwill is being amortized
on a straight-line basis over a period of 40 years, which will produce an annual
charge to operations of approximately  $650,000.  The Company will evaluate on a
regular basis whether events and circumstances have occurred which indicate that
the carrying amount of goodwill warrants revision or may not be recoverable. Any
future  determination  requiring  the  write-off  of a  significant  portion  of
unamortized goodwill could adversely affect the Company's financial condition.

SHARES ELIGIBLE FOR FUTURE SALE

     A total of 1,555,650 shares of Common Stock have been reserved for issuance
under the Company's employee  compensation plans and certain  outstanding option
agreements and will be registered for resale on Form S-8 in the near future. The
Company also had  outstanding,  as of September  30,  1998,  convertible  notes,
public and non-public warrants,  convertible  preferred stock, and certain other
rights to acquire a total of 2,379,183  shares of Common Stock, of which all but
approximately  680,012 shares of Common Stock have been registered for resale on
registration  statements  on  Form  S-3,  including  600,000  shares  underlying
publicly-traded  warrants.  The  beneficial  owners of 660,012 shares of Common
Stock, issuable upon conversion of currently  outstanding  convertible preferred
stock and debt have registration  rights that allow them to cause the Company to
register their shares for sale under certain circumstances. Sales of substantial
amounts of Common Stock, or the  availability  of substantial  amounts of Common
Stock for future sale, could adversely affect the prevailing market price of the
Common Stock.

                                     -28-
<PAGE>


REGULATION AND LITIGATION

     The  Company's  business is subject to extensive  federal,  state and local
regulation and supervision.  Such regulation,  among other things,  requires the
Company  to limit  interest  rates,  fees and other  charges  related to finance
contracts,  make specified  disclosures to consumers and adhere to strict limits
in the repossession and selling of collateral.  Such regulations exist primarily
for the  benefit of  consumers,  rather  than for the  protection  of dealers or
finance  companies  and could limit the  Company's  discretion  in operating its
business. Noncompliance with any applicable statutes or regulations could result
in the  suspension  or  revocation  of any  license  at  issue,  as  well as the
imposition of civil fines and criminal penalties.

     Currently,  the Company's  used car sales  activities are conducted and its
finance contracts have been originated in Florida, where existing statutes limit
the  interest  rate  which a lender may charge on  consumer  finance  contracts.
Before the Company  expands its  operations  to states other than  Florida,  the
Company must  consider the impact of usury laws in those  states.  To the extent
that the  interest  rates and fees  charged by the  Company  are  limited by the
application of maximum  allowable  interest rates and charges that in the future
may be  lower  than  those  currently  charged  by the  Company,  the  Company's
financial  condition,  results  of  operations  or cash  flows may be  adversely
affected. 

     In addition, due to the consumer-oriented  nature of the automobile finance
industry,  used car dealerships are frequently named as defendants in litigation
involving alleged violations of federal and state consumer lending or other laws
and  regulations.  There can be no  assurance  that the Company  will not become
subject to such  litigation in the future.  A significant  judgment  against the
Company  could  have  a  material  adverse  effect  on the  Company's  financial
condition, results of operations or cash flows.

DEPENDENCE ON KEY PERSONNEL

     The  Company's  future  success  depends on the  continued  services of the
Company's key management  personnel as well as the Company's  ability to attract
additional  members to its management team with experience in the used car sales
and  financing  industries.  The  unexpected  loss of the services of any of the
Company's key  management  personnel,  or an inability to attract new management
when  necessary,  could  have a  material  adverse  effect  upon  the  Company's
financial condition, results of operations or cash flows.

POTENTIAL VOLATILITY OF STOCK PRICE

     The  market  price of the  Common  Stock  has been and may  continue  to be
subject  to  wide   fluctuations   in   response   to,   among   other   things,
quarter-to-quarter   variations  in  operating  results,   changes  in  earnings
estimates by analysts,  market  conditions in the industry and general  economic
conditions.  Further, the stock market from time to time experiences significant
price  and  volume   fluctuations  which  may  be  unrelated  to  the  operating
performance of particular companies.  Factors such as the foregoing could have a
material  adverse  effect on the price of the  Common  Stock.

ENVIRONMENTAL RISKS

     The Company is subject to federal,  state and local  laws,  ordinances  and
regulations which establish various health and environmental  quality standards,
and liability  related  thereto,  and provide  penalties for violations of those
standards.  Under certain laws and  regulations,  a current or previous owner or
operator of real property may be liable for the cost of removal and  remediation

                                     -29-
<PAGE>

of hazardous or toxic  substances or wastes on, under, in or emanating from such
property.  Such laws  typically  impose  liability  whether  or not the owner or
operator  knew of, or was  responsible  for, the  presence of such  hazardous or
toxic substances or wastes.  Certain laws, ordinances and regulations may impose
liability on an owner or operator of real property  where on-site  contamination
discharges into waters of the state, including groundwater.  Under certain other
laws,  generators  of  hazardous  or toxic  substances  or wastes that send such
substances  or wastes to  disposal,  recycling or  treatment  facilities  may be
liable  for  remediation  of  contamination  at  such  facilities.  Other  laws,
ordinances  and   regulations   govern  the   generation,   handling,   storage,
transportation  and disposal of hazardous and toxic  substances  or wastes,  the
operation and removal of underground  storage tanks, the discharge of pollutants
into  surface  waters  and  sewers,  emissions  of certain  potentially  harmful
substances into the air and employee health and safety. The business  operations
of the Company are subject to such laws,  ordinances and  regulations  including
the use,  handling  and  contracting  for  recycling or disposal of hazardous or
toxic substances or wastes, including  environmentally  sensitive materials such
as motor oil,  transmission  fluid,  antifreeze,  freon, waste paint and lacquer
thinner, batteries, solvent, lubricants,  degreasing agents, gasoline and diesel
fuels.  The Company is subject to other laws,  ordinances  and  regulations as a
result of the past or present existence of underground  storage tanks at many of
the Company's properties.

     Certain laws and  regulations,  including those governing air emissions and
underground  storage tanks, are amended  periodically to require compliance with
new or more stringent  standards as of future dates.  The Company cannot predict
what  other  environmental  legislation  or  regulations  will be enacted in the
future,  how  existing or future laws or  regulations  will be  administered  or
interpreted  or what  environmental  conditions  may be  found  to  exist in the
future.  Compliance  with new or more  stringent laws or  regulations,  stricter
interpretation  of  existing  laws,  or the future  discovery  of  environmental
conditions  may  require  expenditures  by the  Company,  some of  which  may be
material.

POTENTIAL CONFLICTS OF INTEREST

     Robert J.  Abrahams,  the Chairman of the Board of the  Company,  is also a
director of Ugly  Duckling  Corporation  ("Ugly  Duckling"),  a retailer of used
cars.  Although the Company  believes that it is not in direct  competition with
Ugly  Duckling  because  the  Company  generally  retails  later model cars to a
different  market  segment of  customers,  Mr.  Abrahams  may have a conflict of
interest in the future  should  Ugly  Duckling  and the Company  pursue the same
acquisitions  or customers  having the same credit profile.  In such event,  Mr.
Abrahams  would be required  to recuse  himself  from both  boards of  directors
regarding any decisions to be made about business opportunities.

POTENTIAL INFLUENCE OF EXISTING SHAREHOLDERS

     As of September 30, 1998, the Company's  directors and executive  officers,
their affiliates, and certain principal shareholders owned or had voting control
of approximately 42% of the issued and outstanding  Common Stock of the Company.
Further,  assuming  exercise by all of the  Company's  directors  and  executive
officers of all of the outstanding options and warrants to purchase Common Stock
held by them, they would control,  as of September 30, 1998 approximately 52% of
the voting stock. Consequently, management may be able to direct the election of
the  Company's  directors,  effect  significant  corporate  events and generally
direct  the  affairs of the  Company.  The  concentration  of  ownership  by the
Company's  directors and executive  officers and certain principal  shareholders
may have the effect of approving or preventing a sale or takeover of the Company
on terms unfavorable to other shareholders.

ANTI-TAKEOVER CONSIDERATIONS

     Certain   provisions  of  Florida  law  and  the   Company's   Articles  of
Incorporation  as  amended  or  Bylaws  as  amended  ("Articles/Bylaws")  could,
together or separately,  discourage potential  acquisition  proposals,  delay or
prevent a change in control  of the  Company  and limit the price  that  certain
investors might be willing to pay in the future for the Company's  Common Stock.

                                     -30-
<PAGE>

The  Company is subject to the  "affiliated  transactions"  and  "control  share
acquisition"  provisions of the Florida  Business  Corporation Act (the "FBCA").
Those provisions  require,  subject to certain  exceptions,  that an "affiliated
transaction"  be  approved by a majority of  disinterested  directors  or by the
holders of two-thirds of the voting shares other than those  beneficially  owned
by an "interested shareholder." Voting rights must also be conferred on "control
shares" acquired in specified control share acquisitions,  generally only to the
extent conferred by resolution  approved by the shareholders,  excluding holders
of  shares   defined  as  "interested   shares."  In  addition,   the  Company's
Articles/Bylaws, among other things, provide for a classified Board of Directors
for the Company  and provide  that (i) any action  required or  permitted  to be
taken by the  shareholders  of the Company may be effected  only at an annual or
special meeting of shareholders and not by written consent of the  shareholders;
(ii) any special meeting of the  shareholders may be called only by the Chairman
of the Board, the President or the Chief Executive Officer,  or upon the written
demand of the holders of not less than 25% of the votes entitled to be cast at a
special  meeting;  (iii)  an  advance  notice  procedure  must be  followed  for
nomination of directors and for other shareholder  proposals to be considered at
annual shareholders' meetings; and (iv) a director may be removed only for cause
upon approval of holders of not less than 662/3% of the  Company's  voting stock
as such  term is  used in the  Articles/Bylaws.  In  addition,  the  Company  is
authorized to issue up to 5.0 million shares of preferred  stock, in one or more
series,  having  terms  fixed by the  Board  of  Directors  without  shareholder
approval, including voting, dividend or liquidation rights that could be greater
than or senior to the rights of holders of Common  Stock.  As of  September  30,
1998, the Company had outstanding 595.98 shares of preferred stock.  Issuance of
additional  shares of Common Stock or new series of  preferred  stock could have
the effect of  preventing  or delaying a sale or  takeover of the Company  which
might have been in the best interests of the Company and its shareholders.


                       SMART CHOICE AUTOMOTIVE GROUP, INC.
                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

     On December 24, 1997,  the Company  entered  into a letter  agreement  with
Sands Brothers & Co., Ltd. ("Sands Brothers"), a member of the NASD, pursuant to
which Sands Brothers agreed to render certain  financial  advisory and corporate
finance  services in exchange  for an annual fee of $15,000 (of which $7,500 was
paid in January  1998),  warrants to purchase an aggregate  of 90,000  shares of
Common Stock and certain other rights regarding the Company's future  financing.
Due to a  disagreement  with  regard  to the  fulfillment  of the  terms of such
agreement  by Sands  Brothers,  and  pursuant to the  settlement  of  litigation
regarding  such  transaction  commenced in August 1998,  both parties  agreed in
August 1998 to unwind the December  1997  agreement in exchange for a payment of
$137,500 (other than the $7,500 previously paid by the Company and the warrants,
which were issued pursuant to Section 4(2), which Sands Brothers will retain).

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

     Described below are the sales of securities by the Company during the third
quarter of 1998 that were not  registered  under the  Securities Act of 1933, as
amended (the "1933 Act"). On the issuance of these securities the Company relied
on the exemption from registration  under the 1933 Act set forth in Section 4(2)
thereof,  based on  established  criteria  for  effecting  a  private  offering,
including  the number of offerees for each  transaction,  access to  information
regarding the Company, disclosure of information by the Company, restrictions on
resale of the securities offered,  investment representations by the purchasers,
and the qualification of the offerees as "accredited investors."

     As described above, on December 24, 1997, the Company entered into a letter
agreement with Sands Brothers, pursuant to which Sands Brothers agreed to render
certain  financial  advisory and corporate  finance  services in exchange for an
annual fee of $15,000 (of which  $7,500 was paid in January  1998),  warrants to
purchase an aggregate of 90,000  shares of Common Stock and certain other rights
regarding the Company's future financing.  The Warrant  Agreement  provides that
the  warrants  are  exercisable  immediately  at an exercise  price of $8.00 per
share.

     On various  dates  during the three months ended  September  30, 1998,  the
Company  issued Common Stock to holders of the Company's 12%  convertible  notes
due April 15, 1998 (the  "Notes") on  conversion  of the Notes.  The Company had
issued the Notes in 1997 to institutional and individual  accredited  investors.
The Notes were converted into Common Stock at a conversion  price that was based
on the market  price of the Common Stock at the time of  conversion.  A total of
30,000  shares of Common  Stock  were  issued  in the third  quarter  of 1998 on
conversion of the Notes.
 
                                    -31-
<PAGE>


ITEM 4.   OTHER INFORMATION

CERTAIN DEADLINES IN CONNECTION WITH THE 1999 ANNUAL MEETING OF SHAREHOLDERS

     The Securities and Exchange  Commission  (the "SEC")  recently  amended its
proxy rules to provide that a  registrant,  such as the Company,  may specify in
its proxy statement or form of proxy for its annual meeting of stockholders that
proxies solicited by the registrant will confer discretionary  authority to vote
with regard to matters not identified in the proxy  statement that may be raised
at the meeting, if the registrant first mailed its proxy materials for the prior
year's annual meeting of stockholders, or by such other date as may be specified
in an advance notice  provision  adopted by the registrant.  The Company has not
adopted  an  advance  notice  provision.  The  Company  first  mailed  its proxy
materials for its 1998 Annual Meeting of Stockholders on May 22, 1998. Under the
SEC's amended rules, the 45-day deadline for notice to the Company of matters to
be raised at the Company's 1999 Annual Meeting of  Stockholders is thus March 8,
1999. Any  stockholder  who wishes to have a proposal  included in the Company's
proxy  statement  for its 1999 Annual  Meeting of  Stockholders  must submit the
proposal to the Company pursuant to Rule 14a-4 by January 22, 1999.

BUSINESS

GENERAL

     Smart Choice Automotive Group, Inc. currently operates 22 stores in Florida
that sell used cars under the "First  Choice" brand name.  The  Company's  First
Choice  cars are three to six years old,  have less than  80,000  miles and have
undergone thorough  inspection,  reconditioning  and, as necessary,  repair. The
Company also sells used cars that may not meet the First Choice criteria through
four  additional  stores in Florida  that  operate  under the "Team" brand name.
Through its finance  company  subsidiary,  the Company  (referred to herein as a
"self-financed"  retailer of used cars) provides  financing for its customers by
originating retail automobile installment sales contracts secured by the cars it
sells ("finance  receivables" or "finance  contracts").  The Company's customers
typically have limited credit histories, low incomes and/or past credit problems
("credit-impaired").   The  Company  intends  to  expand  primarily  by  opening
additional  used car stores in Florida and extending its  operations  into other
areas of the southeastern  United States.  The Company's  objective is to become
the  leading  self-financed  retailer  of used cars in the  southeastern  United
States.

     Retail  sales  of  new  and  used  cars  in  the  United   States   totaled
approximately  $673 billion in 1997. Used cars represented  approximately 75% of
cars  sold  in  the  United  States  and  55%  of  total  sales  in  1997,  with
approximately  41 million used cars sold at an average price of $9,029 per unit.
Retail  sales of used cars in Florida in 1997  totaled  more than $24.4  billion
(over 2 million vehicles). Approximately 36% of Florida's used car sales in 1997
(not  including  sales  of  used  cars  at  new  car  dealerships)  occurred  at
approximately 2,800 self-financed used car stores.

     Management believes that the quality and reliability of the Company's First
Choice cars (i) reduce the  probability  of product  failure  (which  management
believes is a leading  cause of defaults on finance  contracts in the  Company's
industry),  (ii) reduce losses on the Company's  repossessions of cars and (iii)

                                     -32-
<PAGE>

define the First Choice brand.  Due to the quality and  reliability of its First
Choice  cars,  the  Company is able to provide a 24  month/24,000  mile  service
contract to its customers,  which is underwritten by a third party.  The Company
sells  used cars at its First  Choice  stores  for an  average  retail  price of
approximately  $9,500,  including  the service  contract  on all cars sold.  The
Company's  Team stores  generally  sell older and higher mileage cars than First
Choice cars. Team cars,  which sell for an average retail price of approximately
$7,900, are primarily cars that have been repossessed by the Company,  have been
traded in by customers or have not been sold by the First Choice  stores  within
approximately  180  days.  Cars  sold  at  Team  stores  are  covered  by  a  12
month/12,000 mile service contract.

     The Company also  manufactures  and sells  Corvette  parts and  accessories
through its subsidiary Eckler's,  owns two new car dealerships in Florida, sells
insurance and provides dealer training services.

BUSINESS STRATEGY

     The Company  intends to become the leading  self-financed  retailer of used
cars  in the  southeastern  United  States  by  capitalizing  on  its  operating
strengths and executing the growth strategy described below.

OPERATING STRENGTHS

     SELL RELIABLE, QUALITY CARS. The Company sells reliable, quality used cars.
Management  believes  that  product  failure is a leading  cause of  defaults on
finance  contracts  in the  self-financed  used  car  industry.  Generally,  the
Company's First Choice cars are models having a good or superior  reputation for
quality  and  reliability,  are three to six years old and have less than 80,000
miles.  In  addition,   First  Choice  and  Team  used  cars  have  undergone  a
comprehensive 110 point inspection,  reconditioning and, as necessary, repair at
the  Company's  reconditioning  facilities.  Due  to the  quality,  reliability,
condition  and age of First  Choice  cars,  the  Company is able to provide a 24
month/24,000 mile service contract to its customers,  which is underwritten by a
third  party,  on all First Choice  cars.  Cars sold at Team  stores,  which are
generally   older  and  higher  mileage  cars,  are  covered  by  a  similar  12
month/12,000 mile service contract.  The third-party service contracts allow the
Company's  customers  to  have  their  cars  repaired  nationally  by any one of
approximately 375,000 ASE (Automotive Service Excellence) certified technicians.

     UTILIZE CENTRALIZED CREDIT APPROVAL AND STRICT UNDERWRITING PRACTICES.  The
Company  separates the credit  approval  function and sales process for its used
cars.  Credit review and approval is conducted by experienced  finance personnel
at the Company's  headquarters,  distinct from the sales function. The Company's
credit underwriting process strictly adheres to objective underwriting standards
that have  resulted in  improved  collection  experience  since  February  1997.
Underwriting  criteria  include  employment   continuity,   ties  to  the  local
community,  ability to make the monthly payments and names,  addresses and phone
numbers of a sufficient number of persons who can verify the credit  application
information  and would  likely  know where the  applicant  could be found in the
event a collection  problem arises. The Company regularly reviews its collection
results to assess the effectiveness of its underwriting standards.

     APPLY RIGOROUS COLLECTION PRACTICES. The Company diligently and proactively
pursues  the  collection  of  its  finance   receivables   while  maintaining  a
professional,   customer-friendly   atmosphere.   The  Company  utilizes  proven
techniques in the collection  process,  including  telephone calls,  letters and
various  alternative  payment  mechanisms to facilitate  payment.  The Company's
collection policy includes  telephoning a borrower if the borrower's  payment is
one day late. The Company  generally  begins  repossession  procedures  when the
customer is two payments past due.  Management  believes that one of the reasons
the Company generally  experiences lower losses on defaults than its competitors
is because the Company acts quickly to repossess cars on which  defaults  occur.
As of September  30,  1998,  91.8% of the  Company's  finance  receivables  were
current.

     MAXIMIZE  RECOVERY ON REPOSSESSIONS.  Management  believes that the Company
generally  experiences  lower losses on repossessions  than other lenders in the
self-financed  used car  industry  due to (i) the  quality of the cars it sells,
(ii) the  timeliness  of its  repossessions  and (iii) its  ability to  remarket
repossessions.  The Company  believes  that its  purchasing  and  reconditioning

                                     -33-
<PAGE>

expertise  results in cars that maintain  their quality and value at the time of
repossession.  In addition,  the speed with which the Company  repossesses  cars
results  in  a  repossessed  car  in  better  condition.  Finally,  the  Company
reconditions and remarkets  approximately 70% of its  repossessions  through its
Team stores,  rather than through  auctions  (where cars are  generally  sold at
lower prices).  These practices  allowed the Company to obtain net recoveries of
61.5% of the principal balances as of September 30, 1998.

     INCREASE  OPERATING  EFFICIENCY.  Since late 1997, in an effort to increase
operating   efficiency   by   reducing   administrative   costs  and   enhancing
administrative  functions,  the  Company  has  combined  certain  administrative
functions, such as accounting, treasury, insurance, employee benefits, strategic
marketing  and legal  support.  The  Company  intends  to further  increase  its
operating  efficiency  in such  areas as  advertising,  reconditioning,  raising
capital and purchasing and transporting inventory.

     EMPLOY INTEGRATED  MANAGEMENT  INFORMATION SYSTEMS.  Each used car store is
linked to an integrated computer-based management information system (the "MIS")
that allows the Company to obtain "real time" information on its operations. The
Company uses the MIS to transmit data between its  headquarters  and its stores,
to  evaluate  store  performance  daily,  monitor  inventory,  sales,  costs and
customer  payments and facilitate the Company's  underwriting  and collection of
its finance contracts.

     PROMOTE  FIRST CHOICE  BRAND.  The Company  believes  that its First Choice
brand is  synonymous  with  quality  cars and  customer  service.  By seeking to
maintain  continuity  in the  appearance  of its store  locations,  the  Company
expects to promote  its name  recognition.  The  Company  attempts to maintain a
consistency  between its facilities and its marketing  materials through the use
of  standardized  logos and a white,  blue and yellow color  theme.  The Company
recognizes that the purchase of a car is one of the most  significant  purchases
that many of its  customers  will make.  Consequently,  the  Company  focuses on
providing  professional  service,  convenient  locations and a diverse inventory
selection.  The Company provides to customers  value-added  programs such as the
service  contract,   rapid  turnaround  for  credit  decisions,   financing  and
convenient  financing  pre-qualification.  By developing  customer loyalty,  the
Company seeks to generate repeat and referral business.

     AVOID THIRD PARTY FINANCE RECEIVABLES. As part of its operating philosophy,
the Company only originates and services  finance  receivables on used cars sold
at its used car stores and new car  dealerships.  The Company does not intend to
purchase third party finance receivables.

GROWTH STRATEGY

     In order to become the leading  self-financed  retailer of used cars in the
southeastern  United States, the Company intends to open additional First Choice
and Team stores both in geographic  markets where the Company currently operates
and in new markets. The choice of store locations in new and existing markets is
based upon the presence of a suitable customer base. The Company's  criteria for
opening  additional  used car  stores in  existing  markets  include  sufficient
projected incremental sales volume,  reconditioning  capacity,  geographic media
coverage and market  share.  The Company  believes  that  significant  expansion
opportunities  satisfying  these  criteria  are  available  within its  existing
markets.

     The Company's  criteria for opening used car stores in new markets  include
the adequacy of radio and television coverage,  demographic makeup of the market
(including  income  level  and age of  population),  availability  of  qualified
managers,  access to an adequate supply of quality used cars and availability of
appropriate store locations. Initially, the stores in new markets will rely upon
access  to the  Company's  existing  used car  inventory  at nearby  stores  and
reconditioning  facilities.  As a new market  matures,  the Company  will open a
reconditioning center with sufficient capacity to support growth.

                                     -34-
<PAGE>


INDUSTRY OVERVIEW

     AUTOMOTIVE  RETAILING.  Retail  sales  of new and used  automobiles  in the
United  States  totaled  approximately  $673  billion in 1997  compared  to $438
billion in 1991. New car sales accounted for  approximately  $303 billion of the
1997 sales. Used car sales in 1997 were estimated at approximately $370 billion,
with  approximately $195 billion in sales by new car franchised dealers and $130
billion in sales by independent  dealers,  many of which are self-financed  used
car  dealerships.  From 1991 to 1997,  new car  retail  sales  have  grown at an
average  annual  rate of 6.5%,  used car  retail  sales have grown at an average
annual rate of 8.5%, and used car sales at independent dealerships have grown at
an average annual rate of 10.0%.  This significant  increase in used car revenue
is  primarily  a  result  of  the  average  price  of a  new  car  having  risen
significantly  since 1991,  and newer,  higher  quality used cars now comprise a
larger part of the used car market.

     USED CAR  SALES.  Used car  sales  represented  73% of all cars sold in the
United  States in 1997.  Approximately  41 million  used cars were sold for $370
billion,  representing  55% of the total dollar value of the car market.  Retail
sales of used cars in Florida in 1997  totaled more than $24.4  billion  (over 2
million  vehicles).  Approximately  36% of  Florida's  used  car  sales  in 1997
occurred  at  approximately  2,800  self-financed  used car  stores,  which  are
separate from used car operations at new car dealerships.  Used car retail sales
generally  are made by  franchised  new car  dealerships  that sell  used  cars,
independent  used car  businesses  and/or  car  owners in  privately  negotiated
transactions.   While  the  used  car  industry  is  still  highly   fragmented,
significant  changes in the automotive  industry have recently  resulted in much
consolidation.  It  is  estimated  that  the  number  of  independent  used  car
dealerships  has declined  from  approximately  72,800 in 1991 to  approximately
60,500  in  1997.  A  number  of  dealership  groups,   such  as  Ugly  Duckling
Corporation,  have  begun to  acquire a  significant  number  of other  dealers,
including dealers in the Company's markets. In addition, several companies, such
as CarMax and AutoNation USA, have opened chains of used car "superstores"  that
offer a large variety and a number of used cars at their locations. Others, such
as  Auto-by-Tel,  are  marketing  used  cars  on  the  Internet.  Many  new  car
dealerships,  in an effort to focus on higher  margin  products,  are  adding or
enlarging  their used car divisions.  In 1997, for example,  used cars earned an
average gross margin of 11.0% as compared to a new car's average gross margin of
6.4%.  In recent  years,  the number of cars  coming  off  leases has  increased
significantly,  resulting  in an  increased  supply  of high  quality  used cars
available for sale. These cars and cars from other sources have become available
to  franchised  new car  dealerships  and  non-franchised  dealers of used cars,
resulting in increased competition in the used car market.

     SUB-PRIME  AUTO FINANCE.  The  automobile  financing  industry is the third
largest  consumer  finance market in the country (after mortgage debt and credit
card  debt)  with more  than  $466  billion  in  contracts  on new and used cars
originated in 1997. The segment of this industry representing borrowers with "C"
and "D" credit profiles  accounted for approximately $122 billion of the overall
market in 1997,  up from $55.4  billion in 1990.  Recent  surveys  show that the
number of these  borrowers  has increased to 34.9% in 1997 from 21.8% in 1991 at
franchised  new  car  dealers  and to  55.8%  in  1997  from  39.5%  in  1991 at
independent  used car  dealers.  The  Company  believes  that the portion of the
automobile  finance  market   attributable  to  used  car  borrowers  has  grown
significantly in recent years and will continue to grow. Factors contributing to
such growth include (i) the rise in lower skilled  service  industry jobs,  (ii)
the rise in consumer  debt and (iii) the increase in sales of used cars relative
to new cars in recent years due  principally to increased new car prices and the
number of late model used cars coming off lease.

RECENT GROWTH

     The  Company's  growth has resulted  from  acquisitions  and, more recently
internal growth as reflected in the table below.

                                     -35-
<PAGE>



USED CAR OPERATIONS:
<TABLE>
<CAPTION>
                                                                                                      NUMBER OF
                   COMPANY NAME                              SOURCE             DATE ACQUIRED           STORES
----------------------------------------------------    ------------------    ------------------    ----------------

<S>                                                        <C>                         <C>              <C>    

Suncoast Auto (part of FFG)                             Predecessor                1/28/97                 3
RC Hill's World of Wheels (part of Liberty Finance)     Predecessor                2/12/97                 4
225 North Military Trail (part of PBF)                  Predecessor                2/14/97                 1
Roman Fedo                                              Acquisition                6/30/97                 1
Strata Holdings, Inc.                                   Acquisition                6/30/97                 2
"First Choice" and "Team Stores"                        Internal                  9/97-7/98               15
                                                        Expansion                                         --
    TOTAL USED CAR STORES                                                                                 26
</TABLE>


OTHER BUSINESS OPERATIONS:

<TABLE>
<CAPTION>

             COMPANY NAME                      SOURCE            DATE ACQUIRED              PRINCIPAL BUSINESS
---------------------------------------    ----------------    ------------------    ----------------------------------
<S>                                           <C>                    <C>               <C>

Eckler's                                   Predecessor              1/28/97          Corvette parts and accessories
Dealer Development Services, Inc.          Acquisition              1/28/97          Auto dealership training services
Dealers Insurance Services, Inc.           Acquisition              1/28/97          Insurance broker for auto
                                                                                     dealerships
Jack Winters Enterprises, Inc.             Acquisition              8/21/97          Volvo new car dealership
B&B Florida Enterprises, Inc.              Acquisition              8/29/97          Nissan new car dealership

</TABLE>

1997 RESTRUCTURING

     In late  1997,  management  undertook  a  comprehensive  evaluation  of its
business in order to improve earnings and address the Company's  operational and
liquidity needs. As a result, management determined to emphasize used car sales,
which typically have higher gross margins than new car sales.  Accordingly,  the
Company  terminated  all plans to acquire or open new car  dealerships  in early
December 1997 and began to focus on achieving  operational  efficiencies  at the
used car stores that the Company had acquired or opened during 1997.

     The  Company  implemented  the  following  changes  to focus  its  business
strategy and to achieve certain operational efficiencies.

o    The Company took one-time charges in the fourth quarter of 1997 relating to
     acquisition expenses and severance payments.

o    Corporate  headquarters  personnel was reduced by approximately  15% in the
     fourth quarter of 1997.

o    A Company-wide budget was prepared and implemented and, in addition, "flash
     reports" were developed for the Company's  divisions  beginning January 15,
     1998.  These flash reports  provide key  information  daily and are used to
     monitor business operations and results on a regular basis.

o    In late 1997,  the Company began  maintaining a "static pool" analysis that
     establishes  a  benchmark  for  analysis  of the  quality of the  Company's
     finance receivable portfolio.

                                     -36-
<PAGE>


o    The Company's  finance  subsidiary,  FFG, expanded its loan portfolio which
     was  $75.5  million  as of  September  30,  1998,  while  establishing  and
     maintaining  underwriting  procedures  that have  resulted  in 91.8% of the
     finance contracts being current (30 days or fewer past due) as of September
     30, 1998.

o    The Company  restructured  certain debt obligations in late 1997 and in the
     first quarter of 1998. The debt restructuring  included expanded financings
     for key areas of the business as well as  negotiating  conversions  of some
     debt instruments into equity and refinancing obligations with maturities in
     1998.

SELF-FINANCED USED CAR STORES

     The Company  currently owns and operates 22  self-financed  used car stores
under the First Choice name and 4 used car stores under the Team name. Cars that
have less than 80,000  miles are placed at First  Choice  locations,  while cars
that have more than 80,000 miles (usually repossessions or trade-ins) are placed
at Team stores.  The  Company's  used car stores are divided into three  regions
(the Tampa-St.  Petersburg,  Orlando and West Palm Beach,  Florida  metropolitan
areas), and each region is managed by a regional manager.  Each store is managed
by a sales  manager  who  oversees  a sales  staff.  The  Company  upgrades  the
facilities  it acquires with fresh  exterior and interior  paint and new signage
(with an  emphasis  on the  blue,  yellow  and white  colors  of First  Choice),
replaces  furniture  and  fixtures as  necessary  to be similar to the  existing
locations and installs upgraded computer systems.

     The Company's First Choice stores generally maintain an approximate average
of 90 used cars (ranging from 50 to 125) per store,  featuring a wide variety of
makes and models  (with ages  generally  ranging  from three to six years) and a
range of sale prices,  all of which  enable the Company to meet the  preferences
and budgets of a wide range of potential customers. The Company believes that by
selling  higher  quality  used cars and  providing a service  agreement to cover
major  repairs,  improved  customer  satisfaction  and fewer defaults on finance
contracts result.

     The Company provides,  through a third-party underwriter, a 24 month/24,000
mile service  contract  with each used car sold at a First Choice store and a 12
month/12,000  mile service  contract to purchasers  of the Company's  Team cars.
Under the  service  contracts,  which are  underwritten  by a third  party,  the
Company's customers may have their First Choice or Team cars repaired nationally
by  any  one  of  approximately  375,000  ASE  (Automotive  Service  Excellence)
certified  technicians.  The Company  does not  perform any repairs  under these
service  contracts.  These  service  contracts  cover most major  repairs due to
mechanical breakdown or failure.  Customers are responsible for payment of up to
a $100 deductible during each repair visit under the service contract.

     The Company acquires its used cars primarily at auto auctions. All cars are
subjected to a 110 point inspection  program,  reconditioning and, as necessary,
repair at the Company's reconditioning facilities.

     The Company  outsources  all  painting and body work.  The Company  invests
approximately  $300  per car in  repairs  prior  to  delivering  the cars to the
individual stores for sale. The Company's regional managers determine the number
and types of cars for the  stores in their  regions.  If a car is not sold in 90
days,  it is moved to  another  First  Choice  store in the same  region  for an
additional 90 days,  after which, if not sold, it is moved to a Team location or
sold wholesale to other dealers.

     RECONDITIONING  CENTERS. The Company uses two reconditioning centers in its
used car  operations.  Both centers  process used cars through the Company's 110
point inspection, perform minor body work and apply detailing, as necessary. The
main  reconditioning  facility,  based in  Lakeland,  Florida,  has total square
footage of 31,286 and is located on a 6.7 acre parcel. As of September 30, 1998,

                                     -37-
<PAGE>

the  Lakeland   operation  had  20  bays  and  was  capable  of   reconditioning
approximately  700 cars per month.  The Company believes that the parcel of land
could be used to  expand  reconditioning  capacity  by  adding  more  bays.  The
Lakeland  facility  also  contains  the  Company's  off-site  disaster  recovery
operations center.

     In addition to the main  facility,  the Company uses a second center at its
Nissan dealership in Stuart,  Florida.  This reconditioning  operation uses 7 of
the  dealership's 14 bays in a facility which has total square footage of 25,940
and has the capacity to recondition approximately 250 cars per month.

     MARKETING AND SALES.  A primary focus of the Company's  marketing  strategy
for its used car stores is its  ability to finance  consumers  with poor  credit
histories.  The Company has  initiated  marketing  programs  designed to attract
credit-impaired  customers,  assist  such  customers  in  re-establishing  their
credit,  reward those customers who pay on time,  develop  customer  loyalty and
increase referral and repeat business.  The Company created value-added programs
for its  customers  including  providing  quality cars  through a  comprehensive
inspection and refurbishment  program, a service agreement on all used cars sold
at the Company stores, rapid loan application  processing and  pre-qualification
over the telephone by calling a toll-free number. The Company reports monthly to
credit   bureaus,   allowing   customers   the   opportunity   to  work   toward
re-establishing  their  credit  while  providing  an avenue for them to purchase
newer cars as their credit improves.

     In general,  the Company's  advertising for its used car stores  emphasizes
its multiple locations,  wide selection of quality used cars, ability to provide
financing to many credit-impaired  borrowers and additional value-added programs
such as service agreements and loan  pre-qualifications.  The Company advertises
extensively in the radio and television media. In addition,  management believes
that the Company's upgraded facilities provide effective advertising and attract
drive-by traffic to visit the stores because their appearance  fosters the image
of a used car store that offers  quality  cars.  The Company  believes  that its
advertising and marketing  approach  creates brand name recognition and promotes
its image as a professional, customer oriented business.

     The Company  utilizes  various  telemarketing  programs to promote its used
cars.  For example,  potential  customers are contacted  within  several days of
their  visit to a Company  store to follow  up on leads and  obtain  information
regarding  their  experience  while at a Company  store.  In addition,  used car
customers  with  satisfactory  payment  histories are contacted  several  months
before contract  maturity and are offered an opportunity to purchase another car
with a nominal down payment  requirement  or to move up to a newer car at one of
the Company's new car dealerships if the customer has improved credit.

     The  Company  employs  a  dedicated  on  site  sales  force.   The  Company
continually   seeks  to  develop   and  retain   qualified   salespersons.   The
salesperson's sole responsibility is the sale of cars. The salespersons who sell
used cars do not in any way  participate  in the financing  aspects of the sale.
The Company  employed 113  full-time  salespersons  at its used car stores as of
September  30,  1998.  The  salespersons  are  compensated   primarily   through
commissions.

     COMPETITION.  The used car business in which the Company competes is highly
fragmented and very competitive. The Company may face increased competition from
automobile  consolidators  such as Ugly Duckling  Corporation and  "superstores"
such as CarMax and AutoNation  USA.  Others,  such as  Auto-By-Tel,  Calling All
Cars, AutoVantage and Auto Web International are marketing cars on the Internet.
In addition,  certain  regional and national car rental  companies have begun to
operate retail used car lots to dispose of their used rental cars. Many of these
competitors have significantly greater financial,  marketing and other resources
than the Company.

                                     -38-
<PAGE>

     The  used  car  superstores  typically  use  a  mega-dealer  approach  with
substantial investments in real estate and extensive inventory at each store. In
contrast,  the Company  maintains  several medium to large stores in each of its
marketing  areas.  The Company  believes  that by covering more  territory  with
multiple  locations in a market area rather than having one superstore serving a
large  geographic  area,  the Company's  stores are more easily  accessible to a
wider  population  and the Company  benefits from more  visibility in its market
area.  Also,  the  existence  of multiple  locations  gives the Company  greater
flexibility in responding to a change in market conditions.

     The Company's used car stores do not directly compete with superstores such
as CarMax or AutoNation which offer newer,  more expensive cars than the Company
sells and do not target credit-impaired  borrowers.  Of the large companies that
have entered the  credit-impaired car business,  only Ugly Duckling  Corporation
has announced an intention to focus on the  credit-impaired  borrower.  However,
the Company believes that it competes  effectively with the other  self-financed
dealers and can compete  effectively with Ugly Duckling  Corporation because the
Company's cars are generally  newer,  lower mileage cars.  Further,  the Company
provides  each  customer  with a service  agreement on each used car sold at the
Company's  stores.  The Company  distinguishes  its direct  sales and  financing
operations from those of typical  self-financed  used car retailers by providing
multiple locations,  upgraded facilities, large inventories of used automobiles,
centralized  purchasing,   value-added  marketing  programs  and  dedication  to
customer service. In addition, the Company has developed underwriting guidelines
and techniques to facilitate rapid credit  decisions,  as well as an integrated,
technology-based  corporate  infrastructure  that enables the Company to monitor
and service its finance  contracts.  The Company believes that it is the largest
used car store chain in Florida that focuses on credit-impaired customers.

     The  credit-impaired  segment of the used car financing  business is highly
fragmented  and very  competitive.  In recent years,  several  consumer  finance
companies  have  completed  public  offerings  in  order to  raise  the  capital
necessary  to  fund  expansion  and  support  increased   purchases  of  finance
contracts. In addition, there are numerous financial services companies serving,
or capable of serving,  this market. While traditional  financial  institutions,
such as commercial banks,  savings and loans,  credit unions and captive finance
companies of major  automobile  manufacturers,  have not  consistently  serviced
credit-impaired borrowers, the high rates of return earned by companies involved
in  credit-impaired  financing  have  encouraged  certain  of these  traditional
institutions to enter, or contemplate entering, this market.

FINANCING CUSTOMERS WITH IMPAIRED CREDIT

     The Company offers financing to its customers who purchase used cars at its
used car stores.  The Company  does not have any loans from  persons who are not
customers  except for finance  contracts  purchased  in the  Company's  used car
dealership  acquisitions.  The Company has  established  a policy not to acquire
third party originated finance contracts. It provides financing only for its own
customers,  thereby relying on its own  underwriting  standards and not those of
third parties. Sales and financing are separate functions performed by different
Company subsidiaries.  All credit and financing review and decisions are made by
experienced financing personnel at the Company's headquarters.  The Company uses
a  standardized  sales  contract  that  typically  provides for down payments of
approximately  10% of the purchase  price with the balance of the purchase price
financed at an average annual  percentage rate of approximately 26% over periods
ranging from 12 to 48 months. The Company finances approximately 95% of the used
car sales through finance contracts that the Company originates and services.

     CUSTOMER  CREDIT  PROFILE.  The Company  targets  customers with "C" or "D"
credit profiles. A "C" rated consumer may have an inconsistent employment record
or unresolved problems with credit in the past. This borrower will generally not
be able to obtain a loan to finance a late model or older used car purchase from
a captive finance subsidiary or a bank otherwise available to customers with "A"

                                     -39-
<PAGE>

or "B"  credit  ratings.  A "D" rated  consumer  has an  unfavorable  employment
history and other credit problems, such as personal bankruptcy.  This borrower's
primary choice is to finance his or her used car purchase, which is often from a
self-financed  used car store,  through an independent  finance  company that is
active in this market  segment.  Based on a random  sample by the Company of its
loan portfolio in October 1997, the Company's average customer (at the time such
customer  applies for or is  originally  approved  for credit) has gross  annual
household income of approximately  $30,000,  and an average length of employment
at his or her current job of approximately 3.3 years and has resided in the same
area for approximately 4.9 years.

     CREDIT EVALUATION PROCEDURES.  The Company applies uniform underwriting and
credit approval  standards in originating its used car loans. The most important
criteria   the  Company  uses  in   evaluating   a  loan  are  the   applicant's
creditworthiness,  the  collateral  value of the car,  employment  and residence
histories,   income  information,   personal  references,   income  and  expense
information and credit bureau reports.  The sales managers at the Company's used
car  stores  submit  the   customer's   credit   application  to  the  Company's
headquarters in Titusville,  Florida,  where the customer's  creditworthiness is
analyzed.  The  Company  utilizes a credit  evaluation  system it  developed  to
determine a  customer's  creditworthiness.  Financing  decisions  are made by an
experienced loan staff with a minimum of five-years of experience and an average
of ten years of experience in car financing.  For applicants who fall outside of
the  guidelines,   the  ultimate  financing  determination  is  made  by  senior
management.  Further,  members  of senior  management  regularly  review  credit
decisions made by the Company's  employees to assure  uniformity in underwriting
standards.  Periodically, the Company retains credit underwriting consultants to
review the Company's loan quality,  collection and  underwriting  procedures and
recommend areas for improvement.  See  "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations--Credit  Losses" for information
about the Company's loan loss and delinquency experience.

     CONTRACT SERVICING.  The Company services its finance contracts through the
use of  servicing  procedures  which  have  been  specifically  tailored  to the
Company's  customers and include:  (i) monitoring loans and related  collateral,
(ii)  accounting  for and posting all payments  received,  (iii)  responding  to
borrowers' inquiries,  (iv) taking all necessary action to maintain the security
interest granted in the financed automobile, (v) investigating delinquencies and
communicating   with  borrowers  to  obtain  timely   payments,   (vi)  pursuing
deficiencies  on loans,  and (vii) when  necessary,  repossessing  the  financed
automobile.

     COLLECTION  POLICY.  The  Company  is  strict in its  collection  policies,
believing that by acting promptly and working with the customers, the Company is
able to minimize its loss exposure.  The Company  employs a credit  counselor in
each of its major market areas to work directly with delinquent  customers,  and
the Company also maintains regional payment centers so customers can pay by cash
rather than send  checks  through the mail.  Approximately  60% of the  customer
payments are received through the regional  payment centers.  The Company begins
collection efforts when an account balance becomes one day past due.  Generally,
the Company's policy is to work with the customer to permit the customer to keep
the automobile and continue making payments,  and to take more aggressive action
if the customer fails to continue making payments.

     REPOSSESSIONS.  The  Company  begins the process of  repossession  when two
payments are past due. Repossessions are handled by independent licensed, bonded
and insured  repossession firms engaged by the Company. The Company reconditions
and remarkets  approximately 70% of its repossessions through the Company's Team
stores,  rather than through  auctions  (where cars are generally  sold at lower
prices).  These practices  allowed the Company to obtain net recoveries of 61.5%
of the principal balances as of September 30, 1998.

     COMPETITION.  The market for financing  credit-impaired customers is highly
competitive.  The Company's  competitors  include  local,  regional and national
automobile  dealers,  used car finance  companies and other sources of financing

                                     -40-
<PAGE>

for automobile  purchases,  many of which are larger and have greater  financial
and  marketing  resources  than the  Company.  Historically,  commercial  banks,
savings and loan associations,  credit unions,  captive finance  subsidiaries of
automobile  manufacturers  and other  consumer  lenders  have not  competed  for
financing  for  credit-impaired  used car  buyers.  During  the past two  years,
however, several companies,  including large, well-capitalized public companies,
have devoted considerable  resources to acquisitions in the Company's market for
credit-impaired customers.

     THIRD PARTY FINANCE  RECEIVABLES AND  ACCOUNTING.  As part of its operating
philosophy, the Company only originates and services finance receivables on used
cars sold at its used car  stores.  The  Company  does not  intend  to  purchase
receivables not originated by the Company.

NEW CAR DEALERSHIPS

     The Company owns and operates two new car dealerships in Stuart, Florida, a
Nissan and a Volvo  dealership.  The Company purchased these new car dealerships
before it determined to focus on used car sales.  The Company does not intend to
purchase any additional new car dealerships.

     The Company sells new and used cars at the new car dealerships and provides
parts and services. The Company emphasizes customer satisfaction  throughout its
new car dealerships. The customer satisfaction surveys sent by the manufacturers
to the Company's new car customers enhance the Company's ability to maintain its
customer satisfaction.  Advertising and marketing play a significant role in the
success of the Company's  new car sales.  The Company  advertises  new car sales
primarily through the print media. The manufacturers  advertise in the print and
radio media.

     The new car  dealership  business in which the  Company  operates is highly
competitive.  The Company  principally  competes in this business with other new
car dealerships,  ranging in size from the independent dealer selling fewer than
25 cars per year to the large,  well-capitalized  new car dealership chains that
are  significantly  bigger  than the  Company.  Also,  the  Company's  franchise
agreements  with  manufacturers  do not give the Company the exclusive  right to
sell the manufacturer's product within a given geographical area. Accordingly, a
manufacturer could grant another dealer a franchise to start a new dealership in
close proximity to either of the Company's locations or an existing dealer could
move its dealership to a location which would be directly  competitive  with the
Company.

CORVETTE PARTS AND ACCESSORIES

     The  Company,   through  Eckler's,   is  a  manufacturer  and  supplier  of
aftermarket  Corvette  parts and  accessories.  For the year ended  December 31,
1997,  and the nine months ended  September  30, 1998,  Eckler's  accounted  for
approximately  22.4% and 13.1%,  respectively,  of the Company's  revenues.  The
Company expects that Eckler's revenues, as a percentage of overall revenue, will
continue to decrease as the Company expands its used car operations.

     The Company has  entered  into a  Reproduction  and  Service  Part  Tooling
License  Agreement with General  Motors  Corporation,  Service Parts  Operations
("GM") (the "GM Agreement").  Under the GM Agreement, the Company is licensed to
manufacture, sell, distribute and market numerous parts discontinued by GM which
the  Company  may sell under the GM  Restoration  Parts  trademark  for  various
Corvette model years.

     SALES AND DISTRIBUTION METHODS. Eckler's generates revenues through catalog
sales and, to a lesser extent, showroom sales. The Company markets approximately
17,000 items through the Eckler's  catalog.  In late 1997,  the Company began to
distribute  its catalog  semiannually  instead of  annually.  The  Company  also
markets  Corvette  products  from its  5,000  square  foot  Titusville,  Florida
showroom,  advertises in magazines and trade  publications  and sponsors various

                                     -41-
<PAGE>

promotional programs.  The Company also distributes  approximately 30,000 copies
of its catalog through newsstands.

     SOURCING AND PRODUCTION.  A majority of the Company's  Corvette products is
obtained  from many  independent  manufacturers  and  distributors.  The Company
sources its GM  Restoration  Parts  through  third-party  manufacturers  and the
purchase  of  discontinued  parts  directly  from GM. The  Company  has over 400
Corvette product  suppliers with no single source accounting for more than 5% of
purchases,  except for Bob Steele  Chevrolet,  which accounted for approximately
14% of purchases in 1996. Of Eckler's approximately 95,000 customers,  no single
customer accounted for more than 5% of its total revenues during 1997.

     COMPETITION. The Company competes directly with a number of local, regional
and national suppliers of aftermarket Corvette automotive parts. The Company has
identified seven primary competitors.

MANAGEMENT INFORMATION SYSTEMS

     The Company's  management  information  system allows the Company to manage
its  operations  uniformly  and  efficiently  through  "real time"  information.
Utilizing  its MIS, the Company is able to bar code  inventory,  track sales and
costs,  and provide its stores  access to inventory  available at other  Company
stores from one integrated platform. The Company also employs financial software
to facilitate the Company's  underwriting  and credit  approval  process,  track
collections  and monitor its loan portfolio.  The Company has  assimilated  loan
tracking  software  utilized by the finance  companies it acquired in connection
with  acquisitions  of  self-financed  used car  dealerships.  The  Company  has
installed  financial  software for its finance contracts that will integrate all
loan monitoring and servicing functions into one uniform system. The Company has
a  recovery  system  in the  event  of a  natural  disaster  (e.g.,  hurricanes,
tornadoes,  fire, lightning) under which all systems can be rerouted to a remote
location and be fully  operational  within 24 hours. The Company has the ability
to  customize  and  upgrade  its  software  in-house  with its own  staff of MIS
personnel and to  trouble-shoot  any  interruptions  that may occur. The Company
foresees no material problems in becoming Year 2000 compliant.

INSURANCE

     The  Company has  developed  a program  offering  collision  and  liability
insurance to its used car customers as well as credit life insurance.

REGULATION, SUPERVISION AND LICENSING

     The Company's operations are subject to ongoing regulation, supervision and
licensing  under  various  federal,  state and local  statutes,  ordinances  and
regulations.  Among other things, these laws require that the Company obtain and
maintain  certain licenses and  qualifications,  limit or prescribe terms of the
contracts  that the  Company  originates  and/or  purchases,  require  specified
disclosures  to  customers,  limit the  Company's  right to  repossess  and sell
collateral,  and  prohibit  the  Company  from  discriminating  against  certain
customers.  The  Company is also  subject to federal and state  franchising  and
insurance laws.

     The Company  typically  charges  interest rates ranging from 25.0% to 29.9%
per annum on the finance contracts originated at its used car stores. Currently,
all of the Company's used car sales activities are conducted in, and its finance
contracts  are  originated  in,  Florida,  which limits the interest rate that a
lender may charge.  The Company may expand its operations into other states that
also impose interest rate limits.

                                     -42-
<PAGE>


TRADEMARKS AND PROPRIETARY RIGHTS

     The Company does not have any registered  trademarks or service marks other
than  "Eckler's."  Under  certain  license  agreements  with GM, the  Company is
licensed to use the GM Restoration Parts label on discontinued Corvette parts it
manufactures  or  acquires  under the GM  Agreement.  The  Company  also has the
non-exclusive right to use certain GM trademarks (e.g.,  "CORVETTE" and Corvette
body designs) under certain  trademark and licensing  agreements,  in connection
with  the  manufacture,   sale,   promotion  and  distribution  of  pre-approved
accessory, novelty, gift and apparel items.

EMPLOYEES

     At September 30, 1998, the Company  employed 561 persons,  of which 85 were
employed  in the  Company's  executive  and  administrative  offices,  313  were
employed in its Company dealership operations, 73 were employed in the Company's
credit and collection activities,  and 90 were employed by Eckler's. None of the
Company's  employees  are  covered by a  collective  bargaining  agreement.  The
Company considers its relations with its employees to be good.

PROPERTIES

     The  Company  owns  approximately  5.6 acres of real  property  at its main
facilities in Titusville,  Florida.  Three buildings comprise the Company's main
facilities--an administrative building, a manufacturing facility and a warehouse
and shipping  facility--with  total square  footage of 87,825.  The Company also
owns 5.3 acres of undeveloped property adjacent to its main facilities,  as well
as a First Choice store located in Melbourne, Florida.

     As of September 30, 1998 the Company leased 30 facilities, consisting of 23
used car stores, two new car dealerships,  office space in Tampa,  Florida,  and
its main reconditioning facility in Lakeland,  Florida. The other reconditioning
facility is leased as part of the Stuart Nissan new car dealership. The lease on
the  Lakeland  reconditioning  facility is being  extended for a three year term
until August,  2001, with renewal provisions for a three year,  followed by five
one year,  terms. The lease at the Volvo  dealership  expires in 2004, while the
lease for the Nissan dealership expires in 2003.

     The rent expense on the Company's  facilities was approximately  $1,312,500
for the nine months ended  September  30, 1998,  and $1.3 million for the twelve
months  ended  December  31,  1997.  See  "Certain   Relationships  and  Related
Transactions."

                                     -43-
<PAGE>


     

ITEM 5.  EXHIBITS AND REPORTS ON FORM 8-K.

(A)      EXHIBITS

     EXHIBIT                                      FILED HEREWITH OR 
      LIST              EXHIBIT DESCRIPTION       INCORPORATED BY REFERENCE TO:


      10.1       Warrant from the Company to      Filed herewith
                 Sands Brothers & Co.
 
      27.0       Financial Data Schedule.         Filed herewith




(B)      REPORTS ON FORM 8-K

                  None.




                                     -44-
<PAGE>





                                   SIGNATURES


     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on November 16, 1998.


                                SMART CHOICE AUTOMOTIVE GROUP, INC.


                                By:   /S/ GARY R. SMITH         
                                -------------------------------------------
                                    Gary R. Smith
                                    President and Chief Executive Officer



     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


         SIGNATURES             TITLE                              DATE


/S/ GARY R. SMITH           President and Chief Executive    November 16, 1998
-------------------         Officer, Director
Gary R. Smith               


/S/ JOSEPH E. MOHR          Chief Financial Officer,         November 16, 1998
------------------          (Principal Financial and
Joseph E. Mohr              Accounting Officer)
                           





                                   
                                      -45-
<PAGE>





EXHIBIT                                          FILED HEREWITH OR INCORPORATED
LIST         EXHIBIT DESCRIPTION                 BY REFERENCE TO:


10.1       Warrant from the Company to           Filed herewith
           Sands Brothers & Co.
 
27.0       Financial Data Schedule.              Filed herewith







                                     -46-