THIS  DOCUMENT IS A COPY OF THE FORM 10-K FILED ON MARCH 30, 2000  PURSUANT TO A
RULE 201 TEMPORARY HARDSHIP EXEMPTION
================================================================================


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

--------------------------------------------------------------------------------

                                    FORM 10-K

 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
                                   (Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999
                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
           For the transition period from __________ to _____________.

                         Commission File Number 0-20841
                            UGLY DUCKLING CORPORATION
          (Exact name of registrant as specified in its charter)

                Delaware                                 86-0721358
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)
   2525 E. Camelback Road, Suite 500,
            Phoenix, Arizona                                85016
(Address of principal executive offices)                 (Zip Code)

       (Registrant's telephone number, including area code) (602) 852-6600

Securities registered pursuant to Section 12(b) of the Act:

          Title of Class              Name of each Exchange on which registered
          --------------              -----------------------------------------
12% Subordinated Debentures Due 2003           American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

       Title of Class                 Name of each Exchange on which registered
       --------------                 -----------------------------------------
Common Stock, $.001 par value                  The Nasdaq Stock Market


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

       The aggregate market value of common stock held by  non-affiliates of the
registrant was approximately $80,689,000.

              Applicable Only to Registrants Involved in Bankruptcy
                  Proceedings During the Preceding Five Years:
     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes [ ] No [ ]

                   (Applicable Only to Corporate Registrants)
      As of March 15, 2000, there were 14,929,552  shares of common stock of the
Registrant outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
             Portions of the Registrant's Proxy Statement for the Annual Meeting
of  Stockholders  currently  scheduled  for May 23,  2000  are  incorporated  by
reference into Part III

================================================================================
<PAGE>


                            Ugly Duckling Corporation

                                TABLE OF CONTENTS

                   For the fiscal year ended December 31, 1999

<TABLE>
<S>                <C>                                                                       <C>
                                                                                              Page

  PART I

       Item 1       Business................................................................    1
       Item 2       Properties..............................................................    5
       Item 3       Legal Proceedings.......................................................    5
       Item 4       Submission Of Matters To A Vote Of Security Holders.....................    5
       Item 4A      Executive Officers Of The Registrant....................................    5
  PART II

       Item 5       Market For The Registrant's Common Equity Securities And Related
                    Stockholder Matters.....................................................    7
       Item 6       Selected Consolidated Financial Data....................................    8
       Item 7       Management's Discussion And Analysis Of Financial Condition And
                    Results Of Operations...................................................   10
       Item 7A      Quantitative And Qualitative Disclosures About Market Risk..............   29
       Item 8       Consolidated Financial Statements And Supplementary Data................   30
       Item 9       Changes In And Disagreements With Accountants On Accounting And
                    Financial Disclosures...................................................   54
  PART III

       Item 10      Directors And Executive Officers Of The Registrant......................   54
       Item 11      Executive Compensation..................................................   54
       Item 12      Security Ownership Of Certain Beneficial Owners And Management..........   54
       Item 13      Certain Relationships And Related Transactions..........................   54
  PART IV

       Item 14      Exhibits, Consolidated Financial Statement Schedules, And Reports On
                    Form 8-K................................................................   55
  Signatures................................................................................   60


</TABLE>

<PAGE>




                                     PART I

                               ITEM 1 -- BUSINESS

Principal Line of Business

We operate the largest chain of buy here-pay here car  dealerships in the United
States. At December 31, 1999, we operated 72 dealerships located in eleven large
markets from coast to coast.  We have one line of business:  to sell and finance
quality used vehicles to customers  within what is generally  referred to as the
sub-prime segment of the used car market.

      Our business is divided into three operating  segments.  Information about
our  operating  segments can be found in Note (18) of the Notes to  Consolidated
Financial Statements beginning on page 36. Operating segment information is also
included in  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations - Business Segment  Information"  beginning on page 14. We
have  revised  the  composition  of our  operating  segments  as a result of the
discontinuance  of our Cygnet  Dealer and bulk  purchasing  and third party loan
servicing lines of business.  See "Discontinued  Operations" below. As a result,
we have restated our segment  information for all periods  included in Note (18)
of the Notes to Consolidated Financial Statements contained herein.

      We commenced  operations  through various entities beginning in 1989. Ugly
Duckling  Corporation was formed in 1992 and was  reincorporated  in Delaware in
1996.

               Overview of Used Car Sales and Finance Industry (1)

Used Car Sales and Financing

      Used car  retail  sales  typically  occur  through  either  manufacturer's
franchised new car dealerships  that sell used cars or through  independent used
car  dealerships.  The  market  for  used  car  sales in the  United  States  is
significant and has steadily  increased over the past five years. There are over
19,000 franchised and 56,000 independent used car dealers in the United States.

      The automobile  financing  industry is the third-largest  consumer finance
market in the country,  after mortgage debt and credit card revolving debt. This
industry is served by such  traditional  lending  sources as banks,  savings and
loans, and captive finance subsidiaries of automobile manufacturers,  as well as
by independent finance companies and buy here-pay here dealers. In general,  the
industry is categorized  according to the type of car sold (new versus used) and
the   credit   characteristics   of  the   borrower.   Based  on  these   credit
characteristics,   credit  worthiness  classifications  have  evolved  generally
ranging from A through D, with the D classification representing those customers
being the least credit worthy. The C and D, or sub-prime  segment,  is comprised
of customers who typically  have limited credit  histories,  low incomes or past
credit  problems.  This sub-prime market segment alone is estimated to grow over
the next two years  from the  current  1999  estimate  of $136  billion  to $143
billion, an increase of 5.1%. Of the C and D total market,  independent used car
dealerships provide approximately $59 billion of total retail sales, or 43.4%.

      We are a buy here-pay here dealer and participate in the sub-prime segment
of the independent used car sales and finance market.  Buy here-pay here dealers
typically  offer  their  customers  certain  advantages  over  more  traditional
financing sources, including:

o  expanded credit opportunities;
o  flexible  payment terms,  including  structuring loan  payment due  dates  as
        weekly or biweekly, often coinciding with a customer's payday; and
o  the  ability to make  payments in  person at  the  dealerships.   This is  an
        important feature to many sub-prime  borrowers who may not have checking
        accounts  or are  otherwise  unable to make  payments  by the  due  date
        through use of the mail due to the timing of paydays.









--------
     (1) The  industry  statistical  information  presented in this section from
information provided to us by CNW Marketing/Research of Bandon, Oregon.

                                     Page 1
<PAGE>

                     Company Dealership (Retail) Operations

Aggressive Growth in Dealership Sites

      We commenced  dealership  operations in 1992 with the  acquisition  of two
dealerships in Arizona.  At December 31, 1996, we had expanded to 8 dealerships,
all  in  Arizona.   Beginning  in  1997,  we  expanded  aggressively  through  a
combination of de novo dealership developments and acquisitions. Acquisitions in
1997 and 1999 added 38 dealerships in ten new markets outside of Arizona.  Since
1996, we have also developed a total of 26 de novo sites in existing markets.

The following table  summarizes,  by market for the last three years, the number
of dealerships we had in operation:


                                        Dealerships, by Market

                    --------------------------------------------------------
                          1999               1998                1997
                    -----------------   ---------------     ----------------
Los Angeles......          12                   8                    6
Phoenix..........           9                   9                    7
San Antonio......           9                   9                    7
Atlanta..........           9                   9                    5
Tampa............           9                   8                    5
Dallas...........           7                   6                    3
Richmond.........           5                  --                   --
Orlando..........           4                  --                   --
Tucson...........           3                   3                    3
Albuquerque......           3                   3                    2
Las Vegas........           2                   1                    1
Miami............          --                  --                    2
                    -----------------   ---------------     ----------------
                           72                  56                  41
                    =================   ===============     ================

Retail Car Sales

      We distinguish  our dealership  (retail)  operations from those of typical
buy here-pay here dealers through our:

o   dedication to customer service,      o   advertising and marketing programs,
o   larger inventories of used cars,     o   upgraded facilities, and
o   network of multiple locations,       o   centralized purchasing.

      Our dealerships  are generally  located in high  visibility,  high traffic
commercial  areas, and tend to be newer and cleaner in appearance than other buy
here-pay here  dealerships.  These  characteristics  help promote our image as a
friendly  and  reputable  business.  We believe  this  image,  coupled  with our
widespread  brand name  recognition,  enables us to attract  customers who might
otherwise visit another buy here-pay here dealer.

      Each dealership is run by a general manager who has responsibility for the
operations of the dealership facility, including:
<TABLE>

<S>                                                              <C>
o   underwriting and approval of sales and loan originations,    o  profitability of the dealership,
o   hiring, training, and performance of dealership employees,   o  post-sale customer relations, and
o   inventory maintenance,                                       o  the appearance and condition of the facility.
</TABLE>

      Our dealerships  generally maintain an average inventory of 50 to 150 used
cars and  feature a wide  selection  of makes and models  (with  ages  generally
ranging from 4 to 7 years) and a range of sale prices.  This inventory allows us
to meet the  tastes and  budgets of a broad  range of  potential  customers.  We
acquire  our  inventory  from  new or  late-model  used  car  dealers,  used car
wholesalers,  used car auctions, and customer trade-ins. In making purchases, we
take into account each car's retail value,  longevity,  and the costs of buying,
reconditioning,  and delivering  the car for resale.  After  purchase,  cars are
generally  delivered  to one  of  our 15  inspection  centers,  where  they  are
inspected and reconditioned for sale.

                                     Page 2
<PAGE>

Used Car Financing

      We  finance  substantially  all of the  used  cars  that  we  sell  at our
dealerships through retail installment loan contracts. Subject to the discretion
of our dealership or sales  managers,  potential  customers must meet our formal
underwriting  guidelines  before we will agree to finance the purchase of a car.
In  connection  with each sale,  we require our  customers  to complete a credit
application.  Our  employees  then analyze and verify the  customer  application
information,   which  contains  employment  and  residence   histories,   income
information,  references,  and other information regarding the customer's credit
history.

      Our credit  underwriting  process  takes into  account  the ability of our
managers to make sound judgments  regarding the extension of credit to sub-prime
borrowers  and to  personalize  financing  terms to meet the needs of individual
customers.  For example,  we may  schedule  loan  payments to coincide  with the
customer's paydays, whether weekly, biweekly, semi-monthly, or monthly.

Monitoring and Collections

      One of our goals is to minimize credit losses through close  monitoring of
loans in our portfolio.  When a car sale is completed, the loan is automatically
added to our loan servicing database.  Our monitoring and collections staff then
use our collection software to monitor the performance of the loans.

      The  collection  software  provides  us with,  among  other  capabilities,
up-to-date activity reports,  allowing prompt  identification of customers whose
accounts  have become past due. Our early  detection of a customer's  delinquent
status, as well as our commitment to working directly with our customers, allows
us to identify and address payment  problems  quickly,  and reduce the chance of
credit loss.

      Unlike  most  other  used car  dealership  chains  or  automobile  finance
companies,  we permit our customers to make payments on their loans in person at
any of our dealerships or at any of our collection facilities. Payments received
at our dealerships currently account for more than 60% of monthly loan receipts.

Integrated Computer System

      We manage all the operations of our inspection centers,  dealerships, loan
service  centers,  and our  accounting  and  reporting  functions  with a single
integrated  computer  system.   When  a  used  car  is  purchased,   the  system
automatically  adds the car to inventory and records the appropriate  entries in
our accounting system.  Reconditioning  costs also are subsequently  tracked for
each car. With the generation of a sales contract, the system automatically adds
the loan to our loan  servicing and  collections  database and records the sale,
cost of sale, inventory,  loan and all related entries in our accounting system.
We use both local and wide-area data and voice communication networks that allow
us to account for all purchase and sale activity  centrally and to service large
volumes  of  loans  from  one  of our  four  centralized  servicing  facilities.
Concurrently,  we retain the capability and flexibility that allows our customer
to make  payments at any of our  dealership  locations.  We also have  developed
comprehensive  databases and sophisticated  management  tools,  including static
pool analysis, to analyze customer payment history and loan performance,  and to
monitor underwriting effectiveness.

       Primarily as a result of acquisitions,  for 1997 and substantially all of
1998, we managed our operations on four different computer systems. In September
and October  1998 and  February  1999,  we  converted  operations  to our single
integrated computer system.

Advertising and Marketing

      In general,  our  advertising  campaigns  emphasize our ability to provide
financing to most  sub-prime  borrowers,  our multiple  locations,  and our wide
selection of quality used cars. We believe that our marketing  approach  creates
brand  name   recognition  and  promotes  our  image  as  a  professional,   yet
approachable,   business.  We  use  television,   radio,  billboard,  and  print
advertising,  as well as an Internet site at  www.uglyduckling.com to market our
dealerships.  We also  operate  a  loan-by-phone  program  using  our  toll-free
telephone number of  1-800-THE-DUCK.  Substantially all our marketing  materials
are produced in both English and Spanish.

      A primary  focus of our  marketing  strategy  is our  ability  to  finance
consumers with poor credit histories. Consequently, we have initiated innovative
marketing  programs  designed  to  attract  sub-prime  borrowers,  assist  these

                                     Page 3
<PAGE>

customers in establishing  good credit,  reward those customers who pay on time,
develop customer loyalty, and increase referral and repeat business.

Internet Activity

      In 1999, we began to accept  credit  inquiries via the Internet on our web
site  at  www.uglyduckling.com.  Credit  inquiries  received  over  the  web are
reviewed  by  our  employees,  who  then  contact  the  customers  and  schedule
appointments. This "clicks and mortar" approach has increased our internet sales
dramatically  during 1999,  with  internet  based  applications  spawning  sales
totaling $1.5 million,  $2.6 million and $3.9 million for the second,  third and
fourth  quarter  of  1999,  respectively.  Thus  far in  2000,  this  trend  has
continued.  We are in the  process of  developing  new  strategies  to  increase
internet  application  levels and enhance  closing  ratios,  and  believe  sales
activity via the internet will  increasingly  become a  complimentary  method of
expanding our base of operations.

Securitization Program

     We  periodically  securitize our loan portfolio as a significant  source of
capital to finance our  business.  Historically  we have  applied two methods in
structuring these transactions. For the quarter ended September 30, 1998 and for
prior  periods,  we  structured  and recorded  securitization  transactions  for
accounting  purposes using what we refer to as the "gain on sale" method.  After
September 30, 1998, we changed the way we structured and recorded securitization
transactions for accounting  purposes to what we refer to as the "collateralized
borrowing"  method.  The  application  of these two methods in  structuring  and
recording securitization  transactions result in materially different accounting
entries on our books and our results of operations. See "Management's Discussion
and  Analysis  of  Financial   Condition  and  Results  of  Operations  -  Other
Significant Developments."

Discontinued Operations

       In  December  1999,  the Company  sold its Cygnet  Dealer  Finance  (CDF)
subsidiary  to an entity  controlled  by  Ernest  C.  Garcia  II,  Chairman  and
principal  shareholder of the Company for approximately $37.5 million,  the book
value of the Company's  investment in CDF. As a result of the sale, CDF has been
reclassified as discontinued  operations for 1999 and all preceding  years.  See
Note  (2)  of  the  Notes  to  Consolidated  Financial  Statements  for  further
discussion of the sale of CDF.

      Effective  December  31,  1999,  we adopted a formal  plan to abandon  any
efforts to acquire  third party loans or servicing  rights to  additional  third
party  portfolios.  Accordingly,  our Cygnet Servicing and the associated Cygnet
Corporate  segment are reported as components of  discontinued  operations.  The
Company plans to complete servicing the portfolios that it currently services.

      In 1994, we acquired  Champion  Financial  Services,  Inc., an independent
automobile  finance  company.  In April 1995, we initiated an aggressive plan to
expand  Champion's  branch office network and, by December 31, 1997, we operated
83 branch offices across the country. In February 1998, we announced our plan to
close the branch  office  network  and exited this line of business in the first
quarter of 1998. See Note (2) of the Notes to Consolidated  Financial Statements
for further discussion of our discontinued operations.

Trademarks and Proprietary Rights

      We have an  ongoing  program  under  which we  evaluate  our  intellectual
property  and  consider  appropriate  federal  and state  intellectual  property
related filings.  We believe that the value of our trademarks is increasing with
the  development  of our  business,  but  that  our  business  as a whole is not
materially  dependent on our  trademarks.  We believe we have taken  appropriate
measures to protect our proprietary rights.  However,  there can be no assurance
that such efforts have been successful.

Employees

      At February 29, 1999, we employed approximately 2,700 persons, with 1,750,
780 and 170 employed in the  operation of our retail,  portfolio  and  corporate
segments,  respectively.  None of our  employees  are  covered  by a  collective
bargaining agreement.

Seasonality

      Historically,  we have experienced higher same store revenues in the first
two  quarters of the year than in the latter half of the year.  We believe  that
these results are due to seasonal buying patterns resulting in part because many
of our customers  receive  income tax refunds during the first half of the year,
which are a primary source of down payments on used car purchases.

                                     Page 4
<PAGE>

                              ITEM 2 -- PROPERTIES

      As of December 31, 1999, we leased  substantially  all of our  facilities.
Facilities  operated currently include 72 dealerships,  15 inspection centers, 4
loan  administration and collection  facilities that service our loan portfolio,
and our  corporate  office.  Our corporate  administrative  office is located in
Phoenix, Arizona.

                           ITEM 3 -- LEGAL PROCEEDINGS

      We  sell  our  cars on an "as is"  basis.  We  require  all  customers  to
acknowledge  in writing on the date of sale that we disclaim any  obligation for
vehicle-related problems that subsequently occur. Although we believe that these
disclaimers are enforceable  under  applicable  laws,  there can be no assurance
that they will be upheld in every instance. Despite obtaining these disclaimers,
in the  ordinary  course of  business,  we  receive  complaints  from  customers
relating to vehicle condition  problems as well as alleged violations of federal
and state consumer lending or other similar laws and regulations.  Most of these
complaints  are  made  directly  to  us  or  to  various   consumer   protection
organizations and are subsequently  resolved.  However,  customers  occasionally
name us as a defendant  in civil suits filed in state,  local,  or small  claims
courts. Additionally,  in the ordinary course of business, we are a defendant in
various other types of legal  proceedings.  Although we cannot determine at this
time the amount of the ultimate  exposure from these lawsuits,  if any, based on
the advice of  counsel  we do not  expect  the final  outcome to have a material
adverse effect on the Company.

          ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                 ITEM 4A -- EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Information  Concerning  Chairman of the Board and our Executive Officers as
of March 2000.
<TABLE>

<S>                        <C>    <C>
             Name           Age                 Position
--------------------------- ---   -------------------------------------------------------
Ernest C. Garcia II........  42   Chairman of the Board
Gregory B. Sullivan........  41   President, Chief Executive Officer  and Director
Steven T. Darak............  52   Senior Vice President and Chief Financial Officer
Donald L. Addink...........  50   Senior Vice President and Treasurer
Steven A. Tesdahl..........  40   Senior Vice President and Chief Information Officer
Jon D. Ehlinger............  42   Vice President, General Counsel and Secretary
</TABLE>

     Ernest C. Garcia II has served as our Chairman of the Board since 1992. Mr.
Garcia  served  as Chief  Executive  Officer  from 1992 to 1999,  and  served as
President  from 1992 to 1996.  Mr. Garcia is also a significant  stockholder  of
Ugly Duckling, owning approximately 32.2% of our stock at December 31, 1999. Mr.
Garcia is President of Verde Investments, Inc. (Verde), a real estate investment
corporation that is also an affiliate of ours. See below "Involvement in Certain
Legal Proceedings by Directors and Executive Officers."

     Gregory B. Sullivan was appointed Chief Executive Officer in July 1999. Mr.
Sullivan has served as our President since March 1996. In 1998, Mr. Sullivan was
elected to our Board of Directors.  Mr. Sullivan has also served as President of
Ugly Duckling Car Sales,  Inc. since December 1996.  From 1995 through  February
1996,  Mr.  Sullivan was a consultant  to us. Mr.  Sullivan  formerly  served as
President and principal  stockholder of an amusement game manufacturing  company
that he co-founded  in 1989 and sold in 1994.  Prior to 1989,  Mr.  Sullivan was
involved in the securities industry and practiced law with a large Arizona firm.
He is an inactive member of the State Bar of Arizona.  Mr.  Sullivan's sister is
married to John N. MacDonough, another member of our Board of Directors.

     Steven T. Darak has served as our Senior Vice President and Chief Financial
Officer since February 1994.  From June 1993 through January 1994, Mr. Darak was
a  consultant  to us. From 1989 to January  1994,  Mr.  Darak owned and operated

                                     Page 5
<PAGE>

Champion  Financial  Services,  Inc., a used car finance  company we acquired in
early 1994. Prior to 1989, Mr. Darak served in various  positions in the banking
industry and in public accounting.

     Donald L.  Addink has served as our Senior  Vice  President  and  Treasurer
since November 1998. From 1995 to November 1998, he served as our Vice President
- Senior  Analyst.  From  1988 to 1995,  Mr.  Addink  served as  Executive  Vice
President of Pima Capital Co., a life insurance holding Company.  Prior to 1988,
Mr. Addink served in various  capacities with a variety of insurance  companies.
Mr.  Addink is a Fellow of the Society of Actuaries and a Member of the American
Academy of Actuaries.

      Steven A.  Tesdahl  has  served as the  Senior  Vice  President  and Chief
Information  Officer for the Company since September of 1997. From 1993 to 1997,
Mr. Tesdahl was a partner with Anderson Consulting, a leading global provider of
business  integration  consulting  services.  Prior to 1993,  Mr. Tesdahl was an
Associate Partner with Anderson Consulting.

      Jon D.  Ehlinger  has served as our Vice  President,  General  Counsel and
Secretary  since July 1999,  joining us in 1998 as the General  Counsel for Ugly
Duckling  Car Sales and Finance  Corporation.  Prior to 1998,  Mr.  Ehlinger was
in-house  counsel for almost thirteen years for a major  financial  institution.
Mr.  Ehlinger is licensed to practice law in Arizona and has also worked for two
Arizona law firms.

      Our officers  are elected  each year at the first  meeting of our Board of
Directors subsequent to our annual meeting of shareholders,  currently scheduled
for May 23, 2000. Our officers hold office until their successors are chosen and
qualified or until their earlier retirement,  resignation, or removal. Except as
summarized above, there is no family  relationship among any of our officers and
directors.

(b)  Involvement  in  Certain  Legal  Proceedings  by  Directors  and  Executive
Officers.

      Prior to 1992,  when he founded Ugly Duckling,  Mr. Garcia was involved in
various  real  estate,  securities,  and  banking  ventures.  Arising out of two
transactions in 1987 between Lincoln  Savings and Loan  Association  ("Lincoln")
and entities  controlled by Mr. Garcia,  the Resolution  Trust  Corporation (the
"RTC"),  which  ultimately took over Lincoln,  asserted that Lincoln  improperly
accounted  for the  transactions  and that  Mr.  Garcia's  participation  in the
transactions  facilitated  the  improper  accounting.  Facing  severe  financial
pressures,  Mr. Garcia agreed to plead guilty to one count of bank fraud, but in
light of his cooperation  with authorities both before and after he was charged,
was sentenced to only three years  probation,  which has expired,  was fined $50
(the  minimum  fine the  court  could  assess),  and  during  the  period of his
probation, which ended in 1996, was banned from becoming an officer, director or
employee of any federally-insured  financial  institutions or a securities firms
without governmental  approval.  In separate actions arising out of this matter,
Mr. Garcia agreed not to violate the  securities  laws, and filed for bankruptcy
both  personally  and with  respect  to  certain  entities  he  controlled.  The
bankruptcies were discharged by 1993.

                                     Page 6
<PAGE>


                                     PART II

         ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON EQUITY SECURITIES

                         AND RELATED STOCKHOLDER MATTERS

      Our  common  stock  trades on the  NASDAQ  Stock  Market  under the symbol
"UGLY." The high and low closing sales prices of the common  stock,  as reported
by NASDAQ for the two most recent fiscal years are reported below.

                                    Market Price
                                --------------------
                                  High        Low
                                --------    --------

          Fiscal Year 1998:
          First Quarter....... $  10.88      $ 6.31
          Second Quarter...... $  12.69      $ 8.00
          Third Quarter....... $   9.13      $ 4.63
          Fourth Quarter...... $   6.00      $ 4.25
          Fiscal Year 1999:
          First Quarter....... $   6.50      $ 4.25
          Second Quarter...... $   7.69      $ 5.13
          Third Quarter....... $   9.00      $ 6.88
          Fourth Quarter...... $   8.88      $ 6.81

      On March 16,  2000,  the last  reported  sale price of the common stock on
NASDAQ was $8.00 per share.  On March 16,  2000,  there  were  approximately  75
record owners of our common  stock.  We estimate that as of such date there were
approximately 14,929,552 beneficial owners of our common stock.

      Dividend  Policy.  We have never paid dividends on our common stock and do
not anticipate doing so in the foreseeable  future.  It is the current policy of
our Board of  Directors  to retain any  earnings  to finance the  operation  and
expansion  of our  business or to  repurchase  our common  stock  pursuant to an
existing stock buy back program. In addition, the terms of our primary revolving
credit facility prevent us from declaring or paying dividends in excess of 15.0%
of each year's net earnings  available for  distribution.  Our future financings
may also include such restrictions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital Resources
-- Financing Resources -- Revolving Facility."

      1998 Exchange  Offer.  In the fourth quarter of 1998, we issued a total of
approximately  $17.5  million  of our 12%  subordinated  debentures  due 2003 in
exchange  for  approximately  2.7  million  shares  of  our  common  stock.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -- Liquidity  and Capital  Resources --  Supplemental  Borrowings --
Exchange  Offer."  Beginning on March 2, 1999, the debentures  became listed and
trade on the American Stock Exchange under the ticker symbol UGY.

      2000 Exchange  Offer. On February 22, 2000, we commenced an exchange offer
to acquire up to 2.5 million  shares of our common  stock in exchange  for up to
$27.5 million  principal  amounts of 11%  Subordinated  Debentures  due 2007. On
March 22, 2000, the offer was extended and currently expires April 13, 2000. See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Liquidity and Capital Resources -- Supplemental Borrowings -- 2000
Exchange Offer."

       Note  Issuance.  On November  8, 1999,  we issued a note in the amount of
$2.7 million to Virginia Auto Mart as consideration  for the purchase of certain
assets, including five used car dealerships and related vehicle inventory, and a
loan portfolio of approximately $6.8 million.  The note bears interest at a rate
of 7.5% per annum and is payable in September 2000. In the event that we default
on  payment  of the note,  the holder of the note will have the right to convert
the note into shares of our common stock equal to the lesser of:

o  a number of shares equal to the amount  outstanding under the note divided by
     the closing price of our common stock as of the default date; or
o  446,872 shares.

The note was issued under the private placement exemption of Section 4(2) of the
Securities Act of 1933.

                                     Page 7
<PAGE>


                 ITEM 6 -- SELECTED CONSOLIDATED FINANCIAL DATA

      The  following  table  sets  forth our  selected  historical  consolidated
financial data for each of the years in the five-year  period ended December 31,
1999. The selected annual historical consolidated financial data for 1999, 1998,
1997,  1996,  and 1995 are  derived  in part  from  our  consolidated  financial
statements   audited  by  KPMG  LLP,   independent   auditors.   For  additional
information,  see our consolidated  financial  statements  included elsewhere in
this  report.   The  following   table  should  be  read  in  conjunction   with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."  Certain  information  presented  below under the captions:  "Other
Operating  Data",  "Segment  Operating  Expense Data",  "Balance Sheet Data" and
"Loan Portfolio Data" is unaudited.
<TABLE>
                                                                  Years Ended December 31,
                                          ------------------------------------------------------------
                                              1999         1998        1997       1996         1995
                                          ----------  -----------  ----------  ----------  -----------
                                               ($ in thousands except units and per share amounts)
<S>                                       <C>         <C>          <C>          <C>          <C>
Statement of Operations Data:
Sales of Used Cars....................... $  389,908  $   287,618  $  123,814   $  53,768    $  47,824
Less:
      Cost of Used Cars Sold.............    219,037      165,282      72,358      29,890       27,964
      Provision for Credit Losses........    102,955       65,318      22,354       9,657        8,359
                                         -----------  -----------  ----------   ---------    ---------
                                              67,916       57,018      29,102      14,221       11,501
                                         -----------  -----------  ----------   ---------    ---------
Other Income:
Interest Income..........................     68,574       17,287      12,559       8,597        8,227
Portfolio Interest Expense...............     14,597        2,860         175          --           --
                                         -----------  -----------  ----------   ---------    ---------
     Net Interest Income.................     53,977       14,427      12,384       8,597        8,227
Gain on Sale of Loans....................         --       12,093       6,721       3,925           --
Servicing and Other Income...............      7,472       15,481      12,325       2,537          308
                                          ----------  -----------  ----------   ---------    ---------
     Total Other Income..................     61,449       42,001      31,430      15,059        8,535
                                          ----------  -----------  ----------   ---------    ---------
Income before Operating Expenses.........    129,365       99,019      60,532      29,280       20,036
Operating Expenses:
Selling and Marketing ...................     23,132       18,246      10,538       3,585        3,856
General and Administrative ..............     81,570       69,894      39,414      14,210       13,446
Depreciation and Amortization............      6,948        4,912       3,148       1,382        1,225
                                          ----------  -----------  ----------   ---------   ----------
      Operating Expenses.................    111,650       93,052      53,100      19,177       18,527
                                          ----------  -----------  ----------   ---------    ---------
Income before Other Interest Expense.....     17,715        5,967       7,432      10,103        1,509
Interest Expense from Subordinated Debt..      3,028          161         531       2,429        5,328
                                          ----------  -----------  ----------   ---------    ---------
Earnings (Loss) before Income

      Taxes                                   14,687        5,806       6,901       7,674       (3,819)
Income Taxes ............................      6,000        2,351       2,820         694           --
                                          ----------  -----------  ----------   ---------    ---------
Earnings (Loss)  from Continuing

      Operations......................... $    8,687  $     3,455  $    4,081   $   6,980    $  (3,819)
                                          ==========  ===========  ==========   =========    ==========

Earnings (Loss) per Common Share from
   Continuing Operations:
Basic                                     $     0.58       $ 0.19  $     0.23   $    0.89   $    (0.69)
                                          ==========       ======  ==========   =========   ==========
Diluted                                   $     0.57       $ 0.19  $     0.22   $    0.84   $    (0.69)
                                          ==========       ======  ==========   =========   ==========
Shares used in Computation:
Basic Weighted Avg. Shares Outstanding...     15,093       18,082      17,832       7,887        5,522
                                          ==========  ===========  ==========   =========   ==========
Diluted Weighted Avg. Shares Outstanding.     15,329       18,405      18,234       8,298        5,522
                                          ==========  ===========  ==========   =========   ==========
                                                                                            (Continued)
</TABLE>



                                     Page 8
<PAGE>

            ITEM 6 -- SELECTED CONSOLIDATED FINANCIAL DATA -- Continued
<TABLE>
<CAPTION>

                                                                               Years Ended December 31,
                                                -------------------------------------------------------------   -------------
                                                      1999            1998            1997           1996            1995
                                                --------------  --------------  -------------- --------------   -------------
                                                         ($ in thousands, except per car sold and per share amounts)
<S>                                             <C>             <C>             <C>            <C>              <C>
Other Operating Data:
Total Revenues...............................   $   465,954      $  332,479      $   155,419    $    68,827     $      56,359
Number of Used Cars Sold ....................        46,120          35,964          16,636          7,565              7,383
Open Dealerships - End of Year...............           72              56              41              8                  8
Avg. Units Sold per Dealership/Month.........            64              63              79             78                 79
Sales price - Per Car Sold...................   $    8,454      $    7,997      $    7,443     $    7,107      $       6,478
Cost of Sales - Per Car Sold.................    $    4,749      $    4,595      $    4,349     $    3,951      $       3,787
Gross Margin - Per Car Sold..................    $    3,705      $    3,402      $    3,094     $    3,156      $       2,691
Provision - Per Car Sold.....................    $    2,232      $    1,816      $    1,344     $    1,276      $       1,132
Interest Income per Car Sold.................    $    1,487      $      481      $      755     $    1,136      $       1,114
Total Operating Exp. - Per Car Sold..........    $    2,420      $    2,587      $    3,192     $    2,535      $       2,509
Cost of Used Cars as Percent of Sales........        56.2%           57.5%           58.4%          55.6%              58.5%
Gross Margin as Percent of Sales.............        43.8%           42.5%           41.6%          41.4%              41.5%
Provision as % of Originations...............        26.9%           23.6%           19.1%          19.7%              22.9%
Total Operating Exp. - % of Total Revenue            24.0%           28.0%           34.2%          27.9%              32.9%
Segment Operating Expense Data:
Retail Expense - Per Car Sold................    $    1,550      $    1,574      $     1,760    $    1,347      $       1,432
Retail Expense - % of Used Car Sales.........        18.3%           19.7%            23.7%         19.0%              22.1%
Corporate/Other Exp. - Per Car Sold..........    $      417      $      462      $       625    $      564      $         425
Corp. & Other Exp. - % of Total Revenue......         4.1%            5.0%             6.7%          4.9%               5.6%
Loan Servicing Exp. As % of End of Period
    Managed Principal........................         4.9%            6.8%             4.6%          6.2%              10.6%
Balance Sheet Data:
Finance Receivables, Net.....................    $  365,586      $  126,168      $   60,778     $   14,186      $      27,732
Inventory....................................    $   62,865      $   44,145      $   32,372     $    5,464      $       6,329
Total Assets.................................    $  536,711      $  337,281      $  275,633     $  117,629      $      60,712
Notes Payable - Retained Portfolio...........    $  275,774      $  101,732      $   65,171     $   12,904      $      35,201
Subordinated Notes Payable...................    $   28,611      $   37,980      $   12,000     $   14,000      $      14,553
Total Debt...................................    $  340,941      $  155,611      $   77,171     $   26,904      $      49,754
Common Stock.................................    $  173,292      $  173,828      $  172,622     $   82,612      $         127
Treasury Stock...............................    $  (20,321)     $  (14,510)             --             --                 --
Total Stockholders' Equity...................    $  165,680      $  162,767      $  181,774     $   82,319      $       4,884
Common Shares Outstanding - End of Year              14,888          15,841          18,521         13,327              5,580
Book Value per Share.........................   .                $   10.28       $    9.81      $    6.18       $      (0.92)
Tangible Book Value per Share................    $   10.17       $    9.35       $    8.93      $    6.02       $      (0.97)
Total Debt to Equity.........................           2.1             1.0             0.4            0.3               10.1
Loan Portfolio Data:
Interest Income..............................    $   68,574      $   17,287      $   12,559     $    8,597      $       8,227
Avg. Yield on Portfolio......................        26.0%           25.8%           26.7%          29.2%              28.0%
Principal Balances Originated................    $  382,335      $  277,226      $   116,830    $   48,996      $      36,568
Principal Balances Originated as % of Sales          98.1%           96.4%           94.4%          91.1%              76.5%
Principal Balances Acquired..................    $   21,460              --      $   55,400             --                 --
Number of Loans Originated...................        45,756          35,560          16,001          6,929              6,129
Average Original Amount Financed                 $    8,356      $    7,796      $    7,301     $    7,071      $       5,966
Number of Loans Originated as % of Units Sold
                                                     99.2%           98.9%           96.2%            91.6%            83.0%
Number of Loans Acquired.....................         5,129              --          13,251             --                 --
Managed Portfolio Delinquencies:
    31 to 60 days............................         5.7%            4.6%            3.6%           5.0%               2.2%
    Over 60 days.............................         2.9%            2.1%            1.5%           1.7%               1.4%
Principal Outstanding - Managed..............    $  424,480      $  292,683      $  293,990     $   58,730       $     34,265
Principal Outstanding - Retained.............    $  358,818      $   93,936      $   55,965     $    7,068       $     34,226
</TABLE>

                                     Page 9
<PAGE>

                ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     In this discussion and analysis we explain our general financial  condition
and results of operations. In particular, we analyze and explain the significant
annual changes in the consolidated  results of operations as well as significant
annual  changes for our retail,  portfolio and corporate  segments.  As you read
this  discussion,  you should  refer to our  Consolidated  Financial  Statements
beginning on page 30, which contain our financial condition at December 31, 1999
and 1998 and the results of our  operations  for years ended  December 31, 1999,
1998, and 1997.

Overview

     We have  experienced a number of  significant  events during the past three
years. Some of the more important events follow:

   During 1997 we:
   o  completed a private  placement of common stock in February 1997 generating
        $88.7 million in cash,
   o  completed  a  conversion  of  one  of  our  loan  servicing  systems.   We
          experienced various transitional  problems with the conversion,  which
          resulted in a charge of $5.7 million  (approximately  $3.4 million net
          of income  taxes) to write down our  residuals in finance  receivables
          sold,
   o  completed three significant acquisitions and developed new  dealerships to
          increase  our total number of  dealerships in  operation from eight at
          December 31, 1996 to 41 at December 31, 1997, and
   o  expanded our  dealership chain from two  markets to ten markets at the end
          of 1997.

   During 1998 we:
   o  closed our  branch office  network,  resulting in two  significant charges
          to discontinued operations totaling $15.1 million,  approximately $9.2
          million, net of income taxes (an additional charge of $1.5 million net
          of income taxes was taken in the fourth quarter of 1999),
   o  completed  the  conversion of our retail  operations to a single  computer
          system,
   o  developed  15   new   dealerships  to   increase  our   total   number  of
          dealerships  in  operation  from  41 at  December  31,  1997  to 56 at
          December 31, 1998, and
   o  completed   an   exchange  offer   whereby  we  issued  $17.5  million  in
          subordinated  debentures  and  repurchased  approximately  2.7 million
          shares of our common stock.

    During 1999 we:
   o  completed the conversion of loan portfolio administration,  accounting and
          financial reporting, and collections to a single computer system,
   o  completed two  acquisitions  and developed new dealerships to increase our
          total number of dealerships  in operation from 56 at December 31, 1998
          to 72 at December 31, 1999,
   o  completed  the sale of  Cygnet  Dealer  Finance,   Inc. to Cygnet  Capital
          Corporation, an affiliate of Mr. Garcia, and
   o  adopted  a  formal  plan to  discontinue  the  operations  of  our  Cygnet
          Servicing subsidiary operations.

     Other  Significant  Developments - The Company uses  securitization  of its
loan  portfolio  as a  significant  source of  capital to  finance  its  growth.
Historically we have applied two methods in structuring these  transactions that
result in materially  different  accounting  entries on our books.  As financial
results  reported  herein include periods where both  securitization  structures
were  utilized,   the  following   explanation  is  provided  to  facilitate  an
understanding  of the material  impact  these  separate  structures  have had on
financial results.

     September 30, 1998 and prior. For the securitization transactions closed in
the  third  quarter  of  1998  and  prior,  we  structured  and  recorded  these
transactions  for  accounting  purposes  using  what we refer to as the "gain on
sale"  method.  The  computation  of amounts  reported as Gain on Sale income is
equal to the difference  between the sales proceeds for the Finance  Receivables
sold and our recorded investment in the Finance Receivables sold. Our investment
in  Finance  Receivables  consisted  of the  principal  balance  of the  Finance
Receivables  securitized  net of the Allowance for Credit Losses  related to the
securitized receivables.  We then reduced our Allowance for Credit Losses by the
amount of Allowance for Credit Losses attributable to the loans securitized.  We
allocated the recorded investment in the Finance Receivables between the portion
of the Finance  Receivables  sold and the portion retained based on the relative
fair values on the date of sale.



                                    Page 10
<PAGE>

     Gain on Sale Method - Under the gain on sale method,  the securitized loans
are transferred off our balance sheet, a residual interest is recorded (reported
herein as Residual  Interest in Finance  Receivables Sold) and a Gain on Sale of
Loans  is  recorded.  Subsequent  to a  sale,  traditional  financial  statement
elements  generally  associated with loan  portfolios  such as interest  income,
interest  expense,  servicing  costs and other  costs  are not  recorded  on our
accounting  records,  but rather were estimated at the time of sale and recorded
as an element of the gain computation.

     After  September  30, 1998 - Beginning  in the fourth  quarter of 1998,  we
changed the way we structure securitization transactions for accounting purposes
to what we refer to as the  "collateralized  borrowing"  method and  accordingly
recognize the income and associated  costs over the life of the loan. The change
in structure  beginning  in the fourth  quarter of 1998 did not affect our prior
securitizations.

     Collateralized  Borrowing  Method  -  Under  the  collateralized  borrowing
method,  the  securitized  loans are retained on our balance  sheet,  and a note
payable  known as Class A  obligations  is recorded for the amount loaned to the
Company by the Class A note and certificate  holders.  As additional  collateral
for the borrowers, at closing cash is deposited into a restricted cash "reserve"
account  (reported herein as Investments  Held in Trust).  Under this accounting
method,  our financial  statements  include interest income,  interest  expense,
servicing  costs and the other costs  generally  associated  with loan portfolio
accounting and are recognized over the life of the loan.

     With  this   overview  and   background   information,   the  following  is
management's  discussion  and  analysis of  financial  condition  and results of
operations.

Sales of Used Cars and Cost of Used Cars Sold
<TABLE>
<CAPTION>
                                                                                                   Annual Percentage
                                                                                                        Change
                                          ----------------------------------------------        -------------------------
($ in thousands)                             1999              1998             1997              1999            1998
                                          -----------       ----------       -----------        ----------     ----------
<S>                                       <C>               <C>              <C>                <C>            <C>
Number of Used Cars Sold ...........           46,120           35,964            16,636          28.2%          116.2%
                                          ===========       ==========       ===========
Sales of Used Cars .................      $   389,908       $  287,618       $   123,814          35.6%          132.3%
Cost of Used Cars Sold .............          219,037          165,282            72,358          32.5%          128.4%
                                          -----------       ----------       -----------
Gross Margin .......................      $   170,871       $  122,336       $    51,456          39.7%          137.7%
                                          ===========       ==========       ===========

Gross Margin %......................            43.8%             42.5%            41.6%
                                          ===========       ==========       ===========

Per Car Sold:
Sales ..............................      $     8,454       $    7,997       $     7,443             5.7%            7.4%
Cost of Used Cars Sold .............            4,749            4,595             4,349             3.4%            5.7%
                                          -----------       ----------       -----------
Gross Margin .......................      $     3,705       $    3,402       $     3,094             8.9%           10.0%
                                          ===========       ==========       ===========
</TABLE>

     The number of Used Cars Sold (units),  Sales of Used Cars  (revenues),  and
Cost of Used Cars Sold  increased  in both 1999 and 1998.  Same store unit sales
were comparable for the years ended December 31, 1999, 1998 and 1997. The growth
for these periods  reflects  increases in the number of dealerships in operation
and the average unit sales price. The gross margin percentage has also increased
over the past two years,  as we have been  successful  in  increasing  our sales
prices by more than the  increase in the cost of used cars sold.  We  anticipate
future  revenue  growth  will  continue  to come from  increasing  the number of
dealerships and not from higher sales volumes at existing dealerships.

     The Company  finances  substantially  all of its sales. The following table
indicates the percentage of sales units and revenue financed:

                                            1999      1998        1997
Percentage of used cars sold financed...... 99.2%       98.9%      96.2%

Percentage of sales revenue financed....... 98.1%       96.4%      94.4%



                                    Page 11
<PAGE>


Provision for Credit Losses
<TABLE>

                                                                                                       Annual Percentage
                                                                                                            Change
                                                                                                    -----------------------
<S>                                                    <C>           <C>             <C>            <C>          <C>
                                                         1999          1998            1997           1999          1998
                                                       ---------     --------        ---------      ---------     ---------
Provision for Credit Losses (in thousands)........     $ 102,955     $ 65,318        $  22,354        57.6%        192.2%
                                                       =========     ========        =========
Provision per loan originated ....................     $   2,250     $  1,837        $   1,397        22.5%         31.5%
                                                       =========     ========        =========
Provision as % of principal balances originated...          26.9%        23.6%            19.1%
                                                       =========     ========        =========
</TABLE>

     Provision for Credit  Losses is the amount we charge to current  operations
on each car sold to establish an allowance for credit losses.  The Provision for
Credit  Losses in total,  per loan  originated  and as a  percent  of  principal
balances  originated  increased in both 1999 and 1998. The increases were due to
an increase in the average amount  financed to $8,356 per unit in the year ended
December  31, 1999 from $7,796 per unit in the year ended  December 31, 1998 and
from $7,301 per unit in the year ended December 31, 1997. The increase from 1998
to 1999 was also a result  of the  change  in our  securitization  structure  as
discussed in the following paragraph.

     When  we  changed  the way we  structured  securitizations  for  accounting
purposes in the fourth  quarter of 1998,  we also changed the amount we provided
for credit losses. For periods prior to the fourth quarter of 1998, we generally
provided  a  Provision  for  Credit  Losses  of  approximately  20% of the  loan
principal  balance at the time of origination.  Upon  securitization,  using the
gain on sale  method,  losses  for the  life of the  loans  were  estimated  and
recorded as an element of the gain computation.  Beginning in the fourth quarter
of 1998,  we increased  the  provision  for credit  losses to 27% of the initial
amount financed.

Net Interest Income
<TABLE>
<CAPTION>
                                                                          Annual Percentage
                                                                               Change
                                                                        ----------------------
($ in thousands)                      1999         1998        1997      1999         1998
                                   ---------    ---------   ---------   ---------    ---------
<S>                                <C>          <C>         <C>           <C>           <C>
Interest Income..................  $  68,574    $  17,287   $  12,559     296.7%        37.6%
Portfolio Interest Expense.......     14,597        2,860         175     410.4%      1534.3%
                                   ---------    ---------   ---------
Net Interest Income..............  $  53,977    $  14,427   $  12,384     274.1%        16.5%
                                   =========    =========   =========

Average Effective Yield..........       26.0%        25.8%        26.7%
                                   =========    =========    =========
Average Effective Borrowing Cost.        8.0%         9.5%        10.1%
                                   =========    =========    =========
</TABLE>

     Interest  Income  for  1999  consists  primarily  of  interest  on  finance
receivable principal balances retained on our balance sheet.  Retained principal
balances  grew from $93.9  million at  December  31,  1998 to $358.8  million at
December  31,  1999  primarily  as a result of the change in our  securitization
structure.  Interest  income in 1998 and 1997  consists  primarily  of  interest
income  from   Residuals  in  Finance   Receivables   Sold  retained  under  our
securitization  structure  using the gain on sale  method.  Residuals in Finance
Receivables  Sold were $33.3  million and $13.3 million at December 31, 1998 and
1997,  respectively.  Both retained  principal balances and Residuals in Finance
Receivables  Sold are  components  of Finance  Receivables,  Net. See "Growth in
Finance Receivables, Net" beginning on page 17.

     Interest  Expense for 1999 consists  primarily of interest on the revolving
facility and the Class A obligations issued in our  securitization  transactions
arising  from the  collateralized  borrowings  on the  retained  portfolio.  The
increase in interest  expense from 1998 to 1999 is in direct  correlation to the
increase in retained  principal  balances noted above.  Interest expense in 1998
and 1997  relates  solely to expense on our  revolving  facility  for the period
between  origination and  securtization,  which generally averaged three months.
Also, as a result of two common stock  offerings in late 1996 and February 1997,
a significant portion of our portfolio was financed with stockholders' equity.


                                    Page 12
<PAGE>

Gain on Sale of Loans

     We  recorded  no  gains on sale in  1999.  Gains on the sale of loans  from
securitization transactions were $12.1 million in 1998 and $6.7 million in 1997.
The $6.7  million  gain in 1997 is net of a $5.7  million  charge  arising  from
higher loan losses than originally estimated at securitization.

Servicing Income

     We generate  Servicing  Income  primarily from  servicing  loan  portfolios
securitized under the gain on sale method. A summary of Servicing Income follows
($ in thousands):
                                                       Annual Percentage

                                                            Change
                                                   --------------------------
                     1999      1998      1997        1999             1998
                   -------   --------  --------    ----------       ---------

Servicing Income   $ 7,472   $ 15,481  $ 12,325      (51.7%)          25.6%
                   -------   --------  --------    ----------       ---------

     We  service  loans  for  monthly  fees  ranging  from  .25%  to .33% of the
beginning of month principal  balances (3.0% to 4.0% per year).  The decrease in
Servicing Income in 1999 is due to the decrease in remaining  principal balances
securitized  and serviced  under the gain on sale method from $198.7  million at
December 31, 1998 to $65.7  million at December  31, 1999.  The increase in 1998
from 1997 is due to the increase in such principal  balances from $127.4 million
at December 31, 1997 to $198.7  million at December  31,  1998.  The decrease in
Servicing Income is expected to continue as principal  balances  associated with
loans securitized under the gain on sale method continue to decline.

Income before Operating Expenses

     As a result of our continued  expansion,  Income before Operating  Expenses
grew from 1997 through 1999.
<TABLE>

                                                                                 Annual Percentage
                                                                                      Change
                                                                             ----------------------
<S>                                <C>          <C>            <C>          <C>          <C>
                                       1999         1998           1997        1999          1998
                                   -----------  -----------    -----------   --------     ---------

Income before Operating Expenses   $   129,365  $    99,019    $    60,532    30.6%          63.6%
                                   -----------  -----------    -----------   --------     ---------
</TABLE>

     Growth of Sales of Used Cars, Net Interest  Income,  Gain on Sale of Loans,
and Servicing and Other Income were the primary  contributors  to year over year
increases.

Operating Expenses
<TABLE>
<CAPTION>

                                                                                         Annual Percentage
                                                                                              Change
                                                                                     --------------------------
                                       1999            1998            1997            1999            1998
                                    -----------     -----------     -----------      -----------    -----------
<S>                                 <C>             <C>             <C>                <C>             <C>
Operating Expenses (in thousands).. $   111,650     $    93,052     $    53,100        20.0%           75.2%
                                    ===========     ===========     ===========
Per Car Sold....................... $     2,420     $     2,587     $     3,192        (6.5%)         (19.0%)
                                    ===========     ===========     ===========
As % of Total Revenues.............      24.0%           28.0%           34.2%
                                    ===========     ===========     ===========
</TABLE>

     Operating  expenses,  which  consist of  selling,  marketing,  general  and
administrative  and   depreciation/amortization   expenses  increased  in  total
resulting  from overall  growth in the  operations of the Company.  Decreases in
operating  expenses on a per car sold and as a percent of total revenue basis is
a result of increased economies of scale related primarily to marketing expenses
with the opening of additional dealerships in established markets,  efficiencies
gained from enhanced  management  information  systems and benefits  gained from
certain  costs which do not rise  proportionately  to the  increase in used cars
sold and  financed.  See  additional  discussion  of  operating  expenses in the
Business Segment section beginning on page 14.


                                    Page 13
<PAGE>

Interest Expense

     Interest expenses arising from our subordinated debt totaled $3,028,000 for
the year ended December 31, 1999.  Interest expense for the years ended December
31, 1998 and 1997,  other than  interest  expense  associated  with our retained
portfolios,  was not  material to results of  operations.  While the Company has
additional   interest   expenses  arising  from   subordinated   notes  payable,
substantially  all of this interest  expense was  attributed to the financing of
assets and activities  reported as  discontinued  operations.  As the assets and
activities of discontinued  operations diminish,  the Company does not expect to
retire the  subordinated  notes payable but rather use these  borrowings to fund
our growth. Subordinated debt carries interest rates generally higher than those
charged on borrowings  collateralized by our finance  receivables.  Accordingly,
the Company would expect to have a disproportionate increase in interest expense
in future periods as existing subordinated debt is used to fund our growth.

Income Taxes

     Income taxes  totaled $6.0  million for the year ended  December 31,  1999,
$2.4 million for the year ended December 31, 1998, and $2.8 million for the year
ended  December 31,  1997.  Our  effective tax rate was 40.9% for the year ended
December 31, 1999, 40.5% for the year ended December 31, 1998, and 40.9% for the
year ended December 31, 1997.

Earnings from Continuing Operations

     Earnings from Continuing  Operations totaled $8.7 million, $3.5 million and
$4.1 million for 1999,  1998 and 1997,  respectively.  The increase in 1999 from
1998  resulted  from an increase in the number of used cars sold, an increase in
gross  margin on used cars sold,  an  increase in net  interest  income from the
growth of our retained  portfolio  and the  decrease in operating  expenses as a
percent of total revenues.  The increase in 1999 over 1998 was partially  offset
by the change in the level of provision for credit  losses  charged as discussed
in the  following  paragraph.  The decrease in 1998 from 1997 results  primarily
from the  reduction  in gain on sale  income  discussed  below,  and to a lesser
extent an increase in our Provision for Credit Losses.

     In 1997 and 1998, the Company completed one securitization each quarter. In
1997, all four quarterly  securitizations  were completed using the gain on sale
method. In 1998  securitization  transactions for the first  three-quarters were
completed  using the gain on sale method,  with the fourth  quarter  transaction
being completed using the collateralized  borrowings  method,  thus recording no
gain.  Additionally,  beginning in the fourth quarter of 1998, the provision for
credit losses was increased to 27% of the original  amount financed from the 20%
level used in the first three-quarter of 1998 and all of 1997.

Discontinued Operations

     Earnings from  Discontinued  Operations,  net of income tax  benefits,  was
$573,000 in 1999, a loss of $9.2  million in 1998,  and earnings of $5.4 million
in 1997.  The  significant  change  from 1997 to 1998 was due to the  charges we
recorded totaling $15.1 million ($9.2 million, net of income taxes) to close our
branch office network and our terminated Cygnet rights offering. See Note (2) to
the Consolidated Financial Statements included herein.

Business Segment Information

     The Company reports its operations based on three operating segments. These
segments are reported herein as Retail, Portfolio and Corporate.  These segments
were previously reported as Company Dealership,  Company Dealership  Receivables
and Corporate and Other, respectively.

     Operating Expenses for our business  segments,  along with a description of
the included  activities,  for the years ended December 31, 1999,  1998 and 1997
follows:


                                    Page 14
<PAGE>

     Retail  Operations.  Operating  expenses for our retail segment consists of
Company  marketing  efforts,  maintenance  and  development  of  dealership  and
inspection   center  sites,  and  direct   management   oversight  of  used  car
acquisition,  reconditioning and sales activities. A summary of retail operating
expenses follows ($ in thousands except per car sold amounts):


    Retail  Operations.  Operating  expenses for our retail segment  consists of
Company  marketing  efforts,  maintenance  and  development  of  dealership  and
inspection   center  sites,  and  direct   management   oversight  of  used  car
acquisition,  reconditioning and sales activities. A summary of retail operating
expenses follows ($ in thousands except per car sold amounts):
<TABLE>
<CAPTION>
                                                                                                      Annual Percentage
                                                                                                           Change
                                                                                                 --------------------------
                                            1999            1998                1997                1999           1998
                                        -----------     -----------         -----------          ----------    ------------
<S>                                     <C>             <C>                 <C>                     <C>              <C>
   Selling and Marketing..............  $    23,132     $    18,246         $    10,538             26.8%            73.1%
   General and Administrative.........       44,770          35,765              17,215             25.2%           107.8%
   Depreciation and Amortization......        3,588           2,582               1,536             39.0%            68.1%
                                        -----------     -----------         -----------
                                        $    71,490     $    56,593         $    29,289             26.3%            93.2%
                                        ===========     ===========         ===========
Per Car Sold:
   Selling and Marketing..............  $       502     $       507         $       633             (0.1)%          (19.9)%
   General and Administrative.........          970             995               1,035             (2.5)%           (3.9)%
   Depreciation and Amortization......           78              72                  92              8.3%           (21.7)%
                                        -----------     -----------         -----------
                                        $     1,550     $     1,574         $     1,760             (1.5)%          (10.6)%
                                        ===========     ===========         ===========

As % of Used Cars Sold Revenue:
   Selling and Marketing..............       5.9%            6.3%                8.5%
   General and Administrative.........      11.5%           12.4%               13.9%
   Depreciation and Amortization......       0.9%            1.0%                1.2%
                                         --------        --------            --------
   Total..............................      18.3%           19.7%               23.6%
                                         ========        ========            ========
</TABLE>

    Selling and marketing expenses as a percent of revenue and on a per car sold
basis  trended  downward in both 1999 and 1998  primarily  as a result of having
additional  dealerships in existing markets.  Additional dealerships in a market
have  increased  units sold and  revenues  while  selling  and  marketing  costs
remained stable.  This generally equates to costs spread over a larger operating
base  thus  improving  both our  margins  per car sold and  percent  of  revenue
operating results.

    General and Administrative  expenses increased year over year as a result of
our  growth in the number of  operating  dealerships.  On a per car sold  basis,
these expenses trended down in 1998 primarily as a result of increased volume in
each market, thereby allowing certain fixed regional costs to be spread over the
increased  unit volume.  The 1999  increase was  primarily the result of opening
dealerships  in two new markets.  As a percent of used car sales  revenue,  both
1999 and 1998 trended  downward  primarily as a result of an increase in average
selling price as well as the efficiencies  gained with the opening of additional
dealerships in existing markets.

    Portfolio  Operations.  Operating expenses for our portfolio segment consist
of loan servicing and collection efforts,  securitization  activities, and other
operations  pertaining directly to the administration and collection of the loan
portfolio ($ in thousands except expense per month per loan serviced).

<TABLE>
                                                                                          Annual Percentage
                                                                                               Change
                                                                                  --------------------------
<S>                                   <C>           <C>             <C>              <C>              <C>
                                          1999          1998            1997         1999            1998
                                      -----------   -----------     -----------   -----------     ----------
General and Administrative.........   $    19,809   $   18,519      $    12,303      7.0%             50.5%
Depreciation and Amortization......         1,141        1,333           1,108     (14.4)%            20.3%
                                      -----------    ---------       ---------
                                      $    20,950   $   19,852       $   13,411      5.5%             48.0%
                                      ===========   ==========       ==========

Expense per month per loan serviced   $    22.38    $    20.20       $   22.80
                                      ===========   ===========      ==========
Expense as % of Average Managed

  Portfolio........................        4.9%          4.5%            5.3%
                                      =========     =========        ========
</TABLE>


    The increase in operating  expenses for our portfolio segment year over year
is  primarily  a result  of the  increasing  number  of loans in our  portfolio.
Expenses  per loan  serviced  and as a  percent  of  average  managed  portfolio

                                    Page 15
<PAGE>

increased  from  1998 to 1999  primarily  due to  personnel  related  issues  as
discussed below.  Expenses per loan serviced and as a percent of average managed
portfolio  decreased  from 1997 to 1998.  The  decrease is due  primarily to the
efficiencies  associated with our integrated  loans servicing system acquired in
late 1997 and an  initiative  begun in late 1997 that  increased  the  number of
loans each collector serviced.

    In the last half of 1999,  we  experienced  loan  servicing  inefficiencies,
including  the  loss  of a large  number  of  experienced  collectors  to  other
financial  services  entities.  While we believe we have successfully  addressed
these issues, loan servicing costs increased significantly in the fourth quarter
of 1999. As part of our  resolution,  we made market  adjustments  to collection
staff wages and also  decreased the number of delinquent  accounts  serviced per
collector.  While  management is confident  that these  efforts will  ultimately
translate  into  decreased  loan charge  offs,  servicing  expense on a per loan
serviced basis as well as as a percent of the managed  portfolio are expected to
increase from the levels reported in 1999.

    Corporate  Operations.  Operating expenses for our Corporate segment consist
of costs to  provide  managerial  oversight  and  reporting  for Ugly  Duckling,
develop and implement  policies and  procedures,  and provide  expertise to Ugly
Duckling  in areas such as  finance,  legal,  human  resources  and  information
technology.

<TABLE>
<CAPTION>
                                                                                             Annual Percentage
                                                                                                   Change
                                                                                          -----------------------
($ in thousands)                                1999            1998           1997           1999         1998
                                            ------------    ------------   ------------   -----------  ----------
<S>                                         <C>             <C>            <C>                 <C>         <C>
General and Administrative...............   $     16,991    $     15,610   $      9,896        8.8%        57.7%
Depreciation and Amortization............          2,219             997            504      122.6%        97.8%
                                            ------------    ------------   ------------   -----------  ----------
                                            $     19,210    $     16,607   $     10,400       15.7%        59.1%
                                            ============    ============   ============
Per Car Sold..............................  $        417    $        462   $        625       (9.7%)      (26.4%)
                                            ============    ============   ============
As % of Total Revenues...................       4.1%            5.0%           6.7%
                                            ===========     ===========    ===========
</TABLE>

    Operating  expenses related to our Corporate segment decreased on both a per
car sold  basis  and as a  percent  of total  revenue  primarily  as a result of
various operating  efficiencies.  These efficiencies include those gained by the
consolidation of all accounting and management  information to a single computer
system in early 1999.  Further,  as new dealerships  opened in existing markets,
revenue and units sold increased while  expenditures  related to  infrastructure
deployment and support,  human  resources  activities and regulatory  compliance
increased at a lesser rate. Finally, as our retained portfolio increased,  there
is a  proportionate  increase  in  net  interest  income  thereby  significantly
improving the ratio of corporate expenses to total revenues.

Financial Position

    The  following table represents key components of our financial  position ($
in thousands):


                                            December 31,       Annual Percentage
                                        ----------------------      Change
                                          1999       1998            1999
                                        ----------  ----------    ----------
Total Assets.......................... $  536,711  $  337,281       59.1%

Inventory.............................     62,865      44,145       42.4%
Finance Receivables, Net..............    365,586     126,168      189.8%
Net Assets of Discontinued Operations.     33,880     106,997      (68.3%)

Total Debt............................    340,941     155,611      119.1%
Notes Payable - Portfolio.............    275,774     101,732      171.1%
Other Notes Payable...................     36,556      15,899      129.9%
Subordinated Notes Payable............     28,611      37,980      (24.7)%
Stockholders Equity................... $  165,680  $  162,767        1.8%


                                     Page 16
<PAGE>

    Total Assets. The growth in total assets from 1998 to 1999 was primarily due
to an increase in Finance Receivables,  Net and Inventory,  offset by a decrease
in Net Assets of Discontinued Operations.

    Inventory.  Inventory represents the acquisition and reconditioning costs of
used cars located at our dealerships and our inspection centers. The increase in
inventory in 1999 over 1998 was primarily  due to an increase in dealership  and
inspection center sites coupled with a decision to increase  inventory levels at
year end in preparation for the strong seasonal sale period during the first and
second  quarters  of 2000.  Management  estimates  that for each car it has at a
dealership  location  it must  have a car in the  reconditioning  process  at an
inspection  center to maintain a stable  supply of cars for sale.  We  generally
acquire  our used car  inventory  from  three  sources;  approximately  50% from
auctions, 30% from wholesalers and 20% from new car dealerships.

     Growth in Finance Receivables,  Net. As a result of our expansion,  Finance
Receivables, Net increased significantly during the past two years.

Components of Finance Receivables, Net follows:

                                                    December 31,
                                         ---------------------------------
($ in thousands)                               1999              1998
                                           ------------      ------------
Contractually Scheduled Payments........   $    492,937      $   131,510
Unearned Finance Charges................       (134,119)         (37,574)
                                               ---------       ----------
Principal - Retained on Balance Sheet...        358,818           93,936
Add: Accrued Interest Receivable........          3,741              877
Loan Origination Costs, Net.............          5,079            2,237
                                            -----------      -----------
Principal Balances, Net.................        367,638           97,050
Investments Held in Trust...............         56,716           20,564
Residuals in Finance Receivables Sold...         17,382           33,331
                                            -----------      -----------
   Finance Receivables..................        441,736          150,945
Allowance for Credit Losses.............        (76,150)         (24,777)
                                            ------------     ------------
   Finance Receivables, Net.............       $365,586      $   126,168
                                            ===========      ===========



    The  following  table  reflects  the growth in year end  principal  balances
retained on our balance sheet  measured in terms of the  principal  amount ($ in
thousands) and the number of loans outstanding.
<TABLE>
<CAPTION>

                                                       Managed Loans Outstanding - December 31,
                                            -------------------------------------------------------------
                                                  Principal Balances                Number of Loans
                                            -----------------------------     ---------------------------
<S>                                         <C>              <C>                   <C>             <C>
                                                1999             1998             1999           1998
                                            ------------     ------------     ------------   ------------
Principal - Managed.......................  $    424,480     $    292,683          70,450          49,601
Less:  Principal - Securitized and Sold...        65,662          198,747          17,369          37,186
                                            ------------     ------------     -----------    ------------
Principal - Retained on Balance Sheet.....  $    358,818     $     93,936          53,081          12,415
                                            ============     ============     ===========    ============

</TABLE>

    The increase in Principal Balances - Retained on Balance Sheet was primarily
due to an increase in loans  receivable as a result of increased  used car sales
and financing from growth in the number of dealerships,  partially offset by the
principal  balance runoff of loans  originated in prior periods.  Our dealership
network  increased from 41 dealerships at December 31, 1997 to 56 dealerships at
December 31, 1998 to 72 dealerships at December 31, 1999.

    Investments  Held in Trust represent funds held by trustees on behalf of our
securitization  lenders. The increase in 1999 is attributable to securitizations
completed under the collaterized borrowing method.

    Residuals in Finance  Receivables Sold represent the Company's  subordinated
interest in loans sold under the gain on sale  method.  The  decrease in 1999 is
attributable to no additional loans  securitized  under the gain on sale method,
as well as the runoff of portfolios securitized and sold during prior periods.

                                    Page 17
<PAGE>


    The following table reflects activity in the Allowance for Credit Losses, as
well as information regarding charge off activity,  for the years ended December
31, 1999 and 1998 ($ in thousands):
                                                        Years Ended
                                                        December 31,
                                            --------------------------------
                                                 1999               1998
                                            -------------       ------------
Allowance Activity:
Balance, Beginning of Period..............    $     24,777     $     10,356
Provision for Credit Losses...............         102,955           65,318
Other Allowance Activity..................           6,424          (44,539)
Net Charge Offs...........................         (58,006)          (6,358)
                                              -------------    -------------
Balance, End of Period....................    $     76,150     $     24,777
                                              ============     ============
Allowance as % Ending Principal Balances..           21.2%            26.4%
                                              ============     ============
Charge off Activity:
    Principal Balances....................    $    (71,277)    $     (8,410)
    Recoveries, Net.......................          13,271            2,052
                                              ------------     ------------
Net Charge Offs...........................    $    (58,006)    $     (6,358)
                                              =============    =============


    Other  Allowance  activity in 1999  consists  primarily  of additions to our
Allowance  recorded  in  association  with  loans  acquired  as  part of our two
acquisitions.  The reduction in 1998 is the amount of Allowance  transferred off
balance  sheet as part of  loans  sold  under  the  gain on sale  method  in our
securitizations.

    Even though a loan is charged off, we continue  with  collection  efforts on
the loan.  Recoveries  as a percentage  of principal  balances  charged off from
dealership  operations  averaged  18.6% for the year  ended  December  31,  1999
compared to 24.4% for the year ended  December  31, 1998.  The  reduction in the
recovery  percent  is  attributable  to   inefficiencies  in  our  loan  service
operations,  as  previously  mentioned,  and an increase in gross margin per car
sold which translates into the value of the recovered collateral  representing a
lesser percent of the loan balance.

    The   Allowance  for  Credit  Losses  is  maintained  at  a  level  that  in
management's  judgment  is adequate to provide  for  estimated  probable  credit
losses  inherent  in our retail  portfolio.  See  "Management's  Discussion  and
Analysis  of  Financial  Condition  and  Results  of  Operations  - Static  Pool
Analysis" below.

     Net Assets of  Discontinued  Operations.  See Note (2) to the  Consolidated
Financial Statements included herein.

    Total Debt.  Total Debt is  comprised of Notes  Payable -  Portfolio,  Other
Notes Payable and Subordinated  Notes Payable.  We financed the increases in our
loan  portfolio  and  other  assets  primarily  through  additional  borrowings,
represented by increases in Notes Payable - Portfolio.  The significant increase
in Notes  Payable -  Portfolio  in 1999 was  primarily  due to the change in our
securitization structure to the collateralized borrowing method. The decrease in
Subordinated  Notes  Payable was  primarily  due to the  assumption of the Verde
Subordinated debt by Cygnet Capital  Corporation,  the purchaser,  in connection
with the sale of Cygnet  Dealer  Finance.  Other Notes  Payable  were  increased
primarily to finance  assets  attributed  to our  discontinued  operations.  See
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations - Interest Expense."

     Stockholders'  Equity. See the Consolidated  Financial  Statements included
herein - Consolidated Statement of Stockholders' Equity.

Static Pool Analysis

    We use a "static  pool"  analysis to monitor  performance  for loans we have
originated at our dealerships. In a static pool analysis, we assign each month's
originations  to a  unique  pool  and  track  the  charge  offs  for  each  pool
separately.  We  calculate  the  cumulative  net charge  offs for each pool as a
percentage of that pool's original  principal  balances,  based on the number of
complete  payments  made by the  customer  before  charge  off.  The table below
displays the cumulative net charge offs of each pool as a percentage of original
loan cumulative  balances,  based on the quarter the loans were originated.  The
table is further  stratified  by the number of  payments  made by our  customers
prior to charge off.  For periods  denoted by "x",  the pools have not  seasoned
sufficiently to allow us to compute  cumulative  losses.  For periods denoted by


                                    Page 18
<PAGE>

"-",  the pools have not yet  reached the  indicated  cumulative  age.  While we
monitor  static  pools on a monthly  basis,  for  presentation  purposes  we are
presenting the information in the table below on a quarterly basis.

    Currently reported cumulative losses may vary from those previously reported
for the reasons listed below;  however,  management believes that such variation
will not be material:

   o  ongoing collection efforts on charged off accounts, and
   o  the  difference  between  final  proceeds  on  the  sale  of   repossessed
        collateral versus our estimates of the sale of proceeds.

    The following  table sets forth as of February 29, 1999,  the cumulative net
charge offs as a percentage of original loan cumulative  (pool) balances,  based
on the quarter of  origination  and segmented by the number of monthly  payments
completed  by customers  before  charge off. The table also shows the percent of
principal  reduction  for each pool since  inception  and  cumulative  total net
losses incurred (TLI).

          Pool's Cumulative Net Losses as Percentage of Pool's Original
                           Aggregate Principal Balance
                             (dollars in thousands)
<TABLE>
<CAPTION>

                                              Monthly Payments Completed by Customer Before Charge Off
                                  --------------------------------------------------------------------------------
<S>                   <C>             <C>      <C>       <C>        <C>       <C>       <C>       <C>       <C>
                          Orig.       0         3         6         12        18        24        TLI      Reduced
                      ----------  --------  --------  --------   --------  --------  --------  --------   --------
1993                  $   12,984      9.1%     22.1%     28.5%      33.8%     35.9%     36.5%     36.8%     100.0%
1994                  $   23,589      5.3%     14.8%     19.9%      25.6%     28.0%     28.7%     28.8%     100.0%
1995                  $   36,569      2.0%      8.1%     13.2%      19.2%     22.3%     23.6%     24.1%     100.0%
1996:
   1st Quarter        $   13,635      1.6%      8.0%     13.7%      20.6%     24.7%     26.0%     27.2%     100.0%
   2nd Quarter        $   13,462      2.2%      9.2%     13.4%      21.9%     25.8%     27.5%     29.0%      99.9%
   3rd Quarter        $   11,082      1.6%      6.8%     12.4%      21.2%     25.3%     27.5%     29.0%      99.6%
   4th Quarter        $   10,817      0.6%      8.4%     15.8%      24.7%     29.0%     31.8%     32.5%      97.9%
1997:
   1st Quarter        $   16,279      2.1%     10.5%     17.7%      24.3%     29.3%     31.6%     33.8%      93.7%
   2nd Quarter        $   25,875      1.5%      9.9%     15.8%      22.7%     27.4%     29.6%     30.7%      90.0%
   3rd Quarter        $   32,147      1.4%      8.4%     13.2%      22.4%     26.9%     29.5%     30.2%      86.0%
   4th Quarter        $   42,529      1.4%      6.8%     12.5%      21.8%     26.2%       x       29.2%      81.9%
1998:
   1st Quarter        $   69,708      0.9%      6.9%     13.4%      20.9%     26.7%      --       28.5%      76.6%
   2nd Quarter        $   66,908      1.1%      8.0%     14.2%      22.0%       x        --       27.9%      68.1%
   3rd Quarter        $   71,027      1.0%      8.0%     13.4%      23.7%      --        --       26.9%      60.7%
   4th Quarter        $   69,583      0.9%      6.7%     13.4%        x        --        --       25.2%      49.5%
1999:
   1st Quarter        $  103,068      0.8%      7.7%     15.7%       --        --        --       21.0%      37.9%
   2nd Quarter        $   95,768      1.2%     10.3%       x         --        --        --       17.4%      23.2%
   3rd Quarter        $  102,585      1.1%       x        --         --        --        --        8.8%       8.7%
   4th Quarter        $   80,641       x        --        --         --        --        --        1.7%       2.5%

</TABLE>


                                    Page 19
<PAGE>


    The  following  table  sets forth the  principal  balances  delinquent  as a
percentage  of  total  outstanding  loan  principal   balances  from  dealership
operations.

                                                December 31,
                                    ------------------------------------
                                          1999                 1998
                                    ----------------     ---------------
Days Delinquent:                     31-60     61-90      31-60     61-90
                                     -----     -----      -----     -----
Retained on Balance Sheet........    5.3%      2.8%        2.2%      0.6%
Securitized - Gain on Sale.......    7.6%      3.7%        5.7%      2.8%
                                     ----      ----        ----      ----
Total Portfolio..................    5.7%      2.9%        4.6%      2.1%
                                     ====      ====        ====      ====

    In accordance with our charge off policy, no accounts were more than 90 days
delinquent as of December 31, 1999 and 1998.

Securitizations

    Under the current legal  structure of our  securitization  program,  we sell
loans to our subsidiaries that then securitize the loans by transferring them to
separate   trusts  that  issue  several   classes  of  notes  and   certificates
collateralized by the loans. The  securitization  subsidiaries then sell Class A
notes or  certificates  (Class A obligations  or Notes Payable) to investors and
subordinate  classes  are  retained  by us or our  subsidiaries.  We continue to
service the securitized loans.

    The Class A obligations have historically received investment grade ratings.
To  secure  the  payment  of  the  Class  A  obligations,   the   securitization
subsidiaries  obtain an insurance  policy from MBIA Insurance  Corporation  that
guarantees  payment  of  amounts  to the  holders  of the  Class A  obligations.
Additionally,  we also establish a cash "reserve" account for the benefit of the
Class  A  obligation  holders.  The  reserve  accounts  are  classified  in  our
consolidated  financial  statements  as  Investments  Held  in  Trust  and are a
component of Finance Receivables, Net.

    Reserve Account Requirements. Under our current securitization structure, we
make an initial cash deposit into a reserve account,  generally equivalent to 4%
of the initial underlying Finance Receivables  principal balance and pledge this
cash to the reserve account agent. The trustee then makes additional deposits to
the  reserve  account  out of  collections  on the  securitized  receivables  as
necessary to fund the reserve  account to a specified  percentage,  ranging from
8.0% to 10.5%, of the underlying Finance  Receivables'  principal  balance.  The
trustee makes distributions to us when:

  o   the reserve account balance exceeds the specified percentage,
  o   the  required  periodic  payments to the Class A  certificate  holders are
         current, and
  o   the trustee, servicer and other administrative costs are current.

    During 1999, we made initial reserve account deposits totaling approximately
$21.4 million.  The required  aggregate reserve account balance,  based upon the
targeted percentages, was approximately $53.8 million at December 31, 1999, with
balances in the reserve accounts  totaling  approximately  $43.1 million.  As of
December  31,  1999,  the  amount  remaining  to  be  funded  out  of  portfolio
collections  to meet the  required  aggregate  balance was  approximately  $10.7
million.

    During the second and third quarters of 1999, we experienced  loan servicing
inefficiencies that resulted in increased  delinquency and charge off levels. As
a result,  certain reserve account requirements were increased until delinquency
and charge off levels returned to contractually specified percentages. As of the
date of this filing, we have addressed the challenges in the loan servicing area
and, consequently,  have realized improvements in the delinquency and charge off
levels  to  allow  sufficient   reserve  account   (formerly  "spread  account")
requirements to return to their original  specified  percentages.  Additionally,
effective  with the March  2000  collection  period,  all  increases  in reserve
account  requirements  will have been  eliminated,  reducing the reserve account
requirement by approximately $10 million.  Further, all reserve account balances
have reached their specified  percentages and the related trusts will distribute
cash to the Company

    December 1999 Securitization.  As a result of the servicing issues discussed
above,  the  December  1999  securitization  included an  additional  5% initial
deposit requirement.  Assuming  continuation of improved current delinquency and
charge off levels,  the  additional  5% deposit will be returned to us at 1% per
month during the last two quarters in 2000. As of the date of this filing,  this
trust has reached its specified  required deposit level and is distributing cash
to the Company.

                                    Page 20
<PAGE>


           Certain Financial Information Regarding Our Securitizations

    The following table summarizes certain financial  information and attributes
of our securitizations:
<TABLE>
<S>                                                                  <C>                <C>                <C>

($ in thousands)                                                          1999               1998               1997
                                                                     --------------     --------------     --------------
Principal Balances Securitized - Retained by Company and
   Recorded as Finance Receivables.............................      $      359,700     $       69,300     $           --
Class A Obligations Issued - Retained by Company and Recorded
   as Notes Payable ...........................................      $      257,800     $       50,600     $           --
Principal Balances Securitized - Recorded as Sales,
   Transferred off Company Books Recognizing Gain on Sale .....      $           --     $      222,800     $      151,700
Class A Obligations Issued - Transferred off Company Books
   Recognizing Gain on Sale ...................................      $           --     $      161,100     $      121,400
Subordinate Certificates - Retained by Company and Recorded
   as Residuals in Finance Receivables Sold....................      $           --     $       61,700     $       30,300
Weighted Average Yield of Class A Obligations .................          6.3%               5.9%               6.7%
Range of Yields for Class A Obligations........................       5.7% - 6.8%        5.6% - 6.1%        6.3% - 8.1%
Average Net Spreads (after fees and expenses)..................          17.6%              17.6%              15.8%
Range of Net Spreads (after fees and expenses).................      17.1% - 18.2%      17.0% - 18.1%      13.7% - 17.8%
</TABLE>


Liquidity and Capital Resources

    In recent periods, our needs for additional capital resources have increased
in connection with the growth of our business. We require capital for:

<TABLE>
<S>                                                     <C>
  o   increases in our loan portfolio,                  o   common stock repurchases,
  o   expansion of our dealership network,              o   the purchase of inventories, and
  o   working capital and general corporate purposes,   o   the purchase of property and equipment.

</TABLE>

    We fund our capital requirements primarily through:
<TABLE>

<S>                                     <C>
  o  operating  cash  flow,             o our  revolving  facility  with  GE  Capital,  and
  o  securitization transactions,       o supplemental borrowings.
</TABLE>

    While to date we have met our liquidity requirements as needed, there can be
no assurance that we will be able to continue to do so in the future.

Cash Flow

    Net Cash Provided by Operating Activities increased by $106.3 million in the
year ended  December 31, 1999 to $128.8  million from cash  provided in the year
ended December 31, 1998 of $22.5 million. The increase in 1999 was due primarily
to net earnings, an increase in the provision for credit losses and decreases in
activity  associated with the elimination of gain on sale recognition of finance
receivables,  offset by an increase in  inventory  resulting  from  management's
decision  to increase  inventory  levels at year end in  preparation  for strong
seasonal  sales in the first and second  quarters of 2000.  Net Cash Provided by
Operating  Activities  increased by $36.2 million in the year ended December 31,
1998 to $22.5  million  from cash used in the year ended  December  31,  1997 of
$13.7  million.  The increase in 1998 was due primarily to increases in the Loss
from Discontinued Operations, the Provision for Credit Losses, and Proceeds from
the Sale of Finance Receivables,  net of decreases in Net Earnings and purchases
of Finance Receivables.

    Net Cash Used in Investing  Activities increased by $304.9 million to $379.3
million in the year ended  December 31, 1999  compared to $74.4 million in 1998.
The increase is primarily due to increases in Cash Used in Investing  Activities
from  purchases of Finance  Receivables.  Net Cash Used in Investing  Activities
increased by $11.5 million to $74.4 million in the year ended  December 31, 1998
compared to $62.9 million in 1997. The increase is primarily due to increases in
Cash Used in Investing  Activities  from purchases of Finance  Receivables,  net
decreases in Cash advanced under our Notes Receivable,  increased collections of
Notes Receivable, and a reduction in payment for Acquisition of Assets.

                                    Page 21
<PAGE>

    Net Cash  Provided by Financing  Activities  increased by $112.9  million to
$177.9  million in the year ended December 31, 1999 compared to $65.0 million in
1998.  The increase is due to increases  in Notes  Payable,  net of increases in
repayments of Notes Payable. Net Cash Provided by Financing Activities decreased
by $44.8 million to $65.0  million in the year ended  December 31, 1998 compared
to $109.8  million in 1997.  The decrease is due to increases in Notes  Payable,
net of increases in  repayments of Notes Payable and a decrease in proceeds from
the issuance of common stock.

Financing Resources

    Revolving Facility. Under our $125 million revolving facility, our borrowing
base  consists  of up to  65.0%  of the  principal  balance  of  eligible  loans
originated  from the sale of used cars and the  lesser of $25  million or 58% of
the direct vehicle costs for eligible vehicle inventory.  The revolving facility
expires in June 2000 and  includes a  provision  for a one year  extension  upon
agreement by both parties.  Although  there can be no assurance,  we expect this
agreement to be extended for an additional  year.  The  revolving  facility also
contains a provision  that  requires us to pay GE Capital a  termination  fee of
$200,000 if we terminate the revolving facility prior to the expiration date. We
secure the facility with substantially all of our assets.

    As of December 31, 1999, our borrowing capacity under the revolving facility
was  $59.3  million,  the  aggregate  principal  amount  outstanding  under  the
revolving facility was approximately $41.7 million,  and the amount available to
be borrowed under the facility was $17.6 million.  The revolving  facility bears
interest at the 30-day LIBOR plus 3.15%,  payable  daily (total rate of 8.71% as
of December 31, 1999).

    The revolving  facility contains  covenants that, among other things,  limit
our ability to take  certain  actions  without GE Capital's  consent,  including
incur additional indebtedness, make any change in our capital structure, declare
or pay dividends,  and make certain  investments and capital  expenditures.  The
revolving  facility  also  provides  that an event of default  will occur if Mr.
Ernest C. Garcia II owns less than 15.0% of our voting  stock.  Mr. Garcia owned
approximately 32.2% of our common stock at December 31, 1999.

    In addition,  we are also required to maintain  specified  financial ratios,
including a debt (excluding  subordinated debt) to equity ratio of not more than
2.2 to 1 and a net worth of at least $150  million.  As of December 31, 1999, we
were in compliance with the covenants in this agreement.

    Securitizations.  Our  securitization  program  is a  primary  source of our
working  capital.  Securitizations  generate  cash  flow for us from the sale of
Class A obligations,  ongoing servicing fees, and excess cash flow distributions
from  collections  on the  loans  securitized  after  payments  on the  Class  A
obligations,  payment of fees,  expenses,  and insurance premiums,  and required
deposits to the reserve account.

    Securitization  also  allows  us to fix our cost of funds  for a given  loan
portfolio.  See "Management's Discussion and Analysis of Financial Condition and
Results of  Operations--Securitizations"  for a more complete description of our
securitization program.

Supplemental Borrowings

    Senior  Subordinated  Notes.  In February 1998, we borrowed a total of $15.0
million of subordinated debt from unrelated third parties for a three-year term.
We pay interest on this debt quarterly at 12% per annum.  We issued  warrants to
the lenders of this debt to purchase up to 500,000 shares of our common stock at
an exercise  price of $10.00 per share,  exercisable at any time until the later
of February  2001, or when the debt is paid in full.  This debt is senior to the
subordinated  debentures  issued  in  our  exchange  offers  (described  below),
subordinate  to our  other  indebtedness,  and had a $15.0  million  balance  at
December 31, 1999.

    In May 1999, we borrowed approximately $38.0 million from an unrelated party
for a term of two years maturing on May 1, 2001 (Residual  Loan). The note calls
for monthly  principal  payments of generally not less than $800,000 through May
2000 and not less than $1.7 million thereafter, plus interest at a rate equal to
LIBOR plus 550 basis  points.  The loan is secured by our  Residuals  in Finance
Receivables Sold and certain Finance  Receivables and the loan balance was $33.9
million at December 31, 1999.

                                    Page 22
<PAGE>

    Sale-Leaseback  of Real  Property.  In March 1998,  we executed an agreement
with an unrelated  investment  company for the sale and leaseback of up to $37.0
million in real  property.  We sold  certain  real  property  to the  investment
company for its original cost and leased back the properties for an initial term
of twenty years.  We have the right to extend the leases for up to an additional
20 years.  We pay monthly rents of  approximately  one-twelfth  of 10.75% of the
purchase  price plus all  occupancy  costs and taxes.  The  agreement  calls for
annual  increases  in monthly  rent to 11.0% of the  purchase  price in 1999 and
thereafter  in  accordance  with  increases in the Consumer  Price Index.  As of
December 31, 1999, we had sold 17 properties for a total price of  approximately
$27.4 million under this arrangement.  For the reason discussed in the following
paragraph,  we do not anticipate closing any additional  transactions under this
agreement.  We used substantially all of the proceeds from the sales to pay down
debt.

    In December 1999,  Verde acquired at a 10% discount,  all 17  sale-leaseback
properties  sold to the  unrelated  investment  company in 1998. We acquired the
option to purchase these properties at Verde's purchase price at anytime through
December 31, 2000.  Under the terms of the sale of Cygnet Dealer to an affiliate
of Mr. Garcia in December  1999, the term of the option was extended and the new
option  expires  simultaneously  with our  receipt of payment in full of the $12
million note  receivable  arising from the sale of Cygnet Dealer or December 31,
2000, whichever comes later.

    1998  Exchange   Offer.   In  the  fourth   quarter  of  1998,  we  acquired
approximately   2.7  million   shares  of  our  common  stock  in  exchange  for
approximately $17.5 million of subordinated debentures. We issued the debentures
at a premium of  approximately  $3.9 million over the market value of the shares
of our common stock that were  exchanged for the  debentures.  Accordingly,  the
debt was  recorded at $13.6  million on our balance  sheet.  The premium will be
amortized  over the life of the  debentures  and results in an effective  annual
interest  rate of  approximately  18.8%.  The  debentures  are unsecured and are
subordinate to all of our existing and future indebtedness. We must pay interest
on the  debentures  twice a year at 12% per  year.  We are  required  to pay the
principal  amount of the  debentures  on October 23, 2003.  We can redeem all or
part of the debentures at any time.

    2000 Exchange Offer. On February 22, 2000, we commenced a new exchange offer
to acquire up to 2.5 million  shares of our common  stock in exchange  for up to
$27.5 million principal amount of our 11% Subordinated Debentures due 2007. This
offer expires April 13, 2000.

    Additional Financing. In November 1998, we borrowed $15.0 million for a term
of 364 days from Greenwich Capital. We paid interest on this loan at an interest
rate equal to LIBOR plus 400 basis  points.  We secured the loan with the common
stock of our  securitization  subsidiaries.  In March 1999,  we  borrowed  $20.0
million for a term of 278 days from Greenwich Capital.  $1.5 million was used to
repay the remaining  balance of the $15 million  Greenwich Capital loan. The new
loan was secured by the common  stock of our  securitization  subsidiaries.  The
interest rate was at LIBOR plus 500 basis points and we paid an origination  fee
of 100 basis  points.  This loan was paid in full  during the second  quarter of
1999.

    In March 1999,  we executed a commitment  letter with  Greenwich  Capital in
which,  subject to satisfaction of certain conditions,  Greenwich Capital agreed
to provide us with a $100 million  surety-wrapped  warehouse line of credit at a
rate equal to LIBOR plus 110 basis points.

    Debt Shelf  Registration.  In 1997,  we registered up to $200 million of our
debt securities under the Securities Act of 1933. There can be no assurance that
we will be able to use this registration  statement to sell debt securities,  or
successfully register and sell other debt securities in the future.

Capital Expenditures and Commitments

    As a result of an aggressive growth strategy, during the year ended December
31, 1999 we opened 16 new dealerships.  We also have six more dealerships  under
development.  The  magnitude  of the  direct  cost of  opening a  dealership  is
primarily a function of whether we lease a facility or  construct a facility.  A
leased  facility costs  approximately  $650,000 to develop,  while a facility we
construct costs approximately $ 1.7 million. In addition,  we require capital to
finance the portfolio that we carry on our balance sheet for each dealership. It
takes  approximately  $2.2  million  in cash to  support  a  typical  stabilized
dealership  portfolio  with our existing 65% advance rate under our GE facility.
Additionally,  it takes  approximately  34 months for a dealership  portfolio to
reach a stabilized level.

                                    Page 23
<PAGE>

    We intend to finance the construction of new dealerships  through  operating
cash flows and supplemental  borrowings,  including  amounts available under the
revolving facility and the securitization program.

    Common Stock  Repurchase  Program.  In October 1997,  our Board of Directors
authorized a stock repurchase program, allowing us to purchase up to one million
shares of our common stock from time to time. Purchases may be made depending on
market  conditions,  share  price and  other  factors.  Our  Board of  Directors
extended the stock  repurchase  program in February  1999, to December 31, 1999.
During 1999 and 1998, we repurchased 1,004,000 and 75,000 shares,  respectively,
of common stock pursuant to the stock repurchase program.

    Since January 1, 1998,  we have  repurchased  a total of  approximately  3.8
million  shares of our common stock under our stock  repurchase  program and the
exchange offer  described  above at an average cost of  approximately  $5.40 per
share.

    In September  1997,  our Board of  Directors  approved a director and senior
officer stock purchase loan program.  We may make loans of up to $1.0 million in
total  to the  directors  and  senior  officers  under  the  program  to  assist
directors'  and  officers'  purchases of common stock on the open market.  These
unsecured  loans bear  interest at 10% per year.  During 1997,  senior  officers
purchased  50,000  shares of  common  stock  under  this  program  and we loaned
$500,000  to the senior  officers  for these  purchases.  During  1998,  we made
additional loans under similar terms and conditions to senior officers  totaling
approximately  $393,000 for the purchase of 40,000  shares of our common  stock.
During 1999, no loans under this program were made to senior officers.

Inflation

    Increases in inflation  generally  result in higher interest  rates.  Higher
interest  rates  on our  borrowings  would  decrease  the  profitability  of our
existing portfolio.  To date,  inflation has not had a significant impact on our
operations. We seek to limit this risk:

  o  through  our  securitization program,  which allows us to fix our borrowing
        costs,
  o  by  increasing  the  interest  rate  charged for  loans  originated at  our
        dealerships (if allowed under applicable law), or
  o  by increasing the profit margin on the cars sold.


Year 2000 Disclosures

    Many older computer programs refer to years only in terms of their final two
digits. Such programs may interpret the year 2000 to mean the year 1900 instead.
The problem affects not only computer  software,  but also computer hardware and
other  systems  containing  processors  and  embedded  chips.  Business  systems
affected by this  problem may not be able to  accurately  process  date  related
information  before,  during or after January 1, 2000. This is commonly referred
to as the Year 2000 issue.  Failure of our own business systems due to Year 2000
issues as well as those of our suppliers and business  partners could materially
adversely affect our business.

    We have spent  approximately  $2.4 million to date  preparing  and analyzing
Year 2000 issues. With some minor exceptions which have been addressed,  we were
unaffected  by the  change  from  the  year  1999 to the  year  2000.  We do not
anticipate  significant problems or material  expenditures in the future related
to the year 2000 issues.

    As of the date of this  report,  we have not been  affected by any year 2000
problems of our suppliers or business partners, but such problems could arise in
the future.  We will attempt to minimize the impact of other parties' failure to
resolve year 2000 problems.

Accounting Matters

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities" (SFAS No. 133). The adoption of SFAS No. 133 was delayed
by the  issuance of SFAS 137.  The  statement  requires  all  derivatives  to be
recorded on the balance sheet at fair value and establishes new accounting rules
for hedging  instruments.  In June 1999, the FASB deferred the effective date of
SFAS No. 133 for one year until  fiscal  years  beginning  after June 15,  2000.
Management  does not  expect  the  adoption  of SFAS No.  133 to have a material
impact on us.


                                    Page 24
<PAGE>


Risk Factors

    There are various risks in purchasing  our  securities  and investing in our
business,  including those described below. You should carefully  consider these
risk factors together with all other information included in this Form 10-K.

We make forward looking statements.

    This  report  contains  forward  looking  statements  within the  meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The words "believe", "expect",  "anticipate",  "estimate",
"project",  and similar expressions  identify forward looking statements.  These
statements may include, but are not limited to, projections of revenues, income,
or loss,  estimates  of  capital  expenditures,  plans  for  future  operations,
products or  services,  and  financing  needs or plans,  as well as  assumptions
relating to these matters.  Forward-looking statements speak only as of the date
the statement was made. They are inherently  subject to risks and uncertainties,
some of which we cannot  predict or quantify.  Future events and actual  results
could differ materially from the  forward-looking  statements.  When considering
each  forward-looking  statement,  you should keep in mind the risk  factors and
cautionary  statements found  throughout this Form 10-K and  specifically  those
found  below.  We are not  obligated  to  publicly  update or revise any forward
looking  statements,  whether as a result of new information,  future events, or
for any other reason.

Future  losses  could  impair our ability to raise  capital or borrow  money and
consequently affect our stock price.

    Although we recorded earnings from continuing operations of $8.7 million for
the twelve  months ended  December 31, 1999 and $3.5 million in 1998,  we cannot
assure  you that we will be  profitable  in  future  periods.  Losses  in future
periods could impair our ability to raise additional  capital or borrow money as
needed, and could decrease our stock price.

We may not be able to obtain the financing we need to fund our  operations  and,
as a result, our profitability could be reduced.

    Our operations require large amounts of capital. We have borrowed,  and will
continue to borrow,  substantial  amounts to fund our  operations.  If we cannot
obtain the  financing  we need on a timely  basis and on  favorable  terms,  our
business and profitability could be materially adversely affected.  We currently
obtain our financing through three primary sources:  a revolving credit facility
with General  Electric Capital  Corporation,  securitization  transactions,  and
loans from other sources.

    Revolving  Credit Facility with GE Capital.  Our revolving  facility with GE
Capital  is  our  primary   source  of  operating   capital.   We  have  pledged
substantially  all of our assets to GE Capital to secure the  borrowings we make
under this  facility.  Although this  facility has a maximum  commitment of $125
million,  the amount we can borrow is limited by the amount of certain  types of
assets  that we own.  When we have used all our  capacity  under  the  revolving
facility, our liquidity can be adversely affected unless we can find alternative
financing  sources.  The revolving facility expires in June 2000 and, even if we
continue to satisfy the terms and conditions of the revolving  facility,  we may
not be able to extend its term beyond the current  expiration date. If we cannot
extend the term of the  revolving  facility  or  replace  that  facility  with a
substitute facility, our operations would be materially adversely affected.

    Securitization  Transactions - We can restore capacity under the GE facility
from time to time by securitizing portfolios of finance receivables. Our ability
to  successfully  complete  securitizations  and how  favorable the terms of our
securitizations will be to us may be affected by several factors, including:

  o  the condition of securities markets generally;
  o  conditions in the asset-backed securities markets specifically;
  o  the credit quality of our loan portfolio; and
  o  the performance of our servicing operations.

    Contractual  Restrictions  -  The  revolving  facility,  the  securitization
program, and our other credit facilities contain various restrictive  covenants.



                                    Page 25
<PAGE>

Under  these  credit  facilities,  we must also meet  certain  financial  tests.
Failure to satisfy the covenants in our credit facilities or our  securitization
program could preclude us from further  borrowing under the defaulted  facility,
could cause cross defaults to our other debt, and could prevent us from securing
alternate sources of funds necessary to operate our business.

    Recent  Waivers.  From time to time,  we incur  technical or other  breaches
under our material  credit  facilities,  and we have  obtained  waivers from the
applicable  lenders.  There can be no assurance that we will continue to receive
waivers and our inability to obtain these waivers may have a material impact our
ability to obtain or retain operating capital.

We have a high risk of credit losses because of the poor creditworthiness of our
borrowers.

    Substantially  all of the sales  financing that we extend and the loans that
we service are with sub-prime  borrowers.  Sub-prime  borrowers generally cannot
borrow money from traditional lending  institutions,  such as banks, savings and
loans,  credit  unions,  and  captive  finance  companies  owned  by  automobile
manufacturers,  because of their poor credit histories and/or low incomes. Loans
to sub-prime  borrowers  are difficult to collect and are subject to a high risk
of loss.  We have  established  an  allowance  for  credit  losses  to cover our
anticipated credit losses. However, our allowance may not be sufficient to cover
our credit  losses.  A  significant  variation  in the timing of or  increase in
credit losses in our portfolio  would have a material  adverse effect on our net
earnings.

Interest rates affect our profitability.

    Much of our financing income results from the difference between the rate of
interest  that we pay on the funds we borrow  and the rate of  interest  that we
earn on the loans in our portfolio.  While we earn interest on the loans that we
own at a fixed rate,  we pay  interest  on our  borrowings  under our  revolving
facility at a floating rate. When interest rates increase,  our interest expense
increases  and our net  interest  margins  decrease.  Increases  in our interest
expense that we cannot  offset by  increases  in interest  income will lower our
profitability.

Laws that limit the interest  rates that we can charge can adversely  affect our
profitability.

    We operate in many  states that impose  limits on the  interest  rate that a
lender may charge. When a state limits the amount of interest that we can charge
on our  installment  sales  loans,  we may not be able to offset  any  increased
interest expense caused by rising interest rates or greater levels of borrowings
under our credit  facilities.  Therefore,  these interest rate  limitations  can
adversely affect our profitability.

Government  regulation may limit our ability to recover and enforce  receivables
or to repossess and sell collateral.

    We are  subject to ongoing  regulation,  supervision,  and  licensing  under
various federal, state, and local statutes,  ordinances, and regulations.  If we
do not comply  with these laws,  we could be fined or certain of our  operations
could be interrupted or shut down.  Failure to comply could,  therefore,  have a
material adverse effect on our operations. Among other things, these laws:

   o  require that we obtain and maintain certain licenses and qualifications;
   o  limit or prescribe terms of the loans that we originate and/or  purchase;
   o  require specified disclosures to customers;
   o  limit our right to repossess and sell collateral; and
   o  prohibit us from discriminating against certain customers.

    We  believe  that  we are  currently  in  substantial  compliance  with  all
applicable material federal, state, and local laws and regulations.  We may not,
however,  be able to remain in  compliance  with such  laws.  In  addition,  the
adoption of additional  statutes and regulations,  changes in the interpretation
of existing statutes and regulations,  or our entry into jurisdictions with more
stringent  regulatory  requirements could also have a material adverse effect on
our operations.

                                    Page 26
<PAGE>

    We are  subject  to  pending  actions  and  investigations  relating  to our
compliance  with  various  laws and  regulations.  While we do not believe  that
ultimate resolution of these matters will result in a material adverse effect on
our business or financial  condition  (such as fines,  injunctions  or damages),
there can be no assurance in this regard.

Events  happening to other  companies in our industry can  adversely  affect our
operations and the value of our securities.

    In recent years,  several major used car finance  companies  have  announced
major downward  adjustments to their  financial  statements,  violations of loan
covenants,  related litigation,  and other events. Companies in the used vehicle
sales and  financing  market have also been named as defendants in an increasing
number of class action  lawsuits  brought by customers  claiming  violations  of
various federal and state consumer credit and similar laws and  regulations.  In
addition,  some of these companies have filed for bankruptcy  protection.  These
events:

   o  have  lowered the value of  securities  of  sub-prime  automobile  finance
        companies;
   o  have made it more difficult for sub-prime lenders to borrow money; and
   o  could cause more restrictive regulation of this industry.

If our current  contingency plan is inadequate,  we could have a system failure,
which could  adversely  affect our ability to collect on loans,  and comply with
statutory requirements.

    We  depend  on  our  loan  servicing  and   collection   facilities  and  on
long-distance  and local  telecommunications  access  to  transmit  and  process
information among our various  facilities.  We use a standard program to prepare
and store off-site backup tapes of our main system  applications  and data files
on a routine basis. We regularly revise our contingency plan, however,  the plan
as revised may not prevent a systems  failure or allow us to timely  resolve any
systems failures. Also, a natural disaster, calamity, or other significant event
that causes  long-term  damage to any of these facilities or that interrupts our
telecommunications  networks  could  have  a  material  adverse  effect  on  our
operations.

We have continuing risks relating to the First Merchants transaction.

    We have entered into several  transactions in the bankruptcy  proceedings of
First  Merchants  Acceptance  Corporation.  We  have  the  right  to 17  1/2% of
recoveries on First Merchants'  residual  interests in certain  securitized loan
pools and other loans. However, if we lose our right to service these loans, our
share of these  residual  interests  can be  reduced or  eliminated.  This could
affect our future cash flow and profitability.  In addition,  if we meet certain
conditions,  we have the right to issue our common  stock to First  Merchants or
its  unsecured  creditors  or equity  holders in exchange for a portion of First
Merchants' 82 1/2% share of collections on the residual  interests.  However, we
must  estimate  anticipated  collections  in advance to determine  the amount of
stock to issue,  and if our  estimates  are not accurate we could issue too many
shares of our common stock and dilute our shareholders.

We may make acquisitions that are unsuccessful or strain or divert our resources
from more profitable operations.

    In 1999, we completed  two  acquisitions.  We intend to consider  additional
acquisitions,  alliances,  and transactions involving other companies that could
complement  our  existing  business.  However,  we may not be  able to  identify
suitable   acquisition  parties,   joint  venture  candidates,   or  transaction
counterparties.  Also, even if we can identify suitable  parties,  we may not be
able to consummate these transactions on terms that we find favorable.

    We may also not be able to  successfully  integrate any  businesses  that we
acquire  into our  existing  operations.  If we  cannot  successfully  integrate
acquisitions,  our operating  expenses may increase.  This increase would affect
our net  earnings,  which could  adversely  affect the value of our  outstanding
securities.  Moreover,  these types of  transactions  may result in  potentially
dilutive issuance of equity  securities,  the incurrence of additional debt, and
amortization of expenses related to goodwill and intangible assets, all of which
could adversely affect our profitability.  These  transactions  involve numerous
other risks as well,  including the diversion of management attention from other
business  concerns,  entry into  markets in which we have had no or only limited
experience,  and the  potential  loss of key  employees  of acquired  companies.
Occurrence of any of these risks could have a material adverse effect on us.



                                    Page 27
<PAGE>

Increased competition could adversely affect our operations and profitability.

    Our primary  competitors  are the numerous small buy-here  pay-here used car
dealers that operate in the sub-prime segment of the used car sales industry. We
attempt to distinguish  ourselves from our competitors  through name recognition
and other factors.  However the advertising and infrastructure required by these
efforts  increase our  operating  expenses.  There is no  assurance  that we can
successfully distinguish ourselves and compete in this industry. In addition, in
recent years, a number of larger companies with significant  financial and other
resources, have entered or announced plans to enter the used car sales industry.
Although  these  companies do not  currently  compete  with us in the  sub-prime
segment of the market, they compete with us in the purchase of inventory,  which
can result in increased  wholesale  costs for used cars and lower margins.  They
could also enter the sub-prime segment of the market at any time.

    Increased competition may cause downward pressure on the interest rates that
we charge on loans  originated  by our  dealerships.  Either change could have a
material effect on the value of our securities.

The success of our operations depends on certain key personnel.

    We believe that our ability to successfully  implement our business strategy
and to operate  profitably  depends on the  continued  employment  of our senior
management  team.  The  unexpected  loss  of the  services  of  any  of our  key
management  personnel or our inability to attract new management  when necessary
could have a material  adverse  effect on our  operations.  We do not  currently
maintain key person life insurance on any member of our senior  management  team
other than Gregory B. Sullivan, our President and Chief Executive Officer.

We may issue  stock in the future  that will  dilute  the value of our  existing
stock.

    We have the ability to issue common stock or securities  exercisable  for or
convertible  into common  stock,  which may dilute the  securities  our existing
stockholders  now hold. In  particular,  issuance of any or all of the following
securities may dilute the value of the securities that our existing stockholders
now hold:

   o  we have granted warrants to purchase a total of approximately  1.2 million
        shares  of our  common  stock to  various parties,  with exercise prices
        ranging from $6.75 to $20.00 per share;
   o  we may issue additional warrants in connection with future transactions;
   o  we may issue common stock under our various stock option plans; and
   o  we may issue common stock in the First Merchants  transaction  in exchange
        for an increased  share of  collections on certain loans that we service
        for First Merchants.

    We also  currently  intend on asking for our  shareholders  approval  at our
annual meeting,  currently scheduled for May 23, 2000, of a proposal authorizing
the creation of "blank  check"  common  stock.  If passed,  this would allow our
Board  of  Directors  to  establish  a  series  of  common  stock on terms to be
determined by the Board of Directors.  Depending upon the terms of the stock and
of the market's reaction,  existing  shareholders could be adversely affected or
it could have a potential anti-takeover or dilutive effect.

The voting power of our principal stockholder may limit your voting rights.

    Mr. Ernest C. Garcia, II, our Chairman, or his affiliates held approximately
32.2% of our outstanding  common stock as of December 31, 1999. As a result, Mr.
Garcia has a significant influence upon our activities as well as on all matters
requiring  approval  of our  stockholders.  These  matters  include  electing or
removing  members  of our board of  directors,  engaging  in  transactions  with
affiliated entities, causing or restricting our sale or merger, and changing our
dividend policy.  The interests of Mr. Garcia may conflict with the interests of
our other stockholders.

There is a  potential  anti-takeover  or dilutive  effect if we issue  preferred
stock.

    Our  certificate  of  incorporation  authorizes  us to issue  "blank  check"
preferred  stock. Our board of directors may fix or change from time to time the
designation,  number, voting powers, preferences, and rights of this stock. Such

                                    Page 28
<PAGE>

issuance's  could  make it more  difficult  for a third  party to  acquire us by
reducing the voting  power or other  rights of the holders of our common  stock.
Preferred stock can also reduce the market value of the common stock.

      ITEM 7A-- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

    We are exposed to market risk on our financial  instruments  from changes in
interest rates. We do not use financial  instruments for trading  purposes or to
manage  interest rate risk. Our earnings are  substantially  affected by our net
interest  income,   which  is  the  difference  between  the  income  earned  on
interest-bearing assets and the interest paid on interest bearing notes payable.
Increases   in  market   interest   rates  could  have  an  adverse   effect  on
profitability.

   Our   financial   instruments   consist   primarily  of  fixed  rate  finance
receivables,  residual  interests  in pools of fixed rate  finance  receivables,
short term variable rate revolving Notes Receivable, and variable and fixed rate
Notes  Payable.  Our finance  receivables  are  classified as subprime loans and
generally  bear  interest  at the lower of 29.9% or the  maximum  interest  rate
allowed in states that impose  interest rate limits.  At December 31, 1999,  the
scheduled  maturities on our finance  receivables  ranged from one to 48 months,
with a weighted  average  maturity of 18.1 months.  The interest rates we charge
our customers on finance receivables has not changed as a result of fluctuations
in market interest rates,  although we may increase the interest rates we charge
in the future if market interest rates  increase.  A large component of our debt
at December 31, 1999 is the  Collateralized  Note Payable  (Class A obligations)
issued under our securitization program. Issuing debt through our securitization
program  allows us to mitigate our interest rate risk by reducing the balance of
the variable  revolving  line of credit and replacing it with a lower fixed rate
note  payable.  We are subject to interest rate risk on fixed rate Notes Payable
to the extent that future  interest  rates are higher than the interest rates on
our existing Notes Payable.

   The table below illustrates the impact that hypothetical  changes in interest
rates could have on our earnings before income taxes over a twelve month period.
We compute the impact on earnings for the period by first computing the baseline
net interest income on our financial  instruments with interest rate risk, which
are the  variable  rate  revolving  credit  lines and the  variable  rate  notes
payable. We then determine the net interest income based on each of the interest
rate  changes  listed below and compare the results to the baseline net interest
income to determine the estimated change in pretax earnings.  The table does not
give effect to our fixed rate receivables and borrowings.

         Change in Interest Rates            Change in Pretax Earnings
         ------------------------            -------------------------
                                                  ($ in thousands)

                   + 2%                          $         (1,349)
                   + 1%                          $           (674)
                   - 1%                          $            674
                   - 2%                          $          1,349


In  computing  the effect of  hypothetical  changes in interest  rates,  we have
assumed that:

   o  interest rates used for the baseline and  hypothetical net interest income
        amounts are in effect for the entire twelve month period,
   o  interest for the period is  calculated  on financial  instruments  held at
        December 31, 1999 less contractually scheduled payments and maturities,
        and
   o  there is no  change in  prepayment rates as  a result of the interest rate
        changes.

    Our sensitivity to interest rate changes could be significantly different if
actual experience differs from the assumptions used to compute the estimates.

                                    Page 29
<PAGE>




                                                                 75

        ITEM 8-- CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report................................................ 31
Consolidated Financial Statements:
    Consolidated Balance Sheets as of December 31, 1999 and 1998............ 32
    Consolidated Statements of Operations for the years ended
    December 31, 1999, 1998 and 1997........................................ 33
    Consolidated Statements of Stockholders' Equity for the years ended
       December 31, 1999, 1998 and 1997..................................... 34
    Consolidated Statements of Cash Flows for the years ended
       December 31, 1999, 1998 and 1997..................................... 35
Notes to Consolidated Financial Statements.................................. 36




                                    Page 30
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Ugly Duckling Corporation:

    We  have  audited  the  accompanying  consolidated  balance  sheets  of Ugly
Duckling  Corporation and subsidiaries as of December 31, 1999 and 1998, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the years in the  three-year  period ended  December 31, 1999.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

    We conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion,  the  consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position  of Ugly
Duckling  Corporation and subsidiaries as of December 31, 1999 and 1998, and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 1999 in conformity with generally  accepted
accounting principles.

                                                          KPMG LLP

Phoenix, Arizona
March 10, 2000









                                    Page 31
<PAGE>



                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                           Consolidated Balance Sheets
                                ($ in thousands)

<TABLE>
<CAPTION>

                                                                           December 31,
                                                                    ----------------------------
<S>                                                                 <C>             <C>
                                                                        1999            1998
                                                                    ------------    ------------
                               ASSETS

Cash and Cash Equivalents.......................................... $      3,683    $      2,544
Finance Receivables, Net...........................................      365,586         126,168
Note Receivable from Related Party.................................       12,000              --
Inventory..........................................................       62,865          44,145
Property and Equipment, Net........................................       31,752          28,631
Intangible Assets, Net.............................................       14,618          14,433
Other Assets.......................................................       12,327          14,363
Net Assets of Discontinued Operations..............................       33,880         106,997
                                                                    ------------    ------------
                                                                    $    536,711    $    337,281
                                                                    ============    ============

                LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
    Accounts Payable............................................... $      3,185    $      2,137
    Accrued Expenses and Other Liabilities.........................       26,905          16,766
    Notes Payable - Portfolio......................................      275,774         101,732
    Other Notes Payable............................................       36,556          15,899
    Subordinated Notes Payable.....................................       28,611          37,980
                                                                    ------------    ------------
       Total Liabilities...........................................      371,031         174,514
                                                                    ------------    ------------
Stockholders' Equity:
    Preferred Stock $.001 par value, 10,000,000 shares authorized,
       none issued and outstanding.................................           --              --
    Common Stock $.001 par value, 100,000,000 shares authorized,
       18,656,000 and 18,605,000 issued, respectively, and
       14,888,000 and 15,841,000 outstanding,                                 19              19
       respectively............
    Additional Paid-in Capital.....................................      173,273         173,809
    Retained Earnings..............................................       12,709           3,449
    Treasury Stock, at cost........................................      (20,321)        (14,510)
                                                                    ------------- ---------------
        Total Stockholders' Equity.................................      165,680         162,767
Commitments and Contingencies .....................................           --              --
                                                                    ------------    ------------
                                                                    $    536,711    $    337,281
                                                                    =============   ============
</TABLE>


          See accompanying notes to Consolidated Financial Statements.

                                    Page 32
<PAGE>



                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Operations
                     ($ in thousands, except share amounts)

<TABLE>
<CAPTION>

                                                                       Years Ended December 31,
                                                              -------------------------------------------
 <S>                                                          <C>            <C>              <C>
                                                                   1999           1998           1997
                                                              ------------   ------------   -------------
Sales of Used Cars........................................... $    389,908   $    287,618     $  123,814
Less:
   Cost of Used Cars Sold....................................      219,037        165,282         72,358
   Provision for Credit Losses...............................      102,955         65,318         22,354
                                                                ----------     ----------     ----------
                                                                    67,916         57,018         29,102
                                                                ----------     ----------     ----------
Other Income:
   Interest Income...........................................       68,574         17,287         12,559
   Portfolio Interest Expense................................       14,597          2,860            175
                                                                ----------     ----------     ----------
    Net Interest Income......................................       53,977         14,427         12,384
   Gain on Sale of Loans.....................................          --          12,093          6,721
   Servicing and Other Income................................        7,472         15,481         12,325
                                                                ----------     ----------     ----------
                                                                    61,449         42,001         31,430
                                                                ----------     ----------     ----------
Income before Operating Expenses.............................      129,365         99,019         60,532
                                                                ----------     ----------     ----------
Operating Expenses:
   Selling and Marketing.....................................       23,132         18,246         10,538
   General and Administrative................................       81,570         69,894         39,414
   Depreciation and Amortization.............................        6,948          4,912          3,148
                                                                ----------     ----------     ----------
                                                                   111,650         93,052         53,100
                                                                ----------     ----------     ----------
Income before Other Interest Expense.........................       17,715          5,967          7,432

Interest Expense from Subordinated Debt......................        3,028            161            531
                                                                ----------     ----------     ----------
Earnings before Income Taxes.................................       14,687          5,806          6,901
Income Taxes.................................................        6,000          2,351          2,820
                                                                ----------     ----------     ----------
Earnings from Continuing Operations..........................        8,687          3,455          4,081
Discontinued Operations:
Earnings (Loss) from Operations of Discontinued Operations
    net of income taxes (benefit) of $172, ($440) and $3,759.          248           (703)         5,364
Earnings (Loss) from Disposal of Discontinued Operations, net
    of income taxes (benefit) of $225, ($5,393), and  $0.....          325         (8,455)            --
                                                                ----------     -----------    ----------
Net Earnings (Loss)..........................................   $    9,260     $   (5,703)    $    9,445
                                                                ==========     ===========    ==========
Earnings  per Common Share - Continuing Operations:
   Basic.....................................................   $     0.58     $     0.19     $     0.23
                                                                ==========     ==========     ==========
   Diluted...................................................   $     0.57     $     0.19     $     0.22
                                                                ==========     ==========     ==========
Net Earnings (Loss) per Common Share:
   Basic.....................................................   $     0.61     $    (0.32)    $     0.53
                                                                ==========     ===========    ==========
   Diluted...................................................   $     0.60     $    (0.31)    $     0.52
                                                                ==========     ===========    ==========
</TABLE>


          See accompanying notes to Consolidated Financial Statements.

                                    Page 33
<PAGE>



                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity
                  Years Ended December 31, 1999, 1998, and 1997
                                 ( in thousands)



<TABLE>

                                            Number of Shares                                                     Total
                                       -------------------------                   Retained                  Stockholders'
                                        Common         Treasury       Common       Earnings      Treasury       Equity
                                       -----------     --------    -----------   ------------    ---------    -----------
<S>                                    <C>             <C>         <C>           <C>         <C>             <C>
Balances at December 31,  1996........    13,327            --       $  82,612     $    (293)    $      --     $   82,319
Issuance of Common Stock for Cash.....     5,194            --          89,398            --            --         89,398
Issuance of Common Stock Warrants.....        --            --             612            --            --            612
Net Earnings for the Year.............        --            --              --         9,445            --          9,445
                                       ---------       -------       ---------     ---------     ---------     ----------
Balances at December 31, 1997.........    18,521            --         172,622         9,152            --        181,774
Issuance of Common Stock for  Cash....        84            --             306            --            --            306
Issuance of Common Stock  Warrants....        --            --             900            --            --            900
Purchase of Treasury Stock for Cash...        --           (75)             --            --          (535)          (535)
Acquisition of Treasury  Stock  for
    Subordinated Debentures...........        --        (2,689)             --            --       (13,975)       (13,975)
Net Loss for the Year.................        --            --              --        (5,703)          --          (5,703)
                                         -------     ---------       ---------     ----------  -----------     -----------
Balances at December 31, 1998.........    18,605        (2,764)      $ 173,828     $   3,449   $ (14,510)      $  162,767
Issuance of Common Stock for  Cash....        51            --             364            --            --            364
Repurchase of Common Stock Warrants...                      --            (900)           --            --           (900)
Purchase of Treasury Stock for Cash...        --        (1,004)             --            --        (5,811)        (5,811)
Net Earnings for the Year.............        --            --              --         9,260            --          9,260
                                       ---------       -------       ---------     ---------     ---------     ----------
Balances at December 31, 1999.........    18,656        (3,768)      $ 173,292     $  12,709   $ (20,321)      $  165,680
                                       =========       ========      =========     =========   ==========      ==========
</TABLE>




          See accompanying notes to Consolidated Financial Statements.

                                    Page 34
<PAGE>


                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                                ($ in thousands)
<TABLE>
<CAPTION>


                                                                               Years Ended December 31,
                                                                        ------------------------------------
<S>                                                                     <C>           <C>          <C>
                                                                            1999         1998         1997
                                                                        -----------  -----------  ----------
Cash Flows from Operating Activities:
    Net Earnings (Loss)..............................................   $     9,260   $  (5,703)   $   9,445
Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided by
    (Used in) Operating Activities from Continuing Operations:
    Loss (Earnings) from Discontinued Operations.....................          (573)      9,158       (5,364)
    Provision for Credit Losses......................................       102,955      65,318       22,354
    Gain on Sale of Loans............................................           --      (12,093)      (6,721)
    Deferred Income Taxes............................................        (3,078)     (2,759)         510
    Depreciation and Amortization....................................         7,579       5,071        3,150
    Purchase of Finance Receivables for Sale.........................           --     (207,085)    (116,830)
    Proceeds from Sale of Finance Receivables........................           --      159,498       81,098
    Collections of Finance Receivables for Sale......................        16,644      22,000       15,554
      Increase in Goodwill from Acquisitions.........................        (1,217)       (528)          --
      Loss on Disposal of Property and Equipment.....................            43         903           --
    Increase in Inventory............................................       (18,720)    (11,773)     (20,592)
    Decrease (Increase) in Other Assets..............................         1,415        (967)      (1,252)
    Increase in Accounts Payable, Accrued Expenses, and Other                 7,751       2,715        6,345
    Liabilities......................................................
    Increase (Decrease) in Income Taxes Receivable/Payable...........         6,772      (1,233)      (1,377)
                                                                        -----------  -----------  -----------
       Net Cash Provided by (Used in) Operating Activities

          of Continuing Operations...................................       128,831      22,522      (13,680)
                                                                        -----------   ---------    ----------
Cash Flows from Investing Activities:
    Increase in Finance Receivables..................................      (403,742)   (111,467)          --
    Collections of Finance Receivables...............................        80,877      40,112           --
    Increase in Investments Held in Trust............................       (36,152)     (8,927)      (8,475)
    Advances under Notes Receivable..................................       (12,000)         --           --
    Repayments of Notes Receivable...................................           763         149          151
    Proceeds from disposal of Property and Equipment.................            77      28,563           --
    Purchase of Property and Equipment...............................        (8,974)    (22,825)     (18,764)
    Payment for Acquisition of Assets................................          (169)         --      (35,841)
                                                                        ------------ ----------   -----------
       Net Cash Used in Investing Activities of Continuing Operations      (379,320)    (74,395)     (62,929)
                                                                        -----------   ---------    ---------
Cash Flows from Financing Activities:
    Additions to Notes Payable.......................................       751,070      49,967       22,578
    Repayments of Notes Payable......................................      (577,028)     (5,185)          --
    Additions to Other Notes Payable.................................        59,180      21,825           --
    Repayments of Other Notes Payable................................       (38,523)    (13,502)          --
    Issuance of Subordinated Notes Payable...........................           --       15,000           --
    Repayment of Subordinated Notes Payable..........................       (10,000)     (2,000)      (2,000)
    Proceeds from Issuance of Common Stock...........................           364         306       89,398
    Acquisition of Treasury Stock....................................        (5,811)       (535)          --
    Other, Net.......................................................        (1,324)       (862)        (180)
                                                                        -----------   ----------   ---------
       Net Cash Provided by Financing Activities of Continuing
            Operations ..............................................       177,928      65,014      109,796
                                                                        -----------   ---------    ---------



Net Cash Provided by (Used in) Discontinued Operations...............        73,700     (14,134)     (48,105)
                                                                        -----------   ----------   ---------
Net Increase (Decrease) in Cash and Cash Equivalents.................         1,139        (993)     (14,918)
Cash and Cash Equivalents at Beginning of Year.......................         2,544       3,537       18,455
                                                                        -----------   ---------    ---------
Cash and Cash Equivalents at End of Year.............................   $     3,683   $   2,544    $   3,537
                                                                        ===========   =========    =========
Supplemental Statement of Cash Flows Information:
    Interest Paid....................................................   $    17,580  $    10,483   $   5,382
    Income Taxes Paid................................................         2,154        1,633       6,570
    Assumption of Debt in Connection with Acquisition of Assets......            --           --      29,900
    Purchase of Property and Equipment with Notes Payable............            --          825          --
    Purchase of Property and Equipment with Capital Leases...........            --           --         357
    Purchase of Treasury Stock with Subordinated Notes Payable.......            --       13,975          --
    Issuance (Repurchase) of Warrants for Subordinated Note Payable..          (900)         900          --
</TABLE>


          See accompanying notes to Consolidated Financial Statements.

                                    Page 35
<PAGE>

                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1) Organization, Operations and Acquisitions

    Ugly  Duckling  Corporation,  a  Delaware  corporation  (the  Company),  was
incorporated  in April 1996 as the  successor to Ugly  Duckling  Holdings,  Inc.
(UDH), an Arizona corporation formed in 1992.

    The Company, through wholly-owned  subsidiaries,  operates 72 used car sales
dealerships,  15 inspection  centers,  and four loan-servicing  facilities.  Two
additional  wholly-owned  special purpose  securitization  subsidiaries are Ugly
Duckling Receivables  Corporation and Ugly Duckling Receivables  Corporation II,
both of which are "bankruptcy remote subsidiaries". Their assets at December 31,
1999 and 1998  include both  continuing  and  discontinued  residuals in finance
receivables  sold and investments  held in trust in the amounts of $78.6 million
and  $68.1  million,  respectively.  The  assets of these  two  special  purpose
securitization  subsidiaries  generally would not be available to satisfy claims
of creditors of the Company.

    During  1999 and 1997 the Company  completed  a total of five  acquisitions.
These  acquisitions  were recorded in accordance  with the "purchase  method" of
accounting,  and,  accordingly,  the  purchase  price has been  allocated to the
assets  purchased and the  liabilities  assumed  based upon the  estimated  fair
values at the date of  acquisition.  The excess of the  purchase  price over the
fair values of the net assets  acquired has been recorded as goodwill,  which is
being amortized over periods  ranging from fifteen to twenty years.  The results
of  operations of the acquired  entities have been included in the  accompanying
statements of operations from the respective acquisition dates.

    During 1999, the Company  completed two  acquisitions  of two portfolios and
nine car sales locations.  In August,  1999, the Company acquired certain assets
of DCT of Ocala Corporation,  including four dealerships in Orlando, Florida and
a loan  portfolio of  approximately  $15 million in exchange  for  approximately
$12.1 million in cash. In November, 1999, the Company acquired certain assets of
Virginia Auto Mart, including five dealerships in Richmond,  Virginia and a loan
portfolio  of  approximately  $6.8 million in exchange  for  approximately  $3.9
million in cash and $2.7 million in debt provided by the sellers.  The excess of
the  purchase  price  over  the  fair  values  of the net  assets  acquired  was
approximately $1.1 million.

    During 1997, the Company completed three acquisitions.  In January 1997, the
Company acquired substantially all of the assets of Seminole Finance Corporation
and  related  companies   (Seminole),including  four  dealerships  in  Tampa/St.
Petersburg and a loan portfolio of  approximately  $31.1 million in exchange for
approximately  $2.5 million in cash and  assumption of $29.9 million in debt. In
April 1997, the Company  purchased  substantially all of the assets of E-Z Plan,
Inc. (EZ Plan),  including seven dealerships in San Antonio and a loan portfolio
of approximately  $24.3 million in exchange for  approximately  $26.3 million in
cash.  In  September  1997,  the  Company  acquired  substantially  all  of  the
dealership  and loan servicing  assets (but not the loan  portfolio) of Kars-Yes
Holdings Inc. and related companies,  including twelve dealerships,  in exchange
for  approximately  $5.5 million in cash.  The excess of the purchase price over
the fair values of the net assets acquired was approximately $16.0 million.

(2) Discontinued Operations

    During  the first  quarter of 1998,  the  Company  closed its branch  office
network  (the  "Branch  Offices")  through  which the Company  purchased  retail
installment  loans,  and exited  this line of  business.  The  Company  plans to
complete servicing its existing portfolio. The Company recorded a pre-tax charge
to discontinued  operations of $15.1 million (approximately $9.2 million, net of
income  taxes) in 1998 for branch  closing  costs,  loan losses and related loan
servicing  expenses.  Loan  losses and  related  loan  servicing  expenses  have
exceeded  amounts  originally  provided  for such  activities  and in the fourth
quarter of 1999 the Company recorded an additional  charge of $2.5 million ($1.5
million  net of  income  tax) for  costs  and loan  losses  associated  with the
remaining  portfolio  servicing  activities.  The Company has  reclassified  the
accompanying   consolidated  balance  sheets  and  consolidated   statements  of
operations of the Branch Offices to Discontinued Operations.

    The Company's Cygnet Dealer program provided qualified used car dealers with
warehouse purchase facilities and revolving lines of credit primarily secured by
the dealers finance receivable portfolios.  In December,  1999, the Company sold
its Cygnet Dealer Finance (CDF) subsidiary to an entity  controlled by Ernest C.
Garcia II, Chairman and principal  shareholder of the Company, for approximately
$37.5 million, the estimated book value of the Company's investment in CDF. As a
result of the sale, CDF has been  reclassified  as  discontinued  operations for
1999 and all preceding years.


                                    Page 36
<PAGE>

    The purchase  price of CDF was paid through the  assumption  by the buyer of
approximately  $8.0  million of  outstanding  debt owed by the  Company to Verde
Investments Inc.  (Verde),  an affiliate of Mr. Garcia,  a $12 million,  10-year
promissory  note from the buyer to the Company that is guaranteed by Verde,  and
the remainder in cash. The note is subordinate to the initial financing obtained
by Cygnet Dealer.

    Effective  December 31, 1999,  the Company  adopted a formal plan to abandon
any effort for its third party dealer  operations  to acquire loans or servicing
rights to  additional  portfolios.  Accordingly,  our Cygnet  Servicing  and the
associated   Cygnet  Corporate  segment  also  are  reported  as  components  of
discontinued operations.  The Company plans to complete servicing the portfolios
that it currently services.

    No gain or loss has been recorded on the disposal of Cygnet Servicing as the
Company anticipates that over the servicing period, expected to be approximately
30 months, it will realize a net gain.

    The components of Net Assets of  Discontinued  Operations as of December 31,
1999 and December 31, 1998 follow ($ in thousands):

<TABLE>
<CAPTION>
                                                                       December 31,
                                                                  ---------------------
                                                                     1999        1998
                                                                  ----------  ---------
<S>                                                                <C>         <C>
Finance Receivables, net.........................................  $ 14,837    $ 65,065
Residuals in Finance Receivables Sold............................     3,742      10,500
Investments Held in Trust........................................     1,545       3,665
Notes Receivable, net of Subordinated Notes Payable..............     6,697      22,071
Property and Equipment...........................................     2,114       5,538
Servicing Receivable.............................................     6,125          --
Other Assets, net of Accounts Payable and Accrued Liabilities....    (1,180)      6,182
Disposal Liability...............................................        --      (6,024)
                                                                  ---------    ---------
                                                                  $  33,880    $106,997
                                                                  =========    ========
</TABLE>


    Following  is a  summary  of  the  operating  results  of  the  Discontinued
Operations  for  the  years  ended  December  31,  1999,  1998,  and  1997 ($ in
thousands):

                                                           December 31,
                                               ---------------------------------
                                                  1999        1998        1997
                                               ----------  ----------  ---------
Revenues......................................  $  46,705  $   33,193   $ 34,515
Operating Expenses............................     38,056      40,508     19,338
Interest Expense..............................      7,673       7,676      6,053
                                                ---------  ----------   --------
Gain (Loss) before Income Tax (Benefit).......        976     (14,991)     9,124
Income Tax (Benefit)..........................        403      (5,833)     3,760
                                                ---------  -----------  --------
Earnings (Loss) from Discontinued Operations..  $     573  $   (9,158)  $  5,364
                                                =========  ===========  ========


(3) Summary of Significant Accounting Policies

Principles of Consolidation

    The Consolidated  Financial  Statements  include the accounts of the Company
and its subsidiaries.  Significant  intercompany  accounts and transactions have
been eliminated in consolidation.

Use of Estimates

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




                                    Page 37
<PAGE>

Concentration of Credit Risk

    The Company  provides sales finance services in connection with the sales of
used cars to individuals  residing in numerous  metropolitan  areas. The Company
operated a total of 72, 56, and 41 used car dealerships (Company dealerships) in
eleven, nine and ten metropolitan  markets at December 31, 1999, 1998, and 1997,
respectively.

    Periodically  during  the year,  the  Company  maintains  cash in  financial
institutions in excess of the amounts insured by the federal government.

Cash Equivalents

    The Company  considers all highly  liquid debt  instruments  purchased  with
maturities  of three  months or less to be cash  equivalents.  Cash  equivalents
generally consist of interest-bearing money market accounts.

Revenue Recognition

    Revenue from the sales of used cars is recognized  upon  delivery,  when the
sales contract is signed and the agreed-upon down payment has been received.

    Interest  income  is  recognized  using the  interest  method.  Direct  loan
origination  costs  related  to loans  originated  at  Company  dealerships  are
deferred  and  charged  against  finance  income  over the  life of the  related
installment  sales loan as an  adjustment  of yield.  The accrual of interest is
suspended if  collection  becomes  doubtful,  generally 90 days past due, and is
resumed when the loan becomes  current.  Interest income also includes income on
the Company's residual interests from its securitization program.

Residuals in Finance  Receivables  Sold,  Investments Held in Trust, and Gain on
Sale of Loans

    Under the current legal structure of the securitization program, the Company
sells  loans  to  Company   subsidiaries  that  then  securitize  the  loans  by
transferring  them to separate  trusts that issue  several  classes of notes and
certificates  collateralized by the loans. The securitization  subsidiaries then
sell Class A notes or  certificates  (Class A  obligations)  to  investors,  and
subordinate  classes are  retained by the  Company.  The  Company  continues  to
service the securitized loans.

    The Class A obligations have historically received investment grade ratings.
To  secure  the  payment  of  the  Class  A  obligations,   the   securitization
subsidiaries  obtain an insurance  policy from MBIA Insurance  Corporation  that
guarantees  payment  of  amounts  to the  holders  of the  Class A  obligations.
Additionally,  a cash "reserve"  account is  established  for the benefit of the
Class  A  obligations  holders.  The  reserve  accounts  are  classified  in the
financial statements as Investments Held in Trust and are a component of Finance
Receivables, Net.

    For securitization  transactions closed during the third quarter of 1998 and
prior,  gains on sale were computed based upon the difference  between the sales
proceeds for the portion of finance  receivables sold and the Company's recorded
investment in the finance  receivables  sold. The Company allocated the recorded
investment  in the  finance  receivables  between  the  portion  of the  finance
receivables  sold and the portion  retained based on the relative fair values on
the date of sale.  The  retained  portion is  reported as  Residuals  in Finance
Receivables Sold and is a component of Finance Receivables, Net

    Residuals in Finance Receivables Sold represents the present value of future
cash  flows  from  the  underlying  trust   portfolios.   These   securitization
transactions were discounted with a rate of 12% using the "cash out method".  To
the  extent  that  actual  cash  flows on a  securitization  are below  original
estimates and differ  materially  from the original  securitization  assumptions
and, in the opinion of  management,  those  differences  appear to be other than
temporary in nature, the Company's residual will be adjusted, with corresponding
charges  against  income in the  period in which the  adjustment  is made.  Such
evaluations  are  performed on a security by security  basis,  for each residual
interest retained by the Company.

     Residuals  in Finance  Receivables  are  classified  as  "held-to-maturity"
securities in accordance with SFAS No. 115.

    Securtization transactions closed subsequent to September 30, 1998 have been
accounted  for as a  collateralized  borrowing  in  accordance  with  SFAS  125,
Accounting for Transfers and Servicing of Financial  Assets and  Extinguishments
of Liabilities  (SFAS No. 125). The loan contracts  included in the  transaction
remain in Finance Receivables and the Class A obligations are reflected in Notes
Payable.



                                    Page 38
<PAGE>

Servicing Income

    Under servicing agreements for all Company  securitizations,  servicing fees
are earned and paid  monthly.  Servicing  Income is  recognized  when earned for
securitization  transactions  structured  as sales.  Servicing  Income earned on
securitization   transactions   structured  as  borrowings   are  eliminated  in
consolidation.  All servicing  costs are charged to expense as incurred.  In the
event  delinquencies  and/or losses on any portfolio  serviced exceed  specified
levels,  the Company may be required to transfer the  servicing of the portfolio
to another servicer.

Finance Receivables and Allowance for Credit Losses

    Finance  Receivables  consist  of  contractually   scheduled  payments  from
installment  sales  contracts  (loans) net of  unearned  finance  charges,  plus
accrued interest receivable, direct loan origination costs, residuals in finance
receivables sold, investments held in trust, and allowance for credit losses.

    The Company  follows the  provisions  of Statement  of Financial  Accounting
Standards No. 91,  "Accounting for Nonrefundable  Fees and Costs Associated with
Originating or Acquiring  Loans and Initial Direct Costs of Leases." Direct loan
origination  costs  represent the  unamortized  balance of costs incurred in the
origination of loans.

    An allowance for credit losses  (allowance)  is  established by charging the
provision for credit losses and the allocation of acquired allowances. For loans
generated by the Company  dealerships,  the allowance is established by charging
the provision for credit losses.  To the extent that the allowance is considered
insufficient to absorb anticipated credit losses, additions to the allowance are
established  through a charge to the provision for credit losses. The evaluation
of the allowance  considers such factors as the performance of each dealership's
loan portfolio,  the Company's  historical credit losses,  the overall portfolio
quality and delinquency status, the value of underlying collateral,  and current
economic conditions that may affect the borrower's ability to pay.

Inventory

    Inventory  consists of used vehicles  held for sale,  which is valued at the
lower of cost or market,  and repossessed  vehicles,  which are valued at market
value. Vehicle  reconditioning costs are capitalized as a component of inventory
cost. The cost of used vehicles sold is determined on a specific  identification
basis.

Property and Equipment

    Property and Equipment are stated at cost.  Depreciation  is computed  using
straight-line  and  accelerated  methods over the estimated  useful lives of the
assets,  which range from three to ten years for  equipment and thirty years for
buildings. Leasehold and land improvements are amortized using straight-line and
accelerated  methods over the shorter of the lease term or the estimated  useful
lives of the related improvements.

    The Company has  capitalized  costs related to the  development  of software
products for internal  use.  Capitalization  of costs begins when  technological
feasibility  has been  established  and ends when the software is available  for
general use.  Amortization is computed using the  straight-line  method over the
estimated economic life of five years.

Goodwill

    Goodwill,  which  represents the excess of purchase price over fair value of
net assets  acquired,  is amortized on a  straight-line  basis over the expected
periods to be benefited, generally fifteen to twenty years.

Post-Sale Customer Support Programs

    A liability for the estimated cost of post sale customer support,  including
car repairs and the  Company's  down payment back and credit card  programs,  is
established at the time the used car is sold by charging Cost of Used Cars Sold.
The  liability is  evaluated  for  adequacy  through a separate  analysis of the
various programs' historical performance.


                                    Page 39
<PAGE>


Interest Expense

    The  Company  allocates  interest  expense  to  discontinued  operations  in
accordance   with  guidance  under  EITF  87-24:   "Allocation  of  Interest  to
Discontinued Operations".  Thereunder,  interest expense charged to discontinued
operations  is  limited  to  the  total  of  interest  on  debt  assumed  by the
discontinued operations and an allocation of other consolidated interest that is
not directly attributable to other continuing  operations of the Company.  Other
consolidated  interest  that cannot be allocated to operations of the Company is
allocated based on a uniform ratio of consolidated debt to equity.

Income Taxes

    The Company utilizes the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are  recognized  for the future tax  consequences  attributable  to  differences
between  the  financial  statement  carrying  amounts  of  existing  assets  and
liabilities and their respective tax bases.  Deferred tax assets and liabilities
are measured  using enacted tax rates expected to apply to taxable income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

Stock Option Plan

    The  Company  accounts  for its stock  option  plan in  accordance  with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees,  and related  interpretations.  As such, compensation
expense is recorded on the date of grant only if the current market price of the
underlying  stock  exceeded  the  exercise  price.  The  Company has adopted the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based  Compensation,
which permits  entities to provide pro forma net earnings and pro forma earnings
per share  disclosures  for employee stock option grants made in 1995 and future
years as if the  fair-value-based  method as  defined  in SFAS No.  123 had been
applied.

    The Company  uses one of the most widely used  option  pricing  models,  the
Black-Scholes  model  (Model),  for purposes of valuing its stock option grants.
The Model was developed for use in estimating  the fair value of traded  options
that have no vesting  restrictions and are fully transferable.  In addition,  it
requires  the input of highly  subjective  assumptions,  including  the expected
stock price volatility,  expected dividend yields,  the risk free interest rate,
and the expected life. Because the Company's stock options have  characteristics
significantly  different from those of traded  options,  and because  changes in
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion,  the value  determined  by the  Model is not  necessarily
indicative of the ultimate value of the granted options.

Earnings Per Share

    Basic earnings per share is computed by dividing income  available to common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted  earnings per share reflects the potential  dilution that could
occur if  securities  or  contracts  to issue  common  stock were  exercised  or
converted  into common  stock or resulted in the  issuance of common  stock that
then shared in the earnings of the Company.

Impairment of Long-Lived Assets

    Long-Lived  Assets and certain  identifiable  intangibles  are  reviewed for
impairment  whenever  events or changes in  circumstances  indicate the carrying
amount of an asset may not be recoverable.  Recoverability  of assets to be held
and used is  measured  by a  comparison  of the  carrying  amount of an asset to
future  undiscounted  net cash flows  expected to be generated by the asset.  If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured by the amount by which the  carrying  amount of the assets  exceeds the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

Reclassifications

     Certain  reclassifications  have been made to the prior years' consolidated
financial statement amounts to conform to the current year presentation.


                                    Page 40
<PAGE>

(4) Finance Receivables, Net

    A summary of Finance Receivables, Net follows ($ in thousands):

                                                          December 31,
                                                  --------------------------
                                                      1999          1998
                                                  -----------   ------------
   Contractually Scheduled Payments.............  $   492,937   $   131,510
   Unearned Finance Charges.....................     (134,119)      (37,574)
                                                   -----------   -----------
   Loan Principal Balances......................      358,818        93,936
   Add: Accrued Interest Receivable.............        3,741           877
         Loan Origination Costs, Net............        5,079         2,237
                                                   ----------    ----------
   Principal Balances, Net......................      367,638        97,050
   Residuals in Finance Receivables Sold........       17,382        33,331
   Investments Held in Trust....................       56,716        20,564
                                                   ----------    ----------
   Finance Receivables..........................      441,736       150,945
   Allowance for Credit Losses..................      (76,150)      (24,777)
                                                  ------------  ------------
   Finance Receivables, Net.....................   $  365,586    $  126,168
                                                   ==========    ==========


    A summary of Residuals in Finance Receivables Sold (Residuals) follows ($ in
thousands):

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                ------------------------
<S>                                                             <C>           <C>
                                                                    1999          1998
                                                                -----------   ----------
Retained Interest in Subordinated Securities.................   $   17,335    $   51,243
Net Interest Spreads, less Present Value Discount............        6,113        25,838
Reduction for Estimated Credit Loss..........................       (6,066)      (43,750)
                                                                ----------    ----------
Residuals in Finance Receivables Sold........................   $   17,382    $   33,331
                                                                ==========    ==========

Underlying Principal Balances Outstanding on Securitization

Transactions with Residuals .................................   $   65,662    $  198,747
                                                                ==========    ==========
Estimated Credit Losses and Allowances as a % of
    Underlying Principal Balances Outstanding................         10.2%         22.0%
                                                                ===========  ============
</TABLE>

    A summary of activity for the Residuals in Finance  Receivables Sold follows
($ in thousands):
                                                      December 31,
                                         -------------------------------------
                                             1999          1998         1997
                                         -----------   -----------  ----------
Balance, Beginning of Year............   $   33,331    $   13,277   $    8,512
Additions.............................          --         35,435       17,734
Amortization and write-down...........      (15,949)      (15,381)     (12,969)
                                         -----------   -----------  -----------
Balance, End of Year..................   $   17,382    $   33,331   $   13,277
                                         ==========    ==========   ==========

    During the year ended December 31, 1997, the Company recorded a $5.7 million
charge to write-down the Residuals in Finance  Receivables  Sold. No such charge
was recorded for the year ended  December 31, 1999 or 1998.  The 1997 charge had
the effect of increasing  the cumulative  net loss  assumption to  approximately
27.5%,  for the  securitization  transactions  that took place prior to June 30,
1997. For the securitization  transaction that took place in September 1997, net
losses  were  estimated  using  total  expected  cumulative  net  losses at loan
origination of approximately  27.5%,  adjusted for actual  cumulative net losses
prior to securitization.  For securitization  transactions  completed during the
nine month period ended  September  30, 1998,  net losses were  estimated  using
total expected cumulative net losses at loan origination of approximately 29.0%,
adjusted for actual  cumulative net losses prior to  securitization.  Prepayment
rates were estimated to be 1% per month of the beginning of month balance.


                                    Page 41
<PAGE>

    A  summary  of  activity  for  Investments  Held  in  Trust  follows  ($  in
thousands):

                                                          December 31,
                                             -----------------------------------
                                                 1999         1998        1997
                                             ----------   ----------  ----------
Balance, Beginning of Year.................. $   20,564   $   11,637  $    3,162
Initial Deposits at Securitization..........     21,427       13,071       6,068
Additional Deposits from Trust collections..      7,217        5,879       2,407
Collections in Transit......................     15,484        3,594          --
Disbursements to the Company................     (7,976)     (13,617)         --
                                             -----------  ----------- ----------
Balance, End of Year........................ $   56,716   $   20,564  $   11,637
                                             ==========   ==========  ==========

    In connection with its securitization  transactions,  the Company provides a
credit  enhancement to the investor.  The Company makes an initial cash deposit,
generally 4% of the initial  underlying finance  receivables  principal balance,
into an account held by the trustee  (reserve  account) and pledges this cash to
the trust to which the finance  receivables were sold.  Additional deposits from
the residual cash flow (through the trustee) are made to the reserve  account as
necessary to attain and maintain the reserve account at a specified  percentage,
ranging from 8.0% to 10.5%,  of the  underlying  finance  receivables  principal
balances.

    During 1999, we made initial reserve account deposits totaling approximately
$21.4 million.  The required  aggregate reserve account balance,  based upon the
targeted percentages, was approximately $53.8 million at December 31, 1999, with
balances in the reserve accounts  totaling  approximately  $41.2 million.  As of
December  31,  1999,  the  amount  remaining  to be funded to meet the  required
aggregate balance was approximately $10.7 million.

(5)      Allowance for Credit Losses

    A summary of the activity  for the  allowance  for credit  losses on finance
receivables follows ($ in thousands):
<TABLE>
<CAPTION>
                                                                   December 31,
                                                      -------------------------------------
                                                          1999          1998         1997
                                                      -----------   -----------  ----------
<S>                                                   <C>           <C>          <C>
Balances, Beginning of Year.......................... $   24,777    $   10,356   $    1,625
Provision for Credit Losses..........................    102,955        65,318       22,354
Allowance on Acquired Loans..........................      6,424            --       15,309
Reduction Attributable Sale of Finance Receivables...         --       (44,539)     (21,408)
Net Charge Offs......................................    (58,006)       (6,358)      (7,524)
                                                      -----------   -----------  -----------
Balances, End of Year................................ $   76,150    $   24,777   $   10,356
                                                      ==========    ==========   ==========
</TABLE>

(6)  Note Receivable - Related Party

    The Note Receivable - Related Party  originated from the Company's  December
1999 sale of its Cygnet Dealer Finance subsidiary to Cygnet Capital Corporation,
an entity controlled by Ernest C. Garcia II, Chairman and principal  shareholder
of the Company.  The $12.0 million note from Cygnet Capital Corporation has a 10
year term, with interest payable  quarterly at 9%, due December 2009, is secured
by capital stock of Cygnet Capital Corporation and is guaranteed by Verde. Under
the terms of the agreement, Mr. Garcia will be allowed to pay down the principal
balance up to a maximum of $8 million  through the  redemption  of Ugly Duckling
common stock (valued at 98% of the average of the closing prices of the stock on
NASDAQ for the ten trading days prior to the redemption) as long as Mr. Garcia's
ownership interest of voting stock does not fall below 15% or result in a breach
of a covenant.


                                    Page 42
<PAGE>


(7)   Property and Equipment

    A summary of Property and Equipment as of December 31, 1999 and 1998 follows
($ in thousands):
                                                            December 31,
                                                    -------------------------
                                                        1999          1998
                                                    -----------   -----------
 Land.............................................. $     5,431   $     3,721
 Buildings and Leasehold Improvements..............      14,751         9,915
 Furniture and Equipment...........................      24,086        19,345
 Construction in Process...........................         538         2,872
                                                    -----------   -----------
                                                         44,806        35,853
 Less Accumulated Depreciation and Amortization....     (13,054)       (7,222)
                                                    ------------  -----------
 Property and Equipment, Net....................... $    31,752   $    28,631
                                                    ===========   ===========

    In 1998 the Company sold certain real property to an  investment  company at
its cost and leased back the properties for an initial term of twenty years.

    This property was then sold by the buyer to Verde. Verde has provided to the
Company an option to buy back the property from Verde.  The option  expires with
the Company receiving payment in full of the $12 million note receivable arising
from the sale of Cygnet Dealer on December 31, 2000, whichever comes first.

    Interest expense capitalized in 1999, 1998 and 1997 totaled zero,  $135,000,
and $229,000, respectively.

(8)   Notes Payable

    Notes Payable, Portfolio

     A summary of Notes Payable, Portfolio at December 31, 1999 and 1998 follows
($ in thousands):
<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                     ----------------------
                                                                                         1999        1998
                                                                                     ----------  ----------
<S>                                                                                  <C>          <C>

Revolving facility for $125,000,000 with GE Capital, secured by substantially
    all assets of the Company, including $61.1 million in finance receivables.....   $   41,717   $  51,765
Class A Obligations issued pursuant to the company's Securitization Program,
   secured by underlying pools of finance receivables and reserve accounts
   totaling $342.6 million at December 31, 1999...................................      236,555      50,607
                                                                                     ----------  ----------
    Subtotal......................................................................      278,272     102,372
    Less:  Unamortized Loan Fees..................................................        2,498         640
                                                                                     ----------  ----------
    Total.........................................................................   $  275,774  $  101,732
                                                                                     =========== ==========
</TABLE>

    The  revolving  facility  note payable has interest  payable daily at 30 day
LIBOR plus 3.15% (8.71% at December 31, 1999)  through June 2000.  The revolving
facility is subject to a one-year  extension  provision  upon mutual  consent of
both parties.  The revolving  facility agreement also contains various reporting
and  performance  covenants,   including  the  maintenance  of  certain  ratios,
limitations on additional borrowings from other sources, restrictions on certain
operating  activities,  and a  restriction  on the  payment of  dividends  under
certain  circumstances.  The  Company  is  currently  in  compliance  with these
covenants.

    Class A obligations have interest payable monthly at rates ranging from 5.7%
to 6.8% and are  secured by  underlying  pools of finance  receivable  loans and
reserve  accounts  which total  $335.5  million at December  31,  1999.  Monthly
principal  reductions  on Class A obligations  approximate  70% of the principal
reductions on the underlying pool of finance receivable loans.

                                    Page 43
<PAGE>


    Other Notes Payable

    A summary of Other Notes Payable at December 31, 1999 and 1998 follows ($ in
thousands):
<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                     ---------------------
                                                                                        1999        1998
                                                                                     ----------  ---------

<S>                                                                                  <C>         <C>
Note payable, secured by the capital stock of UDRC and UDRC II....................   $   33,900  $      --
$15 million note payable to a finance Company,  secured by the capital stock
   of UDRC and  UDRC II..........................................................            --     12,234
Others bearing interest at rates ranging from 7.5% to 11% due through August
    2001, secured by certain real property and certain property and equipment             2,939      3,930
                                                                                     ----------  ---------
                                                                                         36,839     16,164
    Less:  Unamortized Loan Fees.................................................           283        265
                                                                                     ----------  ---------
    Total........................................................................    $   36,556  $  15,899
                                                                                     =========== =========
</TABLE>


    In 1999, we borrowed approximately $38.0 million from an unrelated party for
a term of two years. The note calls for monthly  principal  payments of not less
than  $800,000  through  May 2000 and $1.7  million  per month  thereafter  plus
interest at a rate equal to LIBOR  (6.64% at December  31,  1999) plus 550 basis
points.  Future minimum principal  payments required under this note payable are
$15.9 million in 2000 and $18.0 million in 2001. The remaining balance,  if any,
is due at maturity,  May 1, 2001.  The note payable  balance is $33.9 million at
December 31, 1999.

    In 1998,  the  Company  borrowed  $15.0  million for a term of 364 days from
Greenwich  Capital.  We paid  interest on this loan at an interest rate equal to
LIBOR  plus 400 basis  points.  The note  payable  balance  is $12.2  million at
December 31, 1998 and was paid in full in 1999.

    Subordinated Notes Payable

    A summary of  Subordinated  Notes  Payable  at  December  31,  1999 and 1998
follows ($ in thousands):
<TABLE>
<CAPTION>

                                                                                            December 31,
                                                                                       ----------------------
                                                                                         1999         1998
                                                                                       ---------    ---------
<S>                                                                                    <C>          <C>
$15 million senior subordinated notes payable to unrelated parties, bearing
    interest at 12% per annum  payable  quarterly,  principal  due February
    2001 and is senior to subordinated debentures.................................     $  15,000    $  15,000
$17.5 million subordinated debentures, interest at 12% per annum
    (approximately 18.8% effective rate) payable semi-annually with the
    entire  principal balance due October 23, 2003................................        17,479       17,479
$14 million unsecured note payable with Verde, interest payable monthly at
    10%  per annum with annual principal payments of $2 million , maturing
    June 2003.....................................................................            --       10,000
                                                                                       ---------    ---------
       Subtotal...................................................................        32,479       42,479
       Less:  Unamortized Loan Fees...............................................           605          761
                  Unamortized Premium - subordinated debentures...................         3,263        3,738
                                                                                       ---------    ---------
       Total......................................................................     $  28,611    $  37,980
                                                                                       =========    =========
</TABLE>

    In connection with the 1998 issuance of the $15 million senior  subordinated
notes  payable,  the Company issued  warrants,  to the lenders to purchase up to
500,000  shares of the  Company's  Common  Stock.  The  warrants  were valued at
approximately  $900,000,  have an  exercise  price of  $10.00  per share and are
exercisable  at any time until the later of February  2001,  or such time as the
notes have been paid in full.

    During 1998 the Company issued $17.5 million of  subordinated  debentures in
exchange for 2.7 million  shares of Company common stock valued at $14.0 million
("Exchange Offer"), including $370,000 of costs incurred for the Exchange Offer.
The debentures are  subordinate  to all other Company  indebtedness  and contain
certain call provisions at the option of the Company. The debentures were issued
at a premium of approximately  $3.9 million in excess of the market value of the
shares  tendered,  which will be amortized as interest  expense over the life of
the debentures.



                                    Page 44
<PAGE>

    Interest expense related to the subordinated note payable with Verde totaled
$879,000,  $1.1 million,  and $1.2 million  during the years ended  December 31,
1999,  1998 and  1997,  respectively.  As the  Verde  note was  assumed  by CDF,
interest  expense for all three years is reclassified as a component of interest
expense within operating results of Discontinued Operations.

(9) Income Taxes

    Income taxes from continuing  operations totaled $6.0 million, $2.3 million,
and $2.8 million for years ended December 31, 1999, 1998 and 1997,  respectively
(an effective tax rate of 40.9%, 40.5%, and 40.9%, respectively). Reconciliation
between  taxes  computed at the federal  statutory  rate of 35%,  34% and 35% in
1999,  1998 and 1997  respectively  at the effective tax rate on earnings before
income taxes are as follows ($ in thousands):

                                                       December 31,
                                            ----------------------------------
                                                1999        1998        1997
                                              --------    --------    --------
Computed "Expected" Income Taxes ...........  $  5,140    $  1,974    $  2,415
State Income Taxes, Net of Federal Effect...       785         385         425
Other, Net..................................        75          (8)        (20)
                                              --------    ---------   ---------
                                              $  6,000    $  2,351    $  2,820
                                              ========    ========    ========

    Components of income taxes  (benefit) for the years ended December 31, 1999,
1998 and 1997 follow ($ in thousands):

                                            Current      Deferred       Total
                                          ----------     ---------    --------
1999:

   Federal..............................  $    2,839     $  1,953     $  4,792
   State................................       1,403         (195)       1,208
                                          ----------     ---------    --------
                                               4,242        1,758        6,000
   Discontinued operations..............         683         (280)         403
                                            --------     ---------    --------
                                          $    4,925     $  1,478     $  6,403
                                          ==========     ========     ========
1998:

   Federal..............................  $     (188)    $  1,955     $  1,767
   State................................          29          555          584
                                          ----------     --------     --------
                                                (159)       2,510        2,351
   Discontinued operations..............          21       (5,854)      (5,833)
                                          ----------     ---------    ---------
                                          $     (138)    $ (3,344)    $ (3,482)
                                          ===========    =========    =========
1997:

   Federal..............................    $  1,751     $    424     $  2,175
   State................................         560           85          645
                                            --------     --------     --------
                                               2,311          509        2,820
   Discontinued operations..............       2,589        1,170        3,759
                                          ----------   ----------     --------
                                            $  4,900     $  1,679     $  6,579
                                          ==========     ========     ========



                                    Page 45
<PAGE>


    The tax  effects  of  temporary  differences  that give rise to  significant
portions of the deferred tax assets and deferred tax  liabilities as of December
31, 1999 and 1998 are presented below ($ in thousands):
<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                -----------------------
                                                                                   1999         1998
                                                                                ----------   ----------
<S>                                                                             <C>          <C>
Deferred Tax Assets:
   Finance Receivables, Principally Due to the Allowance for Credit Losses..    $    2,655   $    2,282
   Inventory................................................................         1,413           --
   Federal and State Income Tax Net Operating Loss Carryforwards............           979        1,224
   Discontinued Operations Liability........................................           583        2,410
   Accrued Post Sale Support................................................           949          717
   Deferred Rent............................................................           312           35
   Other....................................................................           741          899
                                                                                  --------     --------
   Total Gross Deferred Tax Assets..........................................         7,632        7,567
   Less: Valuation Allowance................................................          (735)        (735)
                                                                                  ---------    ---------
      Net Deferred Tax Assets...............................................         6,897        6,832
                                                                                  --------     --------
Deferred Tax Liabilities:
   Software Development Costs...............................................        (2,607)      (2,191)
   Inventory................................................................            --       (1,176)
   Loan Origination Fees....................................................        (2,075)        (255)
   401K.....................................................................          (449)          --
   Other....................................................................          (619)        (584)
                                                                                  --------     --------
      Total Gross Deferred Tax Liabilities..................................        (5,750)      (4,206)
                                                                                  --------     --------
      Net Deferred Tax Asset (Liability)....................................    $    1,147   $    2,626
                                                                                ==========   ==========
</TABLE>

    There was no change in the Valuation  Allowance for the year ended  December
31,  1999 and an  increase of  $735,000  in 1998.  In  assessing  the ability to
realize the Deferred Tax Assets,  management considers whether it is more likely
than not  that  some  portion  or all of the  Deferred  Tax  Assets  will not be
realized.  The ultimate  realization  of Deferred  Tax Assets is dependent  upon
generation of future taxable income during the periods in which those  temporary
differences become deductible. Management considers the reversal of Deferred Tax
Liabilities,  projected  future taxable income,  and tax planning  strategies in
making this  assessment.  Based upon the level of historical  taxable income and
projections for future taxable income over the periods in which the Deferred Tax
Assets are deductible,  management  believes it is more likely than not that the
Company will realize the benefits of these  deductible  differences,  net of the
established valuation allowance at December 31, 1999.

    At December 31, 1999, the Company had net operating loss  carryforwards  for
federal income tax purposes of approximately $148,000,  which, subject to annual
limitations,  are available to offset future  taxable  income,  if any,  through
2011.

(10) Servicing

    Pursuant to the  Company's  securitization  program that began in 1996,  the
Company  securitizes  loan  portfolios  with  servicing  retained.  The  Company
services the securitized  portfolios for a monthly fee ranging from .25% to .33%
(generally,  3.0% to 4.0% per annum) of the beginning of month principal balance
of the serviced  portfolios.  The Company  recognized  servicing  income of $7.5
million,  $15.5 million, and $12.3 million in the years ended December 31, 1999,
1998 and 1997, respectively.

    Servicing   income  is   primarily  a  result  of  fees  earned  on  Company
securitizations  where the loan portfolios were sold with servicing retained. As
the Company currently structures its securitization  transactions as borrowings,
it is  expected  that  servicing  income  will  reduce  significantly  in future
periods.

    The Company has not  established  any  servicing  assets or  liabilities  in
connection with its securitizations as the revenues from contractually specified
servicing fees and other ancillary sources have been just adequate to compensate
the Company  for its  servicing  responsibilities.  Pursuant to the terms of the
various  servicing  agreements,  the serviced  portfolios are subject to certain
performance  criteria.  In the event the serviced portfolios do not satisfy such
criteria,  the servicing agreements contain various remedies up to and including
the removal of servicing rights from the Company.

                                    Page 46
<PAGE>


(11) Lease Commitments

    The  Company  leases  used car sales  facilities,  loan  servicing  centers,
offices,  and certain office equipment  generally from unrelated  entities under
various  operating  leases that expire  through March 2019.  The leases  require
monthly  rental  payments and contain  various  renewal  options from one to ten
years. In certain  instances,  the Company is also responsible for occupancy and
maintenance costs,  including real estate taxes,  insurance,  and utility costs.
Rent  expense  totaled  $13. 0 million,  $11.4  million and $5.4 million for the
years ended December 31, 1999, 1998, and 1997, respectively.

    A summary of future  minimum lease  payments  required  under  noncancelable
operating leases with remaining lease terms in excess of one year as of December
31, 1999 follows ($ in thousands):

                                                               Total
                                                            -----------
    2000................................................    $    10,969
    2001................................................          8,685
    2002................................................          7,000
    2003................................................          5,709
    2004................................................          4,621
    Thereafter..........................................         43,825
                                                              ---------
        Total...........................................    $    80,809
                                                            ===========

    In 1998 the Company sold 17  properties to an unrelated  investment  company
under a  sale-leaseback  agreement.  In December  1999,  Verde acquired these 17
properties at a 10.0%  discount for  approximately  $24.7  million.  The Company
acquired the option to purchase  these  properties at Verde's  purchase price at
anytime until  December 31, 2000.  Under the terms of the sale of Cygnet Dealer,
the term of the option was  extended and the new option  expires  simultaneously
with the Company  receiving payment in full of the $12.0 million note receivable
arising from the sale of Cygnet  Dealer or December 31,  2000,  whichever  comes
later.

(12) Stockholders' Equity

    During  1999 the  Company  acquired  approximately  1.0  million  shares  of
Treasury  Stock for  approximately  $5.8  million  under  its  Stock  Repurchase
Program.  During 1998 the Company acquired  approximately  2.7 million shares of
Company Common Stock with a value of approximately $14.0 million in the Exchange
Offer.   The  Company  also  acquired   75,000  shares  of  Treasury  Stock  for
approximately $535,000 under its Stock Repurchase Program.

    During 1998, the Company issued 50,000 warrants to a third party to purchase
Company common stock.  The warrants are exercisable  through February 2001 at an
exercise price of $12.50 per share of common stock.

    During 1998, the Company issued warrants,  valued at approximately $900,000,
to  purchase  500,000  shares  of  Company  common  stock  at $10 per  share  in
connection with senior  subordinated note payable  agreements.  The warrants are
exercisable  at any time until (1) February  2001,  or (2) the notes are paid in
full.

    During 1998 the Company issued 325,000 warrants to a third party to purchase
Company common stock at $20.00 per share.  The warrants  expire on April 1, 2001
and are subject to a call feature by the Company.

    During 1997, the Company issued  warrants for the right to purchase  389,800
shares of the Company's  common stock for $20.00 per share  exercisable  through
February  2000.  The  warrants  were  valued at  approximately  $612,000.  These
warrants  remained  outstanding  at  December  31,  1998 but  were  subsequently
repurchased during 1999. In addition,  warrants to acquire 121,023 shares of the
Company's  common stock at $6.75 per share and 174,000  shares of the  Company's
common stock at $9.45 per share were outstanding at December 31, 1999.

    During 1997, the Company  completed a private  placement of 5,075,500 shares
of common stock for a total of  approximately  $88.7 million cash,  net of stock
issuance costs. The registration of the shares sold in the private placement was
effective in April 1997. During 1996, the Company completed two public offerings
in which it issued a total of 7,245,000 shares of common stock for approximately
$79.4 million cash, net of stock issuance costs.



                                    Page 47
<PAGE>

 (13) Earnings (Loss) Per Share

    The Company  paid no  preferred  stock  dividends  in 1999,  1998 or 1997. A
summary of the  reconciliation  from basic earnings  (loss) per share to diluted
earnings (loss) per share for the years ended December 31, 1999,  1998, and 1997
follows ($ in thousands, except for per share amounts):
<TABLE>
<CAPTION>
                                                                  1999          1998          1997
                                                                ---------   -----------   -----------
<S>                                                             <C>           <C>           <C>
Earnings from Continuing Operations...........................  $   8,687     $   3,455     $   4,081
                                                                =========     =========     =========

Net Earnings (Loss)...........................................  $   9,260     $  (5,703)    $   9,445
                                                                =========     ==========    =========

Basic Earnings Per Share From Continuing Operations...........  $    0.58     $    0.19     $    0.23
                                                                =========     =========     =========
Diluted Earnings Per Share From Continuing  Operations........  $    0.57     $    0.19     $    0.22
                                                                =========     =========     =========
Basic Earnings (Loss) Per Share...............................  $    0.61     $   (0.32)    $    0.53
                                                                =========     ==========    =========
Diluted Earnings (Loss) Per Share.............................  $    0.60     $   (0.31)    $    0.52
                                                                =========     ==========    =========

Basic EPS-Weighted Average Shares Outstanding.................     15,093        18,082        17,832
Effect of Diluted Securities:
   Warrants...................................................          7            41            98
   Stock Options..............................................        229           282           304
                                                                ---------     ---------     ---------
Dilutive EPS-Weighted Average Shares Outstanding..............     15,329        18,405        18,234
                                                                =========     =========     =========
Warrants Not Included in Diluted EPS Since Antidilutive.......      1,049         1,389           390
                                                                =========     =========     =========
Stock Options Not Included in Diluted EPS Since Antidilutive..        610         1,470           828
                                                                =========     =========     =========
</TABLE>

(14) Stock Option Plan

    In June, 1995, the Company adopted a long-term  incentive plan (Stock Option
Plan)  under  which it has set aside  1,800,000  shares  of  common  stock to be
granted to employees.  Options are to vest over a period to be determined by the
Board of Directors upon grant and will generally  expire 6 to 10 years after the
date of grant. The options generally vest over a period of 5 years.

    In August 1998, the Company's  stockholders  approved an executive incentive
stock option plan (Executive  Plan).  The Company has reserved 800,000 shares of
its common stock for issuance.  Options  granted under the plan expire ten years
after  the  grant  date and vest 20% per year  upon  completion  of each year of
service after the date of grant  (beginning 1 year after the grant date) subject
to meeting additional vesting hurdles that are based on the trading price of the
Company's stock and/or the achievement of certain internal performance measures.
Even if these  additional  vesting  hurdles are not met,  the options will fully
vest 7 years after the date of grant.

    A summary of the aforementioned stock plan activity including the number and
weighted average price per share (Average Price) follows:
<TABLE>
<CAPTION>
                                     Stock Option Plan                  Executive Plan
                                --------------------------       ---------------------------
                                                 Average                           Average
                                    Number        Price              Number         Price
                                --------------  ----------       --------------   ----------
<S>                             <C>             <C>              <C>              <C>
Balance, December 31, 1997....      1,310,000   $    11.66                 --     $    --
   Granted....................        927,000         7.68              525,000         8.25
   Forfeited..................     (1,086,000)       13.97             (25,000)         8.25
   Exercised..................        (76,000)        3.61                  --            --
                                -------------    ---------       -------------    ----------
Balance, December 31, 1998....      1,075,000         6.80              500,000         8.25
   Granted....................        312,000         6.81              300,000         5.56
   Forfeited..................       (178,000)        9.25             (120,000)        7.35
   Exercised..................        (50,000)        1.56                  --            --
                                -------------    ---------       -------------     ---------
Balance, December 31, 1999....      1,159,000         6.56              680,000         7.22
                                =============    =========       ==============    =========
Number of shares exercisable..        382,000         5.55              100,000         8.25
                                =============    =========       ==============    =========
</TABLE>

    At December  31,  1999,  there were  641,000 and 120,000  additional  shares
available   for  grant  under  the  Stock  Option  Plan  and   Executive   Plan,
respectively. The per share weighted-average fair value of stock options granted


                                    Page 48
<PAGE>

during 1999, 1998 and 1997 was $3.88, $3.22 and $6.54, respectively, on the date
of grant using the  Black-Scholes  option-pricing  model.  The following are the
weighted-average  assumptions:  1999 -- expected  dividend  yield 0%,  risk-free
interest rate of 5.67%,  expected volatility of 41.2%, and an expected life of 5
years;  1998 -- expected  dividend yield 0%,  risk-free  interest rate of 5.25%,
expected  volatility of 50.0%, and an expected life of 5 years; 1997 -- expected
dividend  yield 0%,  risk-free  interest rate of 5.53%,  expected  volatility of
40.0%, and an expected life of 5 years

    During 1998 the Board of Directors  approved  separate  plans to reprice the
Company's  outstanding stock options under the Stock Option Plan, one in January
1998 and a second in November  1998. The forfeited  options had exercise  prices
ranging from $9.75 to $20.75 and were repriced at $9.75 or $5.13 per share,  the
fair  market  value  on the  date of the  respective  repricings.  Approximately
391,000 options were issued under the repricing program.  The vesting period was
not affected for the options  repriced  under the January 1998  repricing  plan.
However,  the vesting  period started over on the repricing date for the options
issued under the November 1998 repricing plan.  Generally vesting occurs 20% per
year  beginning one year after the grant date.  The fair values of these options
were  estimated  at the  date of grant  using  the  criteria  noted  above.  The
repricing  resulted  in  additional  pro forma  compensation  expense in 1999 of
$1,084,000,  which is  reflected  in the pro forma table  below.  The  repricing
activity  has been  reflected  in the table above and is included in the options
granted and forfeited in 1999.

    The  Company  applies  APB  Opinion  25 in  accounting  for its  Plans,  and
accordingly,  no compensation  cost has been recognized for its stock options in
the consolidated financial statements.  Had the Company determined  compensation
cost based on the fair value at the grant date for its stock  options under SFAS
No. 123, the Company's net earnings  (loss) and earnings  (loss) per share would
have been  reduced  to the pro forma  amounts  indicated  below ($ in  thousands
except per share data):
<TABLE>
<S>                                               <C>            <C>           <C>
                                                     1999           1998          1997
                                                  -----------    -----------   ----------
Pro Forma Earnings from Continuing Operations

   Available to Common Stockholders.............  $    7,603     $    2,468    $    3,204
Pro forma Net Earnings  (Loss) Available to
   Common Stockholders..........................  $    8,176     $   (6,690)   $    8,567
Earnings (Loss) per Share-- Basic:
   Continuing Operations Pro Forma..............  $     0.50     $     0.14    $     0.19
   Net Earnings (Loss) Pro Forma................  $     0.54     $    (0.37)   $     0.48
Earnings (Loss) per Share-- Diluted:
   Continuing Operations Pro Forma..............  $     0.50     $     0.14    $     0.18
   Net Earnings (Loss) Pro Forma................  $     0.53     $    (0.36)   $     0.47
</TABLE>

    A summary of stock options granted at December 31, 1999 follows:
<TABLE>
<CAPTION>

                                            Options Outstanding                         Options Exercisable
                             --------------------------------------------------  --------------------------
                                  Number        Weighted-Avg.     Weighted-Avg.       Number      Weighted-Avg.
         Range of               Outstanding       Remaining         Exercise        Exercisable     Exercise
      Exercise Prices           at 12/31/99   Contractual Life        Price         at 12/31/99       Price
--------------------------   ---------------  ----------------  ---------------  ---------------  ------------
<S>                          <C>              <C>                 <C>            <C>              <C>
$ .50 to $1.00............          23,000       5.5 years          $  0.86                --       $     --
$1.50 to $7.00............         906,000       6.9 years             5.10           300,000           4.62
$8.00 to $8.25............         851,000       8.3 years             8.24           159,000           8.25
$8.30 to $18.63...........          59,000       7.1 years            10.37            23,000          10.62
                                ----------                          -------         ---------       --------
                                 1,839,000                          $  6.67           482,000       $   6.11
                                ==========                          =======         =========       ========
</TABLE>


 (15) Commitments and Contingencies

    In connection with its securitization  transactions,  the Company provides a
credit enhancement to the investor.  The Company maintains reserve accounts at a
specified  percentage,  ranging from 8.0% to 10.5%,  of the  underlying  finance
receivables'  principal  balance.  In the event that the cash flows generated by
the  finance  receivables  are  insufficient  to pay  obligations  of the trust,
including  principal or interest due to  certificate  holders or expenses of the
trust,  the trustee will draw funds from the reserve account as necessary to pay
the  obligations  of the trust.  The reserve  account  must be  maintained  at a
specified  percentage of the principal balances of the finance  receivables held
by the trust, which can be increased in the event delinquencies or losses exceed
specified levels. If the reserve account exceeds the specified  percentage,  the
trustee  will  release the excess cash to the Company  from the pledged  reserve
account.  Except for releases in this manner, the cash in the reserve account is
restricted from use by the Company.



                                    Page 49
<PAGE>

    The Company's discontinued operations have entered into servicing agreements
with two companies that have filed and subsequently  emerged from bankruptcy and
continue to operate  under their  approved  plans of  reorganization.  Under the
terms  of  the   respective   servicing   agreements   and  approved   plans  of
reorganization,  once certain creditors of the bankrupt companies have been paid
in full, the Company is entitled to certain incentive  compensation in excess of
the servicing fees earned to date. Under the terms of one of the agreements, the
Company  is  scheduled  to  receive  17.5% of all  collections  of the  serviced
portfolio once the specified  creditors have been paid in full.  Under the terms
of the second  agreement,  the Company is  scheduled  to receive the first $3.25
million in collections  once the specified  creditors have been paid in full and
15% thereafter.  The Company is required to issue up to 150,000  warrants to the
extent the Company  receives the $3.25  million and in addition will be required
to issue 75,000  warrants  for each $1.0  million in incentive  fee income after
collection of the $3.25 million. As of December 31, 1999,  management  estimates
that the  incentive  compensation  could range from $7.0 to $8.0  million  under
these agreements. For the year ended December 31, 1999 results of operations for
discontinued operations includes $6.1 million in fee income with regard to these
incentives.

    On July 18, 1997,  the Company filed a Form S-3  registration  statement for
the purpose of registering  up to $200 million of its debt  securities in one or
more  series at prices and on terms to be  determined  at the time of sale.  The
registration  statement  has  been  declared  effective  by the  Securities  and
Exchange Commission and may be available for future debt offerings. There can be
no assurance,  however,  that the Company will be able to use this  registration
statement to sell debt or other securities.

    The  Company is  involved  in  various  claims  and  actions  arising in the
ordinary course of business. In the opinion of management, based on consultation
with legal  counsel,  the ultimate  disposition of these matters will not have a
material  adverse  effect  on the  Company.  No  provision  has been made in the
accompanying  consolidated  financial  statements for losses, if any, that might
result from the ultimate disposition of these matters.

(16)  Retirement Plan

    The Company has  established  qualified  401(k)  retirement  plans  (defined
contribution  plans) which became  effective on October 1, 1995.  The plans,  as
amended,  cover  substantially all employees having no less than three months of
service,  have  attained  the age of 21, and work at least 1,000 hours per year.
Participants  may  voluntarily  contribute to the plan up to the maximum  limits
established by Internal Revenue Service regulations.

    The Company  will match from 10% to 25% of the  participants'  contributions
with Company common stock.  Participants are immediately vested in the amount of
their direct  contributions  and vest over a five-year period, as defined by the
plan, with respect to the Company's  contribution.  Compensation expense related
to these plans totaled  $194,000,  $121,000,  and $49,000 during the years ended
December 31, 1999, 1998, and 1997, respectively.

(17)  Disclosures About Fair Value of Financial Instruments

    Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial  Instruments",  requires that the Company disclose  estimated
fair values for its  financial  instruments.  The following  summary  presents a
description of the methodologies and assumptions used to determine such amounts.

    Limitations - 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,  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 the fair value is  estimated  as of December  31,  1999 and 1998,  the
amounts that will actually be realized or paid in settlement of the  instruments
could be significantly different.

    Cash and Cash  Equivalents - The carrying amount is estimated to be the fair
value due to the liquidity of these instruments.

    Finance Receivables, Residuals in Finance Receivables Sold, Investments Held
in Trust, and Notes Receivable - The carrying amount is estimated to be the fair
value due to the relatively  short maturity and repayment terms of the portfolio
as compared to similar instruments.


                                    Page 50
<PAGE>

    Accounts Payable,  Accrued Expenses, and Notes Payable - The carrying amount
approximates fair value because of 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 market value approximates
the carrying value of these financial instruments.

    Subordinated  Notes Payable - The terms of the Company's  subordinated 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.

(18)  Business Segments

    Operating  results and other  financial data are presented for the principal
business  segments of the Company for the years ended  December 31, 1999,  1998,
and 1997, respectively.  The Company has three distinct business segments. These
consist of retail car sales operations (Retail Operations), the income generated
from the finance  receivables  generated at the Company  dealerships  (Portfolio
Operations),  and  corporate and other  operations  (Corporate  Operations).  In
computing  operating  profit by  business  segment,  the  following  items  were
considered  in the Corporate  Operations  category:  portions of  administrative
expenses,  interest  expense and other  items not  considered  direct  operating
expenses.  Identifiable assets by business segment are those assets used in each
segment of Company operations.

                                    Page 51
<PAGE>


    A summary of operating results and other  information,  by business segment,
for years ended December 31, 1999, 198 and 1997 follows ($ in thousands):
<TABLE>
<CAPTION>

                                                    Retail           Portfolio        Corporate           Total
                                                 -------------     -------------  ---------------     -------------
<S>                                              <C>               <C>              <C>               <C>
December 31, 1999:
Sales of Used Cars...........................    $     389,908     $          --    $          --     $     389,908
Less: Cost of Cars Sold......................          219,037                --               --           219,037
    Provision for Credit Losses..............           80,627            22,328               --           102,955
                                                 -------------     -------------  ---------------     -------------
                                                        90,244           (22,328)              --            67,916
Net Interest Income..........................               --            53,521              456            53,977
Servicing and Other Income...................               --             7,472               --             7,472
                                                 -------------     -------------  ---------------     -------------
Income before Operating Expenses.............           90,244            38,665              456           129,365
                                                 -------------     -------------  ---------------     -------------
Operating Expenses:
Selling and Marketing........................           23,132                --               --            23,132
General and Administrative...................           44,770            19,809           16,991            81,570
Depreciation and Amortization................            3,588             1,141            2,219             6,948
                                                 -------------     -------------  ---------------     -------------
                                                        71,490            20,950           19,210           111,650
                                                 -------------     -------------  ---------------     -------------
Income (loss) before Other Interest Expense..    $      18,754     $      17,715    $     (18,754)    $      17,715
                                                 =============     =============  ================    =============

Capital Expenditures.........................    $       5,175     $         897    $       2,902     $       8,974
                                                 =============     =============  ===============     =============
Identifiable Assets..........................    $     100,183     $     398,437    $       4,211     $     502,831
                                                 =============     =============  ===============     =============
December 31, 1998:
Sales of Used Cars...........................    $     287,618     $          --    $          --     $     287,618
Less: Cost of Cars Sold......................          165,282                --               --           165,282
    Provision for Credit Losses..............           59,770             5,548               --            65,318
                                                 -------------     -------------    -------------     -------------
                                                        62,566            (5,548)              --            57,018
Net Interest Income..........................               --            14,086              341            14,427
Gain on Sale of Loans........................               --            12,093               --            12,093
Servicing and Other Income...................               --            15,481               --            15,481
                                                 -------------     -------------    -------------     -------------
Income before Operating Expenses.............           62,566            36,112              341            99,019
                                                 -------------     -------------    -------------     -------------
Operating Expenses:
Selling and Marketing........................           18,246                --               --            18,246
General and Administrative...................           35,765            18,519           15,610            69,894
Depreciation and Amortization................            2,582             1,333              997             4,912
                                                 -------------     -------------    -------------     -------------
                                                        56,593            19,852           16,607            93,052
                                                 -------------     -------------    -------------     -------------
Income (loss) before Other Interest Expense..    $       5,973     $      16,260    $     (16,266)    $       5,967
                                                 =============     =============    =============     =============

Capital Expenditures.........................    $      19,176     $       1,297    $       2,352     $      22,825
                                                 =============     =============    =============     =============
Identifiable Assets..........................    $      75,366     $     145,880    $       9,038     $     230,284
                                                 =============     =============    =============     =============

December 31, 1997:
Sales of Used Cars...........................    $     123,814     $          --    $          --     $     123,814
Less: Cost of Cars Sold......................           72,358                --               --            72,358
    Provision for Credit Losses..............           22,354                --               --            22,354
                                                 -------------     -------------    -------------     -------------
                                                        29,102                --               --            29,102
Net Interest Income..........................               --            12,384               --            12,384
Gain on Sale of Loans........................               --             6,721               --             6,721
Servicing and Other Income...................            1,498             8,814            2,013            12,325
                                                 -------------     -------------    -------------     -------------
Income before Operating Expenses.............           30,600            27,919            2,013            60,532
                                                 -------------     -------------    -------------     -------------
Operating Expenses:
Selling and Marketing........................           10,538                --               --            10,538
General and Administrative...................           17,215            12,303            9,896            39,414
Depreciation and Amortization................            1,536             1,108              504             3,148
                                                 -------------     -------------    -------------     -------------
                                                        29,289            13,411           10,400            53,100
                                                 -------------     -------------    -------------     -------------
Income (loss) before Other Interest Expense..    $       1,311     $      14,508    $      (8,387)    $       7,432
                                                 =============     =============    =============     =============

Capital Expenditures.........................    $      12,869     $       3,791    $       2,104     $      18,764
                                                 =============     =============    =============     =============
Identifiable Assets..........................    $      74,287     $      78,514    $      72,799     $     225,600
                                               ===============   ===============  ===============   ===============
</TABLE>


                                    Page 52
<PAGE>

(19) Quarterly Financial Data -- unaudited

    A summary of the quarterly  data for the years ended  December 31, 1999, and
1998 follows ($ in thousands):
<TABLE>
<CAPTION>

                                                       First        Second          Third         Fourth
                                                      Quarter       Quarter        Quarter        Quarter       Total
                                                     ---------     ---------      ---------      ---------    ----------
<S>                                                  <C>           <C>            <C>            <C>           <C>
1999:
  Total Revenue................................      $ 119,715     $ 115,927      $ 124,883      $ 105,429     $ 465,954
                                                     =========     =========      =========      =========     =========
  Income before Operating Expenses.............         29,868        31,378         35,516         32,603       129,365
                                                     =========     =========      =========      =========     =========
  Operating Expenses...........................         28,969        27,709         28,082         26,891       111,650
                                                     =========     =========      =========      =========     =========
  Income before Interest Expense...............            899         3,669          7,436          5,711        17,715
                                                     =========     =========      =========      =========     =========
  Earnings from Continuing Operations..........      $     619     $   1,792      $   3,657      $   2,619     $   8,687
                                                     =========     =========      =========      =========     =========
  Earnings (Loss) from Discontinued Operations.
                                                          (196)         (324)           525            568           573
                                                     ==========    ==========     =========      =========     =========
  Net Earnings.................................      $     423     $   1,468      $   4,182      $   3,187     $   9,260
                                                     =========     =========      =========      =========     =========
   Basic Earnings Per Share from Continuing

     Operations................................      $    0.04     $    0.12      $    0.24      $    0.18     $    0.58
                                                     =========     =========      =========      =========     =========
  Diluted Earnings Per Share from Continuing

     Operations................................      $    0.04     $    0.12      $    0.24      $    0.17     $    0.57
                                                     =========     =========      =========      =========     =========
  Basic Earnings Per Share.....................      $    0.03     $    0.10      $    0.28      $    0.21     $    0.61
                                                     =========     =========      =========      =========     =========
  Diluted Earnings Per Share...................      $    0.03     $    0.10      $    0.28      $    0.21     $    0.60
                                                     =========     =========      =========      =========     =========

1998:

  Total Revenue................................      $  85,303     $  80,766      $  85,965      $  80,446     $ 332,479
                                                     =========     =========      =========      =========     =========
  Income before Operating Expenses.............         27,940        25,535         27,712         17,832        99,019
                                                     =========     =========      =========      =========     =========
  Operating Expenses...........................         21,683        21,182         23,973         26,214        93,052
                                                     =========     =========      =========      =========     =========
  Income (Loss) before Interest Expense........          6,257         4,353          3,739         (8,382)        5,967
                                                     =========     =========      =========      =========     =========
  Earnings (Loss) from Continuing Operations...      $   3,745     $   2,590      $   2,184      $  (5,064)    $   3,455
                                                     =========     =========      =========      ==========    =========
  Earnings (Loss) from Discontinued Operations.
                                                        (5,611)          352         (4,285)           386        (9,158)
                                                     ==========    =========      =========      =========     ==========
  Net Earnings (Loss)..........................      $  (1,866)    $   2,942      $  (2,101)     $  (4,678)    $  (5,703)
                                                     ==========    =========      =========      ==========    ==========
  Basic Earnings (Loss) Per Share from

    Continuing Operations......................      $    0.20     $    0.14      $    0.12      $   (0.28)    $    0.19
                                                     =========     =========      =========      =========     =========
  Diluted Earnings (Loss) Per Share from

    Continuing Operations......................      $    0.20     $    0.14      $    0.12      $   (0.27)    $    0.19
                                                     =========     =========      =========      =========     =========
  Basic Earnings (Loss) Per Share..............      $   (0.10)    $    0.16      $   (0.11)     $   (0.26)    $   (0.32)
                                                     ==========    =========      =========      ==========    ==========
  Diluted Earnings (Loss) Per Share............      $   (0.10)    $    0.16      $   (0.11)     $   (0.25)    $   (0.31)
                                                     ==========    =========      =========      ==========    ==========
</TABLE>


                                    Page 53
<PAGE>

             ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURES

    The Company has had no disagreements  with its independent  certified public
accountants in regard to accounting and financial disclosure and has not changed
its independent accountants during the two most recent fiscal years.


                                    PART III

          ITEM 10-- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Information  required by this Item pertaining to executive  officers of Ugly
Duckling  is set  forth  above in Part I of this Form  10-K  under the  caption,
"Executive  Officers of the  Registrant,"  and is incorporated by reference into
this Item.  Information  concerning  directors  of the  registrant  and  persons
nominated to become  directors is  incorporated by reference from the text under
the captions, "Board of Directors, Board Committees and Other Board Information"
and  "Proposal  to Be Voted on -- Item No. 1 --  Election of  Directors"  in the
Proxy Statement for the Annual Meeting of Stockholders  currently  scheduled for
May 23, 2000.  Information  required by this Item  pertaining to compliance with
Section  16(a) of the  Securities  Exchange  Act of 1934 is set forth  under the
caption,  "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement for the Annual Meeting of Stockholders currently scheduled for May 23,
2000 and is incorporated by reference into this Item.

                        ITEM 11 -- EXECUTIVE COMPENSATION

    Information  concerning executive  compensation is incorporated by reference
from  the  text  under  the  captions,   "Certain   Relationships   and  Related
Transactions"  and  "Compensation  of Executive  Officers,  Benefits and Related
Matters"  (excluding  the material  under the headings  "Compensation  Committee
Report on Executive  Compensation" and "Stockholder  Return  Performance  Graph"
therein) in the Proxy Statement for the Annual Meeting of Stockholders currently
scheduled for May 23, 2000.

    ITEM 12-- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Information  concerning  ownership of equity stock of the Company by certain
beneficial  owners and  management is  incorporated  by reference  from the text
under  the  caption,  "Security  Ownership  of  Certain  Beneficial  Owners  and
Management--Beneficial  Ownership  Table" in the Proxy  Statement for the Annual
Meeting of Stockholders currently scheduled for May 23, 2000.

            ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Information  concerning certain  relationships and related transactions with
officers and  directors  is  incorporated  by reference  from the text under the
caption, "Certain Relationships and Related Transactions" in the Proxy Statement
for the Annual Meeting of Stockholders currently scheduled for May 23, 2000.








                                    Page 54
<PAGE>



                                     PART IV

         ITEM 14-- EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES,
                             AND REPORTS ON FORM 8-K

    (a) Consolidated Financial Statements.

     The   following   consolidated   financial   statements  of  Ugly  Duckling
Corporation are filed as part of this Form 10-K.
<TABLE>
<S>                                                                                    <C>
                                                                                       Page
                                                                                       ----
Independent Auditors' Report........................................................    31
Consolidated Financial Statements and Notes thereto of Ugly Duckling Corporation:
Consolidated Balance Sheets-- December 31, 1999 and 1998............................    32
Consolidated Statements of Operations-- for the years ended  December 31, 1999, 1998
    and 1997........................................................................    33
Consolidated Statements of Stockholders' Equity-- for the years ended  December 31,
    1999, 1998 and 1997.............................................................    34
Consolidated Statements of Cash Flows-- for the years ended December 31, 1999, 1998
    and 1997........................................................................    35
Notes to Consolidated Financial Statements..........................................    36

All schedules have been omitted because they are not applicable, not required, or the
information has been disclosed in the consolidated financial statements and related
notes thereto or otherwise in this Form 10-K Report.
</TABLE>


(b)  Reports on Form 8-K.

    During the fourth  quarter of 1999,  the  Company  filed two reports on Form
8-K. The first report on Form 8-K,  dated November 8, 1999 and filed on November
9, 1999,  pursuant to Item 5,  reported  the  acquisition  of certain  assets of
Virginia Auto Mart.  The second report on Form 8-K,  dated December 17, 1999 and
filed on December  21,  1999,  pursuant to Item 5 reported  the  execution  of a
letter of intent to sell Cygnet Dealer Finance,  Inc. to an entity controlled by
Ernest C. Garcia II.

 (c) Exhibits.














                                    Page 55
<PAGE>



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION

<S>        <C>
  3.1      Certificate of Incorporation of the Registrant Amended and Restated as of May 15, 1997(13)
  3.2      Bylaws of the Registrant (22)
  4.1      Certificate of Incorporation of the Registrant (filed as Exhibit 3.1)
  4.2      Warrant Agreement between the Registrant and Harris Trust Company of California, as warrant agent, with
           respect to the FMAC Warrants, dated as of April 1, 1998 (w/form of warrant attached as Exhibit A
           thereto) (16)
  4.3      Form of Certificate representing Common Stock (1)
  4.4      Form of Warrant issued to Cruttenden Roth Incorporated as Representative of the several underwriters
           (1)
  4.5      Form of Warrant issued to SunAmerica Life Insurance Company (1)
  4.6      Form of 12% Senior Subordinated Note between Registrant and Kayne Anderson related entities, each as a
           lender, executed in February 1998 (9)
  4.7      Warrant Agreement dated as of February 12, 1998 between Registrant and each of the Kayne Anderson
           related lenders named therein (9)
  4.8      Form of Warrant issued to Kayne Anderson related entities issued in February 1998 (9)
  4.9      Warrant Agreement between the Registrant and Reliance Acceptance Corporation and Harris Trust Company
           of California, as warrant agent, dated as of February 9, 1998 (w/form of warrant attached as Exhibit A
           thereto) (12)
  4.10     Certificate of Designation of the Preferred Stock (par value $.001 per share) (filed as part of Exhibit
           3.1) (13)
  4.11     Indenture dated as of October 15, 1998 between Registrant and Harris Trust and Savings Bank, as Trustee
           ("Harris") ("Indenture") (15)
  4.11(a)  First Supplemental Indenture dated as of October 15, 1998 between Registrant and Harris (15)
  4.11(b)  Form of 12% Subordinated Debenture due 2003 (16)
10.1       Amended and Restated Motor Vehicle Installment Contract Loan and Security Agreement between Registrant
           and General Electric Capital Corporation ("GECC") (6)
10.1(a)    Assumption and Amendment Agreement between the Registrant and GECC (2)
10.1(b)    Amendment No. 1 to Amended and Restated Motor Vehicle Installment Contract Loan and Security Agreement
           between Registrant and GECC dated December 22, 1997 (10)
10.1(c)    Letter Agreement to amend the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between Registrant and GECC dated as of October 20, 1997(12)
10.1(d)    Letter agreement to amend the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between Registrant and GECC, dated as of March 25, 1998 (12)
10.1(e)    Amendment No. 2 to Amended and Restated Motor Vehicle Installment Contract Loan and Security Agreement
           between Registrant and GECC (14)
10.1(f)           Amendment No. 3 to Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between Registrant and GECC (16)
10.1(g)    Amendment to the Amended and Restated Motor Vehicle Installment Contract Loan and Security Agreement
           between GECC and Registrant dated March 25, 1999 regarding Year 2000 Date Change (17)
10.1(h)    Amendment No. 4 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated June 30, 1999 (19)
10.1(i)    Amendment No. 5 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated August 16, 1999 (20)
10.1(j)    Amendment No. 6 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated August 27, 1999 (20)
10.1(k)    Amendment No. 7 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated as of November 30, 1999**
10.1(l)    Amendment No. 8 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated as of December 7, 1999**
10.1(m)    Amendment No. 9 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated as of December 8, 1999**
10.1(n)    Amendment No. 10 to the Amended and Restated Motor Vehicle Installment Contract Loan and Security
           Agreement between GECC and Registrant dated as of March 6, 2000**
10.2       Note Purchase Agreement between the Registrant and SunAmerica Life Insurance Company (1)
10.2(a)    First Amendment to Note Purchase Agreement between the Registrant and SunAmerica Life Insurance Company
           (1)
10.2(b)    Second Amendment to Note Purchase Agreement between the Registrant and SunAmerica Life Insurance
           Company (1)


                                    Page 56
<PAGE>

10.2(c)    Third Amendment to Note Purchase Agreement between the Registrant and SunAmerica Life Insurance Company
           (1)
10.2(d)    Fourth Amendment to Note Purchase Agreement between the Registrant and SunAmerica Life Insurance
           Company (1)
10.2(e)    Commitment Letter entered into between the Registrant and SunAmerica Life Insurance Company (1)
10.2(f)    Letter Agreement regarding Note Conversion between the Registrant and SunAmerica Life Insurance Company
           (1)
10.3       Amended and Restated Registration Rights Agreement between the Registrant and SunAmerica Life Insurance
           Company(1)
10.4       Loan Purchase Agreement dated as of August 20, 1997 among the Registrant and certain banks (4)
10.4(a)    Assignment of Loan and Bank Claim dated as of August 20, 1997 among the Registrant and certain banks,
           as assignors (4)
10.4(b)    Security Agreement dated as of August 20, 1997 among the Registrant, as obligor, and certain banks (4)
10.4(c)    Payment Guaranty dated as of August 20, 1997 of certain affiliates of the Registrant, as guarantors (4)
10.5*      Restated (as of March 14, 1997) Ugly Duckling Corporation Long-Term Incentive Plan (3)
10.5(a)*   Amended and Restated Long Term Incentive Plan (as of January 15, 1998) (14)
10.6*      Employment Agreement between the Registrant and Ernest C. Garcia II (1)
10.6(a)*   Amendment to Employment Agreement between the Registrant and Ernest C. Garcia II (16)
10.7*      Employment Agreement between the Registrant and Steven T. Darak (1)
10.8*      Amended and Restated Employment Agreement between Registrant and Walter Vonsh dated May 26, 1998 (13)
10.9*      Amended and Restated Employment Agreement between the Registrant and Donald L. Addink (6)
10.10*     Employment Agreement between the Registrant and Steven A. Tesdahl (6)
10.10(a)*  Modification of Terms of Employment between Registrant and Steven A. Tesdahl (13)
10.11      Form of Indemnity Agreement between the Registrant and its directors and officers (18)
10.12*     Ugly Duckling Corporation 1996 Director Incentive Plan (1)
10.13      Purchase Agreement, dated February 10, 1997 between the Registrant and Friedman, Billings, Ramsey &
           Co., Inc. (7)
10.14      Portfolio Servicing Agreement among Registrant, Kars-Yes Financial, inc., and certain other parties,
           dated as of September 15, 1997 (5)
10.14(a)   Subservicing Agreement among Registrant, Kars-Yes Financial, Inc., and certain other parties, dated as
           of September 15, 1997 (5)
10.15      Binding Agreement to Propose and Support Modified Plan Agreement dated as of December 15, 1997 among
           the Registrant, FMAC and the Official Committee of Unsecured Creditors of FMAC (8)
10.16      Purchase Agreement dated as of December 18, 1997 by and among Contract Purchaser, Registrant and
           LaSalle National Bank, as Agent (8)
10.17      Guaranty dated as of December 18, 1997 by Registrant in favor of Contract Purchaser (8)
10.18      Servicing Agreement dated as of December 15, 1997 between Registrant and Contract Purchaser (8)
10.19      FMAC Guaranty and Stock Pledge Agreement among FMAC, Registrant and certain banks (11)
10.20      Contribution Agreement between Registrant and FMAC (10)
10.21      Indemnification Agreement between the Company and FMAC (11)
10.22      Loan Agreement dated as of February 12, 1998 between the Registrant and each of the Kayne Anderson
           related Lenders named therein (9)
10.22      (a)    Amendment to Loan Agreement between the Registrant and each of the Kayne Anderson related lenders
           named therein, dated September 30, 1999 (20)
10.23      Credit and Security Agreement between Registrant and First Merchants Acceptance Corp., dated as of July
           17, 1997 (12)
10.23(a)   First Amendment to Credit and Security Agreement between Registrant and FMAC, dated as of January 21,
           1998 (12)
10.23(b)   Second Amendment to Credit and Security Agreement between Registrant and FMAC, dated as of April 1,
           1998 (12)
10.23(c)   Third Amendment to Credit and Security Agreement between Registrant and FMAC, dated as of August 2,
           1999 (20)
10.24      Service Agreement among Reliance Acceptance Corporation, Registrant, Bank America Business Credit, Inc.
           and certain other parties dated as of February 9, 1998 (14)
10.25      Agreement of Understanding among Reliance Acceptance Group, Inc., Reliance Acceptance Corporation and
           Registrant, dated as of February 9, 1998 (14)
10.26      Purchase and Sale-Leaseback Agreement and Joint Escrow Instructions between Champion Acceptance
           Corporation, Ugly Duckling Car Sales, Inc., Ugly Duckling Car Sales New Mexico, Inc., Ugly Duckling Car
           Sales Florida, Inc. and Ugly Duckling Car Sales Texas, LLP, date as of May 13, 1998 (13)
10.27      Loan Agreement by and among the Registrant, Kayne Anderson Non-Traditional Investments, LP, and certain
           other lenders, dated July 20, 1998 (14)
10.28      Payment Guaranty by Registrant in favor of Kayne Anderson and the Lenders, dated as of July 20, 1998
           (14)
10.29      Agreement of Purchase and Sale of Assets made as of July 31, 1998, by and among Cygnet Financial
           Services, Inc. and Mountain Parks Financial Services, Inc. (14)

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<PAGE>

10.30*     1998 Executive Incentive Plan (14)
10.31      Loan agreement between Greenwich Capital Financial Products, Inc. and Registrant dated November 12,
           1998 (16)
10.31(a)   Stock Pledge Agreement among Greenwich Capital Financial Products, Inc., Registrant, and certain
           related parties, dated November 12, 1998 (16)
10.31(b)   $20 Million Loan agreement between Greenwich Capital Financial Products, Inc. and Registrant dated
           March 18, 1999 (17)
10.31(c)   Stock Pledge Agreement among Greenwich Capital Financial Products, Inc., Registrant, and certain
           related parties, dated March 18, 1999 (17)
10.31(d)   Engagement Letter between Greenwich Capital Markets, Inc. and Registrant dated March 16, 1999 for
           Greenwich to Act as Placement Agent for not less than $300 Million of Securitized Loans (17)
10.31(e)   Commitment Letter between Greenwich Capital Markets, Inc. and Registrant dated March 17, 1999 with Term
           Sheet for $100 Million Revolving Credit Facility (17)
10.32      KPMG Year 2000 Renovation Project Service Proposal to and Engagement Letter with the Registrant, dated
           November 2, 1998 (16)
10.33      $38 Million Senior Secured Loan Agreement between CIBC Inc., SunAmerica, etc. and the Registrant dated
           May 14, 1999 (w/form of note and guaranty attached) (18)
10.33(a)   Stock Pledge Agreement among certain lenders, Harris and the Registrant dated May 14, 1999 (18)
10.34      Stock Purchase Agreement, by and among Ugly Duckling Car Sales & Finance Corporation, Ugly Duckling
           Finance Corporation ("UDFC"), Cygnet Dealer Finance, Inc.("CDF"), and Cygnet Capital Corporation
           ("CCC"), dated as of December 30, 1999 (21)
10.34(a)   Promissory Note dated December 30, 1999 from CCC to UDFC (21)
10.34(b)   Pledge Agreement dated December 30, 1999 from CCC to UDFC (21)
10.34(c)   Verde Guaranty dated December 30, 1999 (21)
10.34(d)   CDF Guaranty dated December 30, 1999 (21)
10.34(e)   Warrant dated December 30, 1999 from CCC to UDFC (21)
11         Earnings (Loss) per Share Computation (see Note 18 to Notes to Consolidated Financial Statements)
12         Statement on Computation of Ratios**
21         List of Subsidiaries**
23.1       Consent of KPMG Peat Marwick LLP**
24.1       Special Power of Attorney for  Ernest C. Garcia II
24.2       Special Power of Attorney for C. Jennings**
24.3       Special Power of Attorney for J. MacDonough**
24.4       Special Power of Attorney for F. Willey**
24.5       Special Power of Attorney for Gregory Sullivan**
27.1       Financial Data Schedules for the year ending December 31, 1999**
27.2       Financial Data Schedules for the year ending December 31, 1998**
27.3       Financial Data Schedules for the year ending December 31, 1997**
27.4       Financial Data Schedules for the three months ending September 30, 1999**
27.5       Financial Data Schedules for the three months ending June 30, 1999**
27.6       Financial Data Schedules for the three months ending March 31, 1999**
27.7       Financial Data Schedules for the three months ending September 30, 1998**
27.8       Financial Data Schedules for the three months ending June 30, 1998**
27.9       Financial Data Schedules for the three months ending March 31, 1998**
___________________________
*          Management contract or compensatory plan, contract or arrangement.
**         Filed with this Form 10-K.
(1)        Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No.
           333-3998), effective June 18, 1996.
(2)        Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No.
           333-13755), effective October 30, 1996.
(3)        Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed August 14, 1997.
(4)        Incorporated by reference to the Company's Current Report on Form 8-K, filed September 5, 1997.
(5)        Incorporated by reference to the Company's Current Report on Form 8-K, filed October 3, 1997.
(6)        Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed November 14, 1997.


                                    Page 58
<PAGE>

(7)        Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No.
           333-22237).
(8)        Incorporated by reference to the Company's Current Report on Form 8-K, filed January 2, 1998.
(9)        Incorporated by reference to the Company's Current Report on Form 8-K, filed February 20, 1998.
(10)       Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No.
           333-42973) effective February 11, 1998.
(11)       Incorporated by reference to the Company's Annual Report on Form 10-K, filed March 31, 1998.
(12)       Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed May 15, 1998.
(13)       Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed August 10, 1998.
(14)       Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed November 13, 1998.
(15)       Incorporated by reference to the Company's Form T-3 Application for Qualification of Indenture under
           the Trust Indenture Act of 1939, filed November 20, 1998 (File No. 022-22415) effective December 21,
           1998.
(16)       Incorporated by reference to the Company's Annual Report on Form 10-K, filed March 30, 1999.
(17)       Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed May 14, 1999.
(18)       Incorporated by reference to the Company's Post-Effective Amendment No. 1 to Registration Statement on
           Form S-1 (Registration No. 333-42973) filed July 9, 1999 ,effective August 2, 1999.
(19)       Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed August 16, 1999.
(20)       Incorporated by reference to the Company's Quarterly Report on Form 10-Q, filed November 15, 1999.
(21)       Incorporated by reference to the Company's Current Report on Form 8-K, filed January 5, 2000.
(22)       Incorporated by reference to the Company's Form T-3 Application for Qualification of Indenture under
           the Trust Indenture Act of 1939, filed February 23, 2000 (File No. 022-22463).
</TABLE>












                                    Page 59
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        UGLY DUCKLING CORPORATION,
                                        a Delaware corporation

                                            By:   /s/ GREGORY B. SULLIVAN
                                                    Gregory B. Sullivan
                                                    Its: Chief Executive Officer

Date: March 29, 2000

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

        Name and Signature                 Title                            Date
        ------------------                 -----                            ----

<S>                          <C>                                       <C>
/s/ ERNEST C. GARCIA II      Chairman of the Board of Directors        March 29, 2000
Ernest C. Garcia II

/s/ GREGORY B. SULLIVAN      President, Chief Executive Officer and    March 29, 2000
Gregory B. Sullivan          Director (Principal Executive Officer
                             and Director)

/s/ STEVEN T. DARAK          Senior Vice President and Chief           March 29, 2000
Steven T. Darak              Financial Officer (Principal Financial
                             and Accounting Officer)

                *            Director                                  March 29, 2000
Christopher D. Jennings

                *            Director                                  March 29, 2000
John N. MacDonough

                *            Director                                  March 29, 2000
Frank P. Willey
</TABLE>



 *By: /s/ JON D. EHLINGER
         Jon D. Ehlinger
         Attorney-in-Fact



                                    Page 60