<PAGE>
                                  UNITED  STATES
                     SECURITIES  AND  EXCHANGE  COMMISSION
                             WASHINGTON,  D.C.  20549
                                      FORM  10-K
(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,  1996.; or,
[    ]     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
      For the transition period from ________ to_________.
                        Commission  File  Number  0-20841
               U G L Y    D U C K L I N G    C O R P O R A T I O N
              (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 1150
                        Phoenix, Arizona           85016
     (Address of principal executive offices)      (Zip Code)
                                (602)  852-6600
     (Registrant's  telephone  number,  including  area  code)
     Securities registered pursuant to Section 12(b) of the Act:
       NONE
     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          NASDAQ  NATIONAL  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.    [    ]

     At  March  24,1997,  the aggregate market value of common stock held by
non-affiliates  of  the  Registrant  was  approximately  $327,146,274.

     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  the  court.    YES  [    ]    NO    [    ]

     (APPLICABLE  ONLY  TO  CORPORATE  REGISTRANTS)
     Indicate  the  number  of  shares outstanding of each of the registrant's
classes  of  common  stock,  as  of  the  latest practicable date: 18,430,776.

     DOCUMENTS  INCORPORATED  BY  REFERENCE
     Portions  of  the registrant's definitive Proxy Statement relating to its
annual  meeting of stockholders to be held on April 22, 1997, are incorporated
by  reference  in  Part  III  hereof.

<PAGE>  1
                                      TABLE  OF  CONTENTS

<TABLE>
<CAPTION>



                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>

PART I
Item 1   Business                                                                                  3
Item 2   Properties                                                                               15
Item 3   Legal Proceedings                                                                        15
Item 4   Submission Of Matters To A Vote Of Security Holders                                      16

PART II
Item 5   Market For The Registrant's Common Equity Securities And Related Stockholder Matters     16
Item 6   Selected Consolidated Financial Data                                                     19
Item 7   Management's Discussion And Analysis Of Financial Condition And Results Of Operations    21
Item 8   Consolidated Financial Statements And Supplementary Data                                 40
Item 9   Changes In And Disagreements With Accountants On Accounting And Financial Disclosures    64

PART III
Item 10   Directors And Executive Officers Of The Registrant                                      64
Item 11   Executive Compensation                                                                  64
Item 12   Security Ownership Of Certain Beneficial Owners And Management                          64
Item 13   Certain Relationships And Related Transactions                                          64

PART IV
Item 14   Exhibits, Consolidated Financial Statement Schedules, And Reports On Form 8-K           65

SIGNATURES                                                                                        68
</TABLE>
























<PAGE>  2
                                    PART I

     ITEM  1  --  BUSINESS

GENERAL

     Ugly  Duckling  Corporation  (the  "Company") operates one of the largest
chains  of  Buy  Here-Pay  Here  used car dealerships in the United States and
underwrites,  finances,  and  services  retail installment contracts generated
from  the  sale  of  used  cars  by its Company Dealerships and by Third Party
Dealers  located  in  selected  markets throughout the country. As part of its
financing  activities,  the  Company  has  initiated the Cygnet Dealer Program
pursuant  to  which  it  intends to provide qualified Third Party Dealers with
operating  credit  lines  secured  by the dealers' retail installment contract
portfolios.  The  Company  targets  its products and services to the sub-prime
segment  of  the  automobile  financing industry, which focuses on selling and
financing  the sale of used cars to persons who have limited credit histories,
low  incomes,  or  past  credit  problems  ("Sub-Prime  Borrowers").

     The  rapidly  growing used car sales and finance industry achieved record
sales in 1995 of 30.5 million units, representing approximately $290.0 billion
in  sales.  During  this  same  period,  more  than  $185.0  billion in retail
installment  contracts were originated through the sale of used cars. Of these
totals,  approximately  11.0  million  units were sold to Sub-Prime Borrowers,
generating  approximately  $50.0  billion  in  retail  installment  contracts.

     Consistent   with   the  industry's  growth,  the  Company  has  expanded
significantly  in  recent periods. From 1995 to 1996, total revenues increased
by  55.2%  from  $48.7 million (pro forma) to $75.6 million. The Company's net
earnings grew to $5.9 million in 1996, or $0.60 per share, compared with a net
loss   of   $(4.0)  million,  or  $(.67)  per  share  in  1995.  See  Item  7.
"Management's  Discussion and  Analysis  of Financial Condition and Results of
Operations - Introduction."

     The  Company  originated  6,929  contracts  through wholly owned used car
dealerships  ("Company  Dealerships")  with  an aggregate principal balance of
$49.0  million  and  purchased 9,825 contracts from small independent used car
dealerships  ("Third  Party  Dealers")  with an aggregate principal balance of
$56.8  million  during  1996.   The  principal  balance of the Company's total
contract  portfolio  serviced  as  of  December  31, 1996, was $109.9 million,
including $51.7 million in contracts serviced under the securitization program
("Securitization Program") with SunAmerica Life Insurance Company ("SunAmerica")

OVERVIEW  OF  USED  CAR  SALES  AND  FINANCE  INDUSTRY

     Used Car Sales.  Used car retail sales typically occur through franchised
new  car  dealerships that sell used cars or 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. The Company believes that the
factors that have led to growth in this industry include substantial increases
in  new  car  prices,  which have made new cars less affordable to the average
consumer relative to used cars, the greater reliability and durability of used
cars  resulting from the production of higher quality cars, and the increasing
number  of  vehicles  coming  off-lease  in recent years. Many analysts expect
these  trends  to continue, leading to further expansion of the used car sales
market.



<PAGE>  3
     The  used  car  sales  industry  is highly fragmented and, traditionally,
sales   to   customers   have  occurred  through  franchised  and  independent
dealerships  owned  by  individuals,  families, and small groups. According to
industry sources, there are over 23,000 franchised and 63,000 independent used
car  dealership locations in the United States. Used car sales from franchised
dealerships  (or  affiliated  used-only  car lots) accounted for approximately
61.3%  of  used car sales during 1995, with the remaining 38.7% resulting from
sales  by  independent  dealerships.

     The Company participates in the sub-prime segment of the independent used
car  sales and  finance  market.  This  segment is serviced primarily by small
independent  used car  dealerships that sell and finance the sale of used cars
to Sub-Prime Borrowers ("Buy Here-Pay Here dealers"). Buy Here-Pay Here dealers
typically  offer  their  customers  certain  advantages  over more traditional
financing  sources,  such  as  expanded credit opportunities, flexible payment
terms (including prorating customer payments due within one month into several
smaller  payments  and  scheduling  payments to coincide with a customer's pay
days),  and  the  ability  to make payments in person, an important feature to
many  Sub-Prime  Borrowers who may not have checking accounts or are otherwise
unable  o make payments by the due date through use of the mail because of the
timing  of  paychecks.

     Recently,  the  growth  of  the  used  car  sales  and finance market has
attracted  significant  attention  from a number of large companies, including
AutoNation,  U.S.A.  and  Driver's Mart, which have entered the used car sales
business  or  announced  plans to develop large used car sales operations. The
Company  believes  that  these  companies are attracted by the relatively high
gross  margins   that  can  be  earned  in  this  business  and  the  lack  of
consolidation  in  this  market.  None  of  these  companies have indicated an
intention  to  focus  on  the  Buy  Here-Pay  Here  segment.

     Used   Car   Financing.     The  automobile  financing  industry  is  the
third-largest  consumer finance market in the country, after mortgage debt and
credit  card revolving debt, with more than $350.0 billion in contracts on new
and  used  cars  originated  in  1995.  The sub-prime segment of this industry
accounted  for  approximately  $50.0  billion of the overall market. Growth in
automobile  financing has been fueled by the increasing prices of both new and
used  cars,  which  has forced greater numbers of purchasers to seek financing
when  purchasing  a  car.  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.  With  respect  to  the  borrowers,  finance companies classify such
individuals  according  to  the  following  generalized  criteria:

-  An "A" credit or "prime" borrower is a person who has a long credit history
with  no  defaults, has been employed in the same job for a period of at least
18 months, and can easily finance a new car purchase through a bank, a captive
finance  subsidiary  of  an automobile manufacturer, or an independent finance
company.

-  A  "B"  credit  or  "non-prime"  borrower is a person who has a substantial
credit  history  that  includes  late  payments,  an  inconsistent  employment
history,  or  significant  or  unresolved problems with credit in the past. To
finance  a  used  car  purchase,  this  borrower will generally not be able to
obtain  a  loan  from a captive finance subsidiary or a bank, and will have to
obtain  financing  from  an  independent  finance company that lends into this
market  category.
<PAGE>  4
-  A  "C"  credit  or  "sub-prime"  borrower generally has little or no credit
history  or  a  credit history characterized by consistently late payments and
sporadic employment. Like "B" credit borrowers, "C" credit borrowers generally
are not able to obtain a loan from a captive finance subsidiary or a bank, and
have  to  obtain financing from an independent finance company that lends into
this  market  category.

-  A  "D" credit borrower is also referred to as a "sub-prime" borrower. These
persons,  however,  in  addition  to having an unfavorable employment history,
have  also experienced debt charge offs, foreclosures, or personal bankruptcy.
In  purchasing  a car, this borrower's only choice is to obtain financing from
an  independent  finance  company  or  through  a  Buy  Here-Pay  Here dealer.

     As  with  its used car sales operations, the Company's finance operations
are  directed  to  the  sub-prime  segment  of  the market. In particular, the
finance  operations  of  Company  Dealerships  are  directed  toward Sub-Prime
Borrowers  classified  in  the  "C"  and "D" categories, while its Third Party
Dealer finance operations are generally directed to "C" credit borrowers. Many
of  the  traditional  lending sources do not consistently provide financing to
the  sub-prime  consumer  finance  market.  The  Company  believes traditional
lenders  avoid  this market because of its high credit risk and the associated
collection  efforts.

     Many  of  the  63,000 independent used car dealers are not able to obtain
debt  financing from traditional lending sources such as banks, credit unions,
or  major  finance companies. These dealers typically finance their operations
through  the  sale  of  contract  receivables  at  a substantial discount. The
Company  believes  that independent dealers prefer to finance their operations
through  credit  facilities  that  enable  them  to  retain their receivables,
thereby  increasing  their  finance  income. Accordingly, the Company believes
that  there  is a substantial opportunity for a company capable of serving the
needs of such dealers to make significant penetration into this underdeveloped
segment  of  the  sub-prime  market.

     The  industry  statistical  information  presented herein is derived from
information  provided  to  the  Company  by  CNW Marketing/Research of Bandon,
Oregon.

RECENT ACQUISITIONS

     In  January  1997,  the  Company  acquired  selected assets of a group of
companies  (the  "Sellers")  engaged  in the business of selling and financing
used  motor  vehicles, including four dealerships located in the Tampa Bay/St.
Petersburg market. The acquired assets consist primarily of Sellers' inventory
of  vehicles  and portfolio of installment sales contracts. The purchase price
for  the assets acquired was approximately $32.1 million in cash. In addition,
the  Company leased certain facilities used in this business. The Company also
assumed  selected  liabilities  of  Sellers.

     In connection with the acquisition, the Company made a commercial loan to
one  of  the Sellers in the amount of $891,000, secured by consumer loans and,
subject to certain conditions, committed to advance to an affiliate of Sellers
$1.5  million,  secured  by  a  second priority lien on certain real property.
These  loans  are  guaranteed  by  the  principal  shareholders  of  Sellers.

     On  March  5,  1997,  the  Company  entered into an agreement to purchase
substantially  all  of  the  assets  of  a  company engaged in the business of
selling  and financing used motor vehicles, including seven dealerships in San
Antonio  and a contract portfolio of approximately $27 million.  The unaudited
<PAGE>  5
book  value  of  assets  to  be  acquired  was approximately $40 million as of
December  31,  1996.   The  purchase,  which is scheduled to close on or about
April 1, 1997, is subject to various conditions, including regulatory approval
No  assurance  can be given that such conditions will be satisfied or that the
purchase  will  be  completed.

BUSINESS  STRATEGY

     The   Company   intends  to  leverage  its  management  team,  collection
facilities, computer networks, and capital base to grow its Company Dealership
and  Third  Party  Dealer  operations, both in Arizona and in other geographic
locales.

     Expand  Company  Dealership  Operations.    Since commencing its used car
sales  and financing operations in 1992, the Company has pursued an aggressive
growth  strategy  through  both  internal  development  and acquisition. As of
January  31,  1997,  the  Company  had  developed  or  acquired twelve Company
Dealerships.  The  Company's strategy is to increase sales revenue and finance
income  by acquiring or opening new dealerships and finance operations. In the
last  several  months,  the  Company  has opened one new Company Dealership in
Arizona  and  has  acquired  four dealerships and a reconditioning facility in
Florida  (as  discussed  above).  In  addition,  the  Company  has  five other
dealerships  (one  in  Arizona,  two  in New Mexico, one in Nevada, and one in
Florida) and two used car reconditioning facilities (in New Mexico and Florida)
currently  under  development.  The Company intends to continue the aggressive
development  or acquisition of Company Dealerships throughout the southwestern
United  States  and  in  other  locations  where opportunities may arise.  See
"--Recent Acquisitions."

     The  Company distinguishes its direct sales and financing operations from
typical  Buy  Here-Pay  Here dealers by providing multiple locations, upgraded
facilities,  large inventories of used automobiles, and dedication to customer
service.  The  Company  has  designed  and  implemented  a  marketing  program
featuring  its animated duck mascot that promotes its image as a professional,
yet  approachable,  operation, in contrast to the generally unfavorable public
image  of  many  Buy  Here-Pay  Here  dealers.  In  addition,  the Company has
developed  flexible  underwriting  guidelines  and  techniques,  which combine
established  underwriting  criteria  with managerial discretion, to facilitate
rapid  credit  decisions, as well as an integrated, technology-based corporate
infrastructure  that  enables the Company to monitor and service large volumes
of  contracts.

     Expand  Third  Party  Dealer  Operations.   The Company has leveraged the
contract servicing experience and capabilities it acquired through its Company
Dealership activities by purchasing and servicing contracts originated by Third
Party Dealers.  As  of  January 31, 1997, the Company  had opened thirty-nine
Branch  Offices  in twelve states. These Branch Offices service approximately
1,400 Third Party Dealers. The Company continually evaluates expansion of its
Third  Party  Dealer operations into additional geographic areas.

     Implement  New  Products  and Services.  The Company is in the process of
expanding  its Third Party Dealer operations by implementing the Cygnet Dealer
Program.  The  Company  believes  that  providing  operating  credit  lines to
qualified  Third  Party Dealers will give such dealers a unique opportunity to
obtain  the debt financing necessary to expand their businesses while enabling
the  Company to earn additional finance income and diversify its earning asset
base.  The Company also believes that the relationships established with these
dealers   will  provide  it  with  a  preferred  position  to  acquire  retail
installment  contracts  from them. Such contract purchases would provide these
<PAGE>  6
dealers  with  an  additional  source  of  financing and enable the Company to
further  expand  its  contract portfolio. The Company anticipates that it will
begin  full-scale  marketing  of the program during the first quarter of 1997.

    The Company also intends to expand its insurance operations, which to date
consist of force placing casualty insurance on its Third Party Dealer contracts.
Among other  things,  the Company  is  evaluating  the sale of other insurance
products to its customer base.  See "- Third Party Dealer Operations."

COMPANY  DEALERSHIP  OPERATIONS

     Company  Dealership  operations  include the retail sale of used cars and
the  underwriting,  financing, and servicing of contracts originated from such
sales.  The  Company's  total  revenues from its Company Dealership operations
were  $32.5  million,  $56.1  million  ($46.6  million  excluding sales at the
Gilbert  Dealership), and $67.0 million for fiscal years 1994, 1995, and 1996,
respectively. See Note 20 to the Consolidated Financial Statements. See Note 7.
"Management's  Discussion  and  Analysis of Financial Condition and Results of
Operations  -  Introduction."

     Retail  Car  Sales.    The  Company  distinguishes its Company Dealership
operations from those of typical Buy Here-Pay Here dealers through its network
of  multiple  locations,  upgraded facilities, large inventories of used cars,
centralized  purchasing,  value-added  marketing  programs,  and dedication to
customer service. All Company Dealerships are located in high visibility, high
traffic  commercial  areas,  and generally are newer and cleaner in appearance
than  other Buy Here-Pay Here dealers, which helps promote the Company's image
as a friendly and reputable business. The Company believes that these factors,
coupled with its widespread brand name recognition (achieved through extensive
promotion  of  its  duck  mascot and logo), enable it to attract customers who
might  otherwise  visit  another  Buy  Here-Pay  Here  dealer.

     Company Dealerships generally maintain an average inventory of 100 to 300
used  cars  and  feature  a  wide  selection  of  makes  and models (with ages
generally ranging from 5 to 10 years) and a range of sale prices, all of which
enables  the  Company  to  meet  the  tastes  and  budgets of a broad range of
potential customers. The Company acquires its inventory from new or late-model
used  car  dealers,  used  car  wholesalers,  used  car auctions, and customer
trade-ins, as well as from repossessions. The Company's size enables it to cut
inventory  costs  by  making  volume purchases for all Company Dealerships. In
making  its  purchases, the Company takes into account each car's retail value
and  the  costs  of buying, reconditioning, and delivering the car for resale.
After  purchase,  cars are delivered to the individual dealerships, where they
are inspected and reconditioned for sale. Although the prices of used cars are
subject  to  market  variance,  the  Company  does  not  believe  that it will
encounter  significant difficulty in maintaining its current inventory levels.

     The average sales price per car at Company Dealerships was $7,107 for the
fiscal  year  ended  December  31,  1996, and $6,065 for the fiscal year ended
December  31,  1995  (exclusive of sales at the Company's Gilbert Dealership).
Company  Dealerships use a standardized sales contract that typically provides
for  down  payments of approximately 10.0% to 15.0% of the purchase price with
the  balance  of  the  purchase price financed at fixed interest rates ranging
from  21.0%  to  29.9%  over periods ranging from 12 to 48 months. The Company
sells  cars  on  an  "as  is"  basis,  and  requires  its customers to sign an
agreement  at  the date of sale releasing the Company from any obligation with
respect  to  vehicle-related  problems  that  subsequently  occur. See Item 3.
"Legal  Proceedings."

<PAGE> 7
     Used Car Financing.  The Company finances approximately 90.0% of the used
car sales at its Company Dealerships through retail installment contracts that
the  Company  services.  Subject  to  the  discretion  of  its sales managers,
potential  customers must meet the Company's underwriting guidelines, referred
to  as  minimum  deal  standards, before the Company will agree to finance the
purchase of a car. The Company created these minimum deal standards to control
its exposure to credit risk while providing its sales managers with sufficient
flexibility  to  consummate  sales  when  appropriate. In connection with each
sale,  customers  are  required  to  complete  a  credit  application. Company
personnel  analyze and verify customer application information, which contains
employment  and  residence  histories,  income information, and references, as
well  as  the customer's personal cash flow statement (taking into account the
completion  of  the  sale),  credit  bureau  reports,  and  other  information
regarding  the  customer's  credit  history.

     The  Company's credit underwriting process takes into account the ability
of  its  managers and other sales employees, who have extensive experience, 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,  contract  payments  may  be  scheduled  to  coincide  with  the
customer's  pay  days,  whether weekly, biweekly, semi-monthly, or monthly. In
addition,  each  manager  makes  credit  approvals only after a "face-to-face"
interview  with  the  potential  customer in which the manager gains firsthand
information  regarding  the customer's financial situation, sources of income,
and  past  credit  problems. The Company believes that its customers value the
expanded credit opportunities that such flexibility provides and, consequently,
will  pay a higher price for their cars. The Company believes that the  higher
prices it charges are necessary to fund the high rate of credit losses incurred
as  a  result  of  financing Sub-Prime Borrowers. To the extent the Company is
unable  to  charge  such  higher prices or otherwise obtain acceptable margins,
its  results  of  operations will be adversely affected.

     Subsequent  to  each  sale, all finance transactions are "audited" by the
Company's  portfolio  manager  and  reviewed for compliance with the Company's
underwriting  standards. To the extent such audits reveal non-compliance, such
non-compliance is discussed with dealership management and, where appropriate,
remedial action is taken against the responsible manager, ranging from oral or
written  reprimands  to  termination.

     The  Company's  use  of  wide  area and local area networks enables it to
service  large  volumes of contracts from its centralized servicing facilities
while  allowing the customer the flexibility to make payments at and otherwise
deal  with  the individual dealerships. In addition, the Company has developed
comprehensive  databases  and sophisticated management tools, including static
pool  analysis,  to  analyze customer payment history and contract performance
and  to  monitor  underwriting  effectiveness.

     Advertising  and  Marketing.   The Company believes that it maintains the
largest  advertising  budget  of  any  Buy Here-Pay Here dealer in Arizona. In
general, the Company's advertising campaigns emphasize its multiple locations,
wide  selection of quality used cars, and ability to provide financing to most
Sub-Prime  Borrowers.  The  Company's  advertising  campaign revolves around a
series  of  television  commercials  that  feature the Company's animated duck
mascot,  as  well as complementary radio, billboard, and print advertisements.
The   Company   believes  that  its  marketing  approach  creates  brand  name
recognition  and  promotes  its  image  as  a  professional, yet approachable,
business,   in  contrast  to  the  lack  of  name  recognition  and  generally
unfavorable  public  image  of  many  Buy  Here-Pay  Here dealers. The Company
believes  that  its  advertising  has  helped  establish it as the most widely
recognized  Buy  Here-Pay  Here  dealership  network  in  Arizona.
     A  primary  focus  of  the Company's marketing strategy is its ability to
finance  consumers with poor credit histories. Under the slogan "Ugly Duckling
Car Sales - Putting You on the Road to Good Credit," the Company has initiated
innovative  marketing programs designed to attract Sub-Prime Borrowers, assist
such  customers in reestablishing their credit, reward those customers who pay
on  time, develop customer loyalty, and increase referral and repeat business.
Among  these  programs  are:

-  The  Down  Payment Back Program.  This program encourages customers to make
timely  payments  on  their  contracts by enabling them to receive a refund of
their  initial down payment (typically representing 10.0%-15.0% of the initial
purchase  price  of  the  car) at the end of the contract term if all payments
have  been  made  by  the  scheduled  due  date.

-  The  Income Tax Refund Program.  During the first quarter of each year, the
Company  offers assistance to customers in the preparation of their income tax
returns,  including  forwarding  customers'  tax  information  to a designated
preparer,  paying  the  preparation  fee,  and,  if there is a forthcoming tax
refund,  crediting  such refund toward the required down payment. This program
enables  customers  to  purchase  cars without having to wait to receive their
income  tax  refund.

-  Secured  $250  Visa  Card  Program.   Pursuant to this program, the Company
arranges  for  qualified  applicants to obtain a Visa credit card secured by a
nonrefundable  $250  payment  made  by the Company to the credit card company.
This  program  offers otherwise unqualified customers the chance to obtain the
convenience  of  a  credit  card  and  rebuild  their  credit  records.

     The  Company  also  utilizes various telemarketing programs. For example,
potential  customers  are  contacted  within  several days of their visit to a
Company  Dealership  to  follow  up  on leads and obtain information regarding
their  experience  while  at a Company Dealership. In addition, customers with
satisfactory  payment  histories  are contacted several months before contract
maturity  and  are  offered  an opportunity to purchase another vehicle with a
nominal  down  payment requirement. The Company also maintains a loan-by-phone
program  utilizing  its  toll-free  telephone  number  of  1-800-THE-DUCK.

     Sales  Personnel  and  Compensation.  Each Company Dealership is run by a
general  manager  who  has  complete  responsibility for the operations of the
dealership   facility,   including   final  approval  of  sales  and  contract
originations,  inventory  maintenance,  the  appearance  and  condition of the
facility,  and  the  hiring,  training,  and performance of Company Dealership
employees.  In  addition  to the general manager, the Company typically staffs
each  dealership  with,  among  others,  up to three sales managers, an office
manager, a lot supervisor, five to twelve salespersons, and several mechanics.

The  Company trains its managers to be contract underwriters. The Company pays
its  managers  a  base  salary  and  allows  them to earn bonuses based upon a
variety  of  factors,  including  the  overall  performance  of  the  contract
portfolio originated. Although sales persons are paid on commission, each sale
must  be  underwritten  and  approved  by  a manager. By giving its managers a
strong incentive to underwrite quality contracts, the Company believes that it
can  maintain  its  current level of credit losses while continuing to achieve
significant  growth  in  sales  revenue.

THIRD  PARTY  DEALER  OPERATIONS

     Contract  Purchasing.    In 1994, the Company acquired Champion Financial
Services,  Inc.,  an independent automobile finance company, primarily for its
<PAGE>  9
management expertise and contract servicing software and systems. Champion had
a  portfolio  of  approximately  $1.9 million in sub-prime contracts averaging
approximately $2,000 in principal amount. For the balance of 1994, the Company
purchased  an  additional  $1.7  million  in  contracts.

     In  April  1995,  the Company initiated an aggressive plan for purchasing
contracts  from  Third  Party  Dealers  and  by  January  31,  1997 had opened
thirty-nine  Branch  Offices in twelve different states throughout the country
and entered into contract purchasing agreements with approximately 1,400 Third
Party  Dealers.  The  Company  has  hired  experienced  branch managers having
existing relationships with Third Party Dealers and opened Branch Offices near
its  Third  Party  Dealers to better service their needs. The Company services
the  Third Party Dealer contract portfolio from its centralized collection and
servicing centers. The expansion of its Third Party Dealer network enabled the
Company  to  leverage  its  existing  infrastructure and increase its contract
portfolio much more quickly than it could through the planned expansion of its
Company  Dealerships.  The Company was also able to increase the socioeconomic
and  geographic  diversity  of  its  contract  portfolio  by purchasing higher
quality  contracts  and  contracts  from  areas  where  there  are  no Company
Dealerships.

     The  Company  generally purchases contracts from Third Party Dealers that
are originated with customers possessing financial characteristics superior to
those  of  Company  Dealership  customers  and  that reflect principal amounts
closer  to the actual wholesale value of the underlying car. Consequently, its
Third Party Dealer contracts generally present a reduced credit and collateral
risk. The Company's total revenues from its Third Party Dealer operations were
$1.8 million and $7.8 million in fiscal years 1995 and 1996, respectively. See
Note  20  to  the  Consolidated  Financial  Statements.

     The   Company   purchases   contracts  from  Third  Party  Dealers  at  a
nonrefundable  acquisition  discount from the principal amount of the contract
that  generally  ranges  from 5.0% to 20.0%, and averages approximately 11.0%.
The  Company  determines  the  appropriate  discount needed to cover estimated
losses  on  a  contract-by-contract  basis,  taking  into account, among other
things,  the  principal  amount  of  the contract in relation to the wholesale
value  of  the  underlying car and the credit risk presented by the particular
customer.  The  Company  generally  will  not purchase a contract from a Third
Party  Dealer  if  the  discounted price exceeds 120.0% of the Kelly Blue Book
wholesale  value  of the underlying car plus license and tax, although it will
make  exceptions  on  a  contract-by-contract  basis.  If  the  Company cannot
negotiate  an  appropriate  discount,  it  will  not  purchase  the  contract.

     When  opening a new office, the Company hires experienced branch managers
having  existing  relationships with Third Party Dealers. The Company's branch
managers  have  an  average  of  approximately nine years of experience in the
sub-prime  automobile  finance  industry.  Upon  the  execution  of  a  dealer
agreement  with  a  Third Party Dealer, Branch Office employees will introduce
the  dealer  to  the  Company's  systems  and procedures. The Company provides
uniform  contract  buying criteria as well as expedient application processing
and  funding.  The  Company expects its Branch Office employees to develop and
maintain  excellent  relationships  with  its  Third  Party  Dealers.

     Branch Office employees monitor and evaluate Third Party Dealer contracts
for  conformity  to  established  policies  and  procedures.  Selected finance
transactions  are  examined  each  month  and  a written report on each Branch
Office  is  prepared. Included in the report is an evaluation of Branch Office
decisions  and  practices  as  well as the portfolio performance of individual

<PAGE> 10
Third  Party  Dealers. Branch Office management is notified and counseled with
respect to variances from underwriting standards that are found. Branch Office
management  monitors the first six months of contract performance. Substandard
contract  performance  during  this  period  is discussed with the Third Party
Dealers  and  appropriate  action  taken.

     Collateralized  Dealer  Financing.   The Company believes that many Third
Party  Dealers  have difficulty obtaining traditional debt financing and, as a
result,  are forced to sell the contracts that they originate through used car
sales  at  deep  discounts in order to obtain the working capital necessary to
operate  their  businesses.  To  capitalize  on  this opportunity, the Company
initiated  the  Cygnet  Dealer  Program,  pursuant  to  which  it will provide
qualified  Third  Party  Dealers (generally, dealers that meet certain minimum
net  worth and operating history criteria) with operating credit lines secured
by  the  dealers'  retail installment contract portfolios. These lines will be
for  a specified amount but will in all cases be subject to various collateral
coverage ratios, maximum advance rates, and performance measurements depending
on  the  financial  condition  of  the dealer and the quality of the contracts
originated.  As  a  condition  to  providing  such financing, the Company will
require  each  dealer  to  upload  its  portfolio information to the Company's
computer   network   on  a  daily  basis,  utilize  the  Company's  management
information   systems,   and  provide  the  Company  with  periodic  financial
statements in a standardized format. These controls will allow Company account
officers,  who will oversee the operations of each dealer participating in the
program,  to  maintain  supervision  over  the  dealers,  thereby enabling the
account  officers  to  ensure  dealer  compliance with financial covenants and
determine  the  appropriateness  of  continued  credit  extensions.

     The Company believes that the Cygnet Dealer Program will fulfill the need
of  Third  Party  Dealers  for debt financing to expand their businesses while
enabling  the  Company to earn finance income at favorable rates and diversify
its  earning  asset  base.  The  Company  also believes that the relationships
established  with  these  dealers will provide it with a preferred position to
acquire  retail installment contracts from them. Such contract purchases would
provide  these  dealers  with an additional source of financing and enable the
Company  to  further  expand  its  contract portfolio. The Company has hired a
person  with  extensive  sub-prime  finance industry experience to oversee the
Cygnet  Dealer Program and began implementing the program with one Third Party
Dealer  during  the  fourth  quarter  of  1996.  The  Company expects to begin
full-scale marketing of the program during the first quarter of 1997, although
the program is not expected to begin generating any substantial revenue before
the  second  quarter  of  1997.

     Insurance  Services.    The retail installment contracts that the Company
purchases  from  Third Party Dealers generally require the customers to obtain
casualty  insurance  within  30  days  of  their  vehicle  purchase. While all
customers are free to obtain such coverage from an insurer of their choice, if
a  customer  fails to obtain the required coverage, the Company may purchase a
policy  on  the  customer's behalf and charge back to the customer the cost of
the  premiums  and  fees associated with such policy. The Company's ability to
force place such insurance has significantly increased the number of customers
who  have  obtained  their  own  casualty  insurance.

     To facilitate its ability to force place mandated insurance coverage, the
Company  has  contracted  with  American  Bankers  Insurance Group ("ABIG"), a
licensed   property,   casualty,  and  life  insurance  company.  Through  its
subsidiary,  Drake  Insurance  Agency, Inc., which acts as agent for ABIG, the
Company  places  casualty  insurance  policies issued by ABIG with Third Party

<PAGE>  11
Dealer  customers.  These  policies  provide  for a maximum payment on a claim
equal  to the current contract principal balance. ABIG, in turn, reinsures the
policies  it  issues  with Drake Property & Casualty Insurance Company, one of
the  Company's  Turks  and  Caicos  Islands-chartered and licensed reinsurance
subsidiaries. Under the terms of its relationship with ABIG, the Company earns
commissions  on each policy issued by ABIG (which mitigate any credit loss the
Company  might  suffer in the event of an otherwise uninsured casualty), while
ABIG  administers  all  accounts  and claims and is responsible for regulatory
compliance. As of December 31, 1996, the Company had placed casualty insurance
policies with approximately 1,200 customers. The Company anticipates expanding
its  insurance  services  to include the provision of credit life, disability,
and  unemployment  insurance.

COMPARISON  OF  CONTRACTS  ORIGINATED  AT  COMPANY DEALERSHIPS AND THIRD PARTY
DEALERS

     The  chart  below  compares  the  characteristics of the average contract
originated  by  Company Dealerships and purchased from Third Party Dealers for
the  twelve  months  ended  November  30,  1996:

<TABLE>
<CAPTION>
                                              COMPANY    THIRD PARTY
                                             ---------  -------------
<S>                                          <C>        <C>
Principal Amount of Contract                 $  7,071   $      5,778
Annual Percentage Rate                           29.9%          24.5%
Loan Term (Months)                               37.5           33.4
Total Down Payment                           $    858   $      1,368
Company Cost or Third Party Dealer Advance   $  3,304   $      5,119
Blue Book Value (Wholesale)                  $  3,685   $      4,983
Model Year                                         88             89
Age of Borrower                                    34             34
Annual Income                                $ 25,589   $     30,559
Years at Current Residence                        4.6            3.8
Years at Current Job                              3.2            3.4
</TABLE>

   The Company expects that approximately 35.0% to 40.0% of Company Dealership
contracts  will  ultimately  default  at some time prior to maturity for a net
loss,  after charge offs and recoveries of approximately 20.0% to 25.0% of the
original  principal  amount financed. See Item 7. "Management's Discussion and
Analysis  of  Financial  Condition  and  Results of Operations - Allowance for
Credit  Losses  -  Contracts  Originated  at  Company  Dealerships."

The  Company  expects  that approximately 20.0% to 25.0% of Third Party Dealer
contracts  will  ultimately  default  at some time prior to maturity for a net
loss,  after  charge offs and recoveries of approximately 8.0% to 12.0% of the
original  principal  amount financed. See Item 7. "Management's Discussion and
Analysis  of  Financial  Condition  and  Results of Operations - Allowance for
Credit  Losses  -  Contracts  Purchased  From  Third  Party  Dealers."

MONITORING  AND  COLLECTIONS

     The Company believes that its ability to minimize credit losses is due in
great  part  to  the  sophisticated  manner  in  which it monitors the Company
Dealership  and  Third  Party  Dealer  contracts  in  its  portfolio.


<PAGE>  12
     Upon  the  origination or purchase of a contract, Company personnel enter
all  terms of the contract into the Company's centralized computer system. The
Company's  monitoring  and  collections  staff  then  utilizes  the  Company's
collections  software  to  monitor  the  performance  of  the  contracts.

     The  collections  software provides the Company with, among other things,
up-to-date  activity  reports,  allowing immediate identification of customers
whose  accounts  have  become  past  due.  In  accordance with Company policy,
collections  personnel contact a customer with a past due account within three
days of delinquency (or in the case of first payment delinquencies, within one
day)  to inquire as to the reasons for such delinquency and to suggest ways in
which  the  customer  can resolve the underlying problem, thereby enabling the
customer  to  continue  making  payments and keep the car. The Company's early
detection  of  a  customer's  delinquent  status, as well as its commitment to
working with its customers, allows it to identify and address payment problems
quickly, thereby reducing the amount of credit loss. See Item 7. "Management's
Discussion  and  Analysis  of  Financial Condition and Results of Operations -
Allowance  for  Credit  Losses."

     If the Company's efforts to work with a customer are unsuccessful and the
customer  becomes  seriously  delinquent,  the Company will take the necessary
steps  to  protect  its  collateral.  Frequently,  delinquent  customers  will
recognize their inability to honor their contractual obligations and will work
with  the  Company  to coordinate "voluntary repossessions" of their cars. For
cases involving uncooperative customers, the Company retains independent firms
to   repossess   the  cars  pursuant  to  prescribed  legal  procedures.  Upon
repossession and after a statutorily-mandated waiting period, the Company will
recondition  the  car, if necessary, and sell it in the wholesale market or at
retail through its Company Dealerships. The Company estimates that it recovers
over  90.0%  of the cars that it attempts to repossess, approximately 90.0% of
which  are  sold  on  a  wholesale  basis  and the remainder of which are sold
through  Company  Dealerships. The Company's access to a retail outlet for its
repossessed  collateral  provides the Company with additional flexibility with
respect  to the disposal of the collateral and helps lessen its credit losses.
See  Item  7. "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Allowance  for  Credit  Losses."

     Unlike  most  other  used  car  dealerships  with  multiple  locations or
automobile  finance  companies, the Company permits its customers to make cash
payments  on  their  contracts  in  person  at  Company  Dealerships or at the
Company's  collection  facilities.  Cash  payments  account  for a significant
portion  of monthly contract receipts on the Company Dealership portfolio. The
Company's  computer technology enables it to process these payments on-line in
real  time  and  its  internal  procedures  enable it to verify that such cash
receipts  are  deposited  and  credited  to  the  appropriate  accounts.

COMPETITION

     Although  the  used car industry has historically been highly fragmented,
it  has  attracted  significant  attention  recently  from  a  number of large
companies,  including AutoNation, U.S.A. and Driver's Mart, which have entered
the used car sales business or announced plans to develop large used car sales
operations.  Many  franchised automobile dealers have increased their focus on
the  used  car  market  as well. The Company believes that these companies are
attracted  by  the  relatively high gross margins that can be achieved in this
market  as  well  as  the  industry's  lack  of  consolidation.  Many of these
companies  and  franchised  dealers  have  significantly  greater  financial,
marketing,  and  other  resources  than  the  Company.

<PAGE>  13
     The  Company's  targeted  competition for its Company Dealerships are the
numerous  independent Buy Here-Pay Here dealers that sell and finance sales of
used  cars  to Sub-Prime Borrowers. The Company distinguishes its direct sales
and  financing  operations  from those of typical Buy Here-Pay Here dealers by
providing  multiple  locations, upgraded facilities, large inventories of used
automobiles,  centralized  purchasing,  value-added  marketing  programs,  and
dedication  to  customer  service.  In  addition,  the  Company  has developed
flexible  underwriting  guidelines  and  techniques to facilitate rapid credit
decisions, as well as an integrated, technology-based corporate infrastructure
that  enables  the  Company to monitor and service large volumes of contracts.
The  Company  believes  that  it  is  the  largest Buy Here-Pay Here dealer in
Arizona  and  one  of  the largest in the United States. Of the numerous large
companies  that  have  entered  the  used car business, none have announced an
intention  to  focus  on  the  Buy  Here-Pay  Here  segment.

     The  sub-prime  segment of the used car financing business is also highly
fragmented  and  very competitive. In recent periods, several consumer finance
companies  have  completed  public  offerings  in  order  to raise the capital
necessary to fund expansion and support increased purchases of used car retail
installment  contracts. These companies have increased the competition for the
purchase  of contracts, in many cases purchasing contracts at prices which the
Company  believes  are not commensurate with the associated risk. In addition,
there  are  numerous  financial  services  companies  serving,  or  capable of
serving,  this  market.  While  traditional  financial  institutions,  such as
commercial  banks,  savings  and  loans,  credit  unions,  and captive finance
companies  of  major  automobile manufacturers, have not consistently serviced
Sub-Prime  Borrowers, the high rates of return earned by companies involved in
sub-prime  financing have encouraged certain of these traditional institutions
to  enter,  or  contemplate  entering,  this market. Increased competition may
cause  downward pressure on the interest rate the Company charges on contracts
originated  by  its  Company  Dealerships  or  cause  the Company to reduce or
eliminate the nonrefundable acquisition discount on the contracts it purchases
from  Third Party Dealers. Such events would have a material adverse affect on
the  Company's  profitability.

REGULATION,  SUPERVISION,  AND  LICENSING

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

     The  Company typically charges fixed interest rates ranging from 21.0% to
29.9%  on  the  contracts originated at Company Dealerships, while rates range
from  17.6%  to  29.9% on the Third Party Dealer contracts it purchases. As of
December  31, 1996, a majority of the Company's used car sales activities were
conducted  in,  and  a  majority  of  the  contracts the Company services were
originated  in,  Arizona, which  does  not  impose limits on the interest rate
that a lender may charge. However, the Company has expanded, and will continue
to expand, its operations into states that impose usury limits, such as Florida
and  Texas.   The  Company  attempts  to  mitigate  these rate restrictions by
purchasing  contracts originated in these states at a higher  discount.


<PAGE> 14
     The  Company believes that it is currently in substantial compliance with
all applicable federal, state, and local laws and regulations. There can be no
assurance, however, that the Company will be able to remain in compliance with
such  laws,  and  such  failure  could  have  a material adverse effect on the
operations  of  the  Company. In addition, the adoption of additional statutes
and  regulations,  changes  in  the  interpretation  of  existing statutes and
regulations,  or the Company's entrance into jurisdictions with more stringent
regulatory  requirements could have a material adverse effect on the Company's
business.

TRADEMARKS  AND  PROPRIETARY  RIGHTS

     The  Company  has  obtained  federal  trademark registrations on its duck
mascot  and  logo,  as  well as for the trade names "Ugly Duckling Car Sales,"
"Ugly  Duckling  Rent-A-Car,"  and "America's Second Car." These registrations
are  effective  through  2002  and  are  renewable for additional terms of ten
years. The Company grants its Ugly Duckling Rent-a-Car franchisees the limited
right to use its duck mascot and logo in their used car rental operations. The
Company  has  also  obtained  a  federal trademark registration for the slogan
"Putting  You  On  the  Road  to  Good  Credit."

     The  Company  licenses  software  from various third parties. It has also
developed  and  copyrighted  customized  software  to facilitate its sales and
financing  activities.  Although  the  Company  believes  it takes appropriate
measures  to  protect  its  proprietary rights and technology, there can be no
assurance  that such efforts will be successful. The Company believes it is in
material  compliance  with  all  third  party  licensing  requirements.

EMPLOYEES

     At  December 31, 1996, the Company employed 652 persons, of which 69 were
employed  in  the  Company's  executive  and  administrative offices, 242 were
employed  in  its  Company  Dealership  operations,  155  were employed in the
Company's  credit  and  collection  activities, and 186 were employed in Third
Party  Dealer  operations.  None  of  the Company's employees are covered by a
collective  bargaining agreement. The Company considers its relations with its
employees  to  be  good.

                              ITEM 2 - PROPERTIES

     As  of  December 31, 1996, the Company owned the property in which six of
its  dealerships,  two  of  its  collection  facilities and one reconditioning
facility are located. In addition, the Company leased 47 other facilities. The
Company's  corporate  headquarters  are located in approximately 13,300 square
feet  of  leased space in Phoenix, Arizona. This lease commenced in April 1996
and  expires in August 2001. Five of the Company's dealerships are leased from
unrelated  third  parties.  The Company's other leased facilities at that date
included a monitoring and collection facility, two storage lots, and 38 Branch
Offices  (of  which 35 were open). The leases contain renewal options from one
to  ten  years  and  require  aggregate  monthly  base  rents  of  $136,000.

                          ITEM 3 - LEGAL PROCEEDINGS

     The Company sells its cars on an "as is" basis, and requires all customers
to  sign  an  agreement  on  the  date  of  sale pursuant to which the Company
disclaims any obligation for vehicle-related problems that subsequently occur.
Although  the  Company  believes  that  such disclaimers are enforceable under
Arizona  and other applicable law, there can be no assurance that they will be

<PAGE>  15
upheld in every instance.  Despite obtaining these disclaimers, the Company,
in  the   ordinary   course  of business, receives complaints from customers
relating  to  such vehicle-related problems as well as alleged violations of
federal  and  state  consumer lending or other similar laws and regulations.
While   most  of  these  complaints  are  made directly to the Company or to
various  consumer  protection  organizations  and are subsequently resolved,
the  Company  is  named  occasionally as a defendant in civil suits filed by
customers in state, local, or small claims courts. There can be no assurance
that  the  Company  will  not  be a target of similar claims in the future.
In the opinion  of  the  Company, the ultimate disposition of these matters
on  an  individual  basis  will  not  have a material adverse effect on the
Company.  However,  there  can  be  no  assurance  in  this  regard.

     In connection with the acquisition of the Florida dealerships and finance
operations (disclosed  in Item 1. "Business-Recent Acquisitions"), a purported
creditor  of  the  sellers filed, on January 21, 1997, to enjoin the sale as a
fraudulent  conveyance.  Alternatively, the suit seeks to void any transfer of
the  assets  that  has  already  occurred, to attach the assets that have been
transferred,   or  to  appoint  a  receiver  to  take  charge  of  the  assets
transferred.  The  Company  has  not been named in this action, has received a
specific  indemnity  from  the  sellers  relating to this action, and has been
advised  by  the  sellers  that,  in  their  view, the claim is without merit.

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

     The  Company  did not submit any matter to a vote of its security holders
during  the  fourth  quarter  of  1996.

                                    PART II

         ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY SECURITIES
                        AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock trades on the Nasdaq National Market tier under the
symbol  "UGLY."  The Company's initial public offering was June 17, 1996.  The
high  and  low  sales  prices of the Common Stock, as reported by Nasdaq since
that  date  are  reported  below.

<TABLE>
<CAPTION>
                                             MARKET PRICE
                                        ----------------------
FISCAL YEAR 1996                            HIGH         LOW
--------------------------------------  -------------  -------
<S>                                     <C>            <C>

Second Quarter (from June 18, 1996)     $       10.00  $  8.50
Third Quarter                           $       15.50  $  8.13
Fourth Quarter                          $       21.63  $ 13.00

FISCAL YEAR 1997
--------------------------------------
First Quarter (through March 15, 1997)  $       25.75  $ 17.50
</TABLE>

     On  March  10,  1997 there were 127 record owners of the Company's Common
Stock.  The Company estimates  that as of such date there were 1,600 beneficial
owners of  the  Company's  Common  Stock.

<PAGE>  16
     Dividend Policy.  The Company has never paid cash dividends on its Common
Stock  and  does  not anticipate doing so in the foreseeable future. It is the
current  policy  of the Company's Board of Directors to retain any earnings to
finance  the  operation  and expansion of the Company's business. In addition,
the  terms  of  the  Company's  Revolving  Facility  prevent  the Company from
declaring  or  paying dividends in excess of 15.0% of each year's net earnings
available  for distribution. See Item 7. "Management's Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations - Liquidity and Capital
Resources  -  Revolving  Facility.

     Reincorporation.    On  April  24,  1996, the Company reincorporated from
Arizona  to  Delaware  by  way  of  a  merger in which the Company, an Arizona
corporation,  merged  with and into a newly created Delaware subsidiary of the
Company.    In  the merger, each share of the Arizona corporation's issued and
outstanding  common  stock  was  exchanged  for  1.16  shares  of the Delaware
corporation's  common  stock and each option to purchase shares of the Arizona
corporation's  common  stock was exchanged for 1.16 options to purchase shares
of the Delaware corporation's common stock.  All share figures set forth above
give  effect  to  this  exchange  ratio.

     Warrant  Issuance.   In  connection  with  the  Company's initial public
offering,  the Company issued warrants to Cruttenden Roth to purchase 170,000
shares of Common Stock at an exercise price per share of $9.45.  The warrants
were  issued  in  exchange  for  $1,700 pursuant to an Underwriting Agreement
between the Company and Cruttenden Roth, as the representative of the several
underwriters in the initial public offering, and pursuant to a Representative's
Warrant Agreement between the Company and Cruttenden Roth.

     Subordinated  Debt Conversion.  In connection with the Company's initial
public  offering,  on  June 21,  1996,  SunAmerica  converted  $3,000,000  of
subordinated  debt  into  Common  Stock (444,444 shares at the initial public
offering  price  of  $6.75  per  share)  in  accordance  with  the terms of a
Convertible  Note,  dated as of August 31, 1995.   In  addition,  in  partial
consideration for SunAmerica's agreement to convert the Convertible Note, the
Company  issued warrants to SunAmerica, on June 21, 1996, to purchase 116,000
shares of Common Stock at an exercise price per share of $6.75.

     Private  Placement.   On  February  13, 1997, the Company sold 5,075,500
shares  of Common  Stock to approximately 115 institutional purchasers for an
aggregate  purchase  price of $94,531,188.  Friedman, Billings, Ramsey & Co.,
Inc.  acted as placement agent in the transaction.  The total proceeds to the
Company,  net  of discounts and commissions, was $89,804,629 before deducting
offering expenses.

    Exemption from registration for the reincorporation, the warrant issuances,
the  subordinated  debt  conversions,  and  the  private placement was claimed
pursuant  to  Section  4(2) of the Securities Act regarding transactions by an
issuer not involving any public offering and/or pursuant to Rule 145 under the
Securities  Act  regarding transactions the sole purpose of which is to change
an issuer's domicile solely within the United States.

FACTORS  THAT  MAY  AFFECT  FUTURE  STOCK  PERFORMANCE

     The  performance  of the Company's Common Stock is dependent upon several
factors  including  those  set  forth  below  and  in  Item  7.  "Management's
Discussion  and  Analysis  of  Financial Condition and Results of Operations -
Factors  That  May  Affect  Future  Results  and  Financial  Condition."


<PAGE>  17
     Control  by  Principal  Stockholder.    Mr.  Ernest  C.  Garcia,  II, the
Company's  Chairman, Chief Executive Officer, and principal stockholder, holds
25.2%  of  the  outstanding Common Stock.  As a result, Mr. Garcia will have a
significant  influence  upon  the activities of the Company, as well as on all
matters requiring approval of the stockholders, including electing or removing
members  of the Company's Board of Directors, causing the Company to engage in
transactions  with  affiliated  entities,  causing  or restricting the sale or
merger  of  the  Company,  and  changing  the  Company's  dividend  policy.

     Potential  Anti-Takeover  Effect  of  Preferred  Stock.    The  Company's
Certificate  of  Incorporation  authorizes  the Company to issue "blank check"
Preferred  Stock,  the  designation,  number,  voting powers, preferences, and
rights  of  which  may  be  fixed or altered from time to time by the Board of
Directors.    Accordingly,  the  Board of Directors has the authority, without
stockholder  approval,  to  issue  Preferred  Stock with dividend, conversion,
redemption,  liquidation,  sinking  fund,  voting, and other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock.  The Preferred Stock could be utilized, under certain circumstances, to
discourage,  delay, or prevent a merger, tender offer, or change in control of
the  Company  that  a  stockholder might consider to be in its best interests.
Although the Company has no present intention of issuing any additional shares
of  its authorized Preferred Stock, there can be no assurance that the Company
will  not  do  so  in  the  future.

     Shares  Eligible  for  Future  Sale.   Approximately 10,535,600 shares of
Common  Stock  outstanding  as  of  the  date  of  this report are "restricted
securities,"  as  that  term  is  defined under Rule 144 promulgated under the
Securities Act.  In general, under Rule 144 as currently in effect, subject to
the  satisfaction of certain other conditions, if two years have elapsed since
the later of the date of acquisition of restricted shares from an issuer or an
affiliate  of an issuer, the acquiror or subsequent holder is entitled to sell
in  the  open  market,  within any three-month period, a number of shares that
does  not  exceed  the greater of one percent of the outstanding shares of the
same class or the average weekly trading volume during the four calendar weeks
preceding  the  filing  of the required notice of sale.  (A person who has not
been  an  affiliate  of  the Company for at least the three months immediately
preceding  the  sale  and who has beneficially owned shares of Common Stock as
described above for at least three years is entitled to sell such shares under
Rule  144  without  regard to any of the limitations described above.)  Of the
"restricted  securities"  outstanding,  substantially all of these shares have
either  been  held  for the two-year holding period required under Rule 144 or
will  be  registered  for  resale under the Securities Act of 1933, as amended
(the  "Securities  Act")  in  the near future, including 5,075,500 shares sold
in  the  private  placement  discussed above.  No predictions can be made with
respect to the effect, if any, that sales of Common Stock in the market or the
availability  of  shares  of Common Stock for sale under Rule 144 will have on
the  market price of Common Stock prevailing from time to time.  Nevertheless,
the  possibility  that  substantial amounts of Common Stock may be sold in the
public  market  may  adversely  affect prevailing market prices for the Common
Stock.

     Possible Volatility of Stock Price.  The market price of the Common Stock
could  be  subject to significant fluctuations in response to such factors as,
among others, variations in the anticipated or actual results of operations of
the  Company  or  other  companies in the used car sales and finance industry,
changes  in  conditions  affecting  the economy generally, analyst reports, or
general  trends  in  the  industry.


<PAGE>  18
                 ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA
              (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

     The following table sets forth selected historical consolidated financial
data  of  the  Company  for  each  of  the years in the five-year period ended
December  31, 1996. The selected annual historical consolidated financial data
for  1993,  1994,  1995,  and 1996 are derived from the Company's Consolidated
Financial  Statements  audited by KPMG Peat Marwick LLP, independent certified
public accountants. The selected annual historical consolidated financial data
for  1992  are  derived  from  the Company's Consolidated Financial Statements
audited  by  Toback  &  Co.,  independent  certified  public  accountants. For
additional  information,  see  the  Consolidated  Financial  Statements of the
Company included elsewhere in this report.  The following table should be read
in conjunction with Item 7. "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations."
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                  ---------------------------------------------
STATEMENT OF OPERATIONS DATA:                       1996      1995      1994     1993     1992
                                                  --------  --------  --------  -------  ------
<S>                                               <C>       <C>       <C>       <C>      <C>
Sales of Used Cars                                $ 53,768  $47,824   $27,768   $13,969  $2,136
Less:
  Cost of Used Cars Sold                            29,890   27,964    12,577     6,089   1,010
  Provision for Credit Losses                        9,811    8,359     8,140     3,292     826
                                                  --------  --------  --------  --------  ------
                                                    14,067   11,501     7,051     4,588     300
                                                  --------  --------  -------   --------  ------
Interest Income                                     15,856   10,071     5,449     1,629     148
Gain on Sale of Loans                                4,434        -         -         -       -
                                                  --------  --------  --------  --------  ------
                                                    20,290   10,071     5,449     1,629     148
                                                  --------  --------  --------  --------  ------
Servicing Income                                       921        -         -         -       -
Other Income                                           650      308       556       879     982
                                                  --------  --------  --------  --------  ------
                                                     1,571      308       556       879     982
                                                  --------  --------  --------  --------  ------
Income before Operating Expenses                    35,928   21,880    13,056     7,096   1,430
Operating Expenses:
  Selling and Marketing                              3,585    3,856     2,402     1,293     656
  General and Administrative                        19,538   14,726     9,141     3,625     828
  Depreciation and Amortization                      1,577    1,314       777       557     429
                                                  --------  --------  --------  --------  ------
                                                    24,700   19,896    12,320     5,475   1,913
                                                  --------  --------  --------  --------  ------
Income before Interest Expense                      11,228    1,984       736     1,621    (483)
Interest Expense                                     5,262    5,956     3,037       893      12
                                                  --------  --------  --------  --------  ------
Earnings (Loss) before Income Taxes                  5,966   (3,972)   (2,301)      728    (495)
Income Taxes (Benefit)                                 100        -      (334)       30       -
                                                  --------  --------  --------  --------  ------
Net Earnings (Loss)                               $  5,866  $(3,972)  $(1,967)  $   698  $ (495)
                                                  ========  ========  ========  ======== =======
Earnings (Loss) per Share                         $   0.60  $ (0.67)  $ (0.35)  $  0.14  $(0.11)
                                                  ========  ========  ========  ======== =======
Shares used in Computation                           8,283    5,892     5,584     5,011   4,640
                                                  ========  ========  ========  ======== =======
</TABLE><PAGE>  19
                 SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
              (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE><CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                  ---------------------------------------------
                                                    1996      1995      1994     1993     1992
                                                  --------  --------  --------  -------  ------
<S>                                               <C>       <C>       <C>       <C>      <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents                         $ 18,455  $ 1,419   $   168   $    79  $  415
Finance Receivables, Net                            51,063   40,726    15,858     7,089   1,758
Total Assets                                       118,083   60,790    29,711    11,936   4,392
Subordinated Notes Payable                          14,000   14,553    18,291     8,941      93
Total Debt                                          26,904   49,754    28,233     9,380   4,189
Preferred Stock                                          -   10,000         -         -       -
Common Stock                                        82,612      127        77         1       1
Total Stockholders' Equity (Deficit)                82,319    4,884    (1,194)      697      (1)
Principal Balances Outstanding:
  Dealership Sales Portfolio                         7,068   34,226    19,881     9,588   2,492
  Third Party Dealer Portfolio                      51,213   13,805     1,620         -       -
  Portfolio Securitized with Servicing Retained     51,663        -         -         -       -
                                                  --------  --------  --------  --------  ------
    Total                                         $109,944  $48,031   $21,501   $ 9,588  $2,492
                                                  ========  ========  ========  ======== =======

DEALERSHIP OPERATING DATA (UNAUDITED):
Average Sales Price per Car                        $ 7,107   $ 6,478   $ 5,269  $ 4,159     n/a
Number of Used Cars Sold                             7,565     7,383     5,270    3,359     n/a
Company Dealerships                                      8         8         8        5       1
Units Sold per Dealership                              946       923       659      672     n/a
Number of Contracts Originated                       6,929     6,129     4,731    3,093     n/a
Principal Balances Originated (000 Omitted)        $48,996   $36,568   $23,589  $12,984     n/a
RETAINED PORTFOLIO:
Number of Contracts Outstanding                      1,045     8,049     5,515    2,929     803
Allowance as % of Outstanding Principal               23.0%     21.9%     30.4%    30.0%   29.4%
Average Principal Balance Outstanding              $ 6,764   $ 4,252   $ 3,605  $ 3,273 $ 3,105
Average Yield on Contracts                            29.2%     28.0%     28.2%    26.4%    n/a
DELINQUENCIES:
Principal Balances 31 to 60 Days                       2.3%      4.2%      5.1%    10.5%    n/a
Principal Balances over 60 Days                        0.6%      1.1%      1.3%    15.0%    n/a
THIRD PARTY OPERATING DATA (UNAUDITED):
Number of Contracts Purchased                        9,825     3,012     1,423        -      -
Principal Balances Purchased (000 Omitted)         $56,770   $16,455   $ 3,607  $     - $    -
Number of Branch Offices                                35         8         1        -      -
Number of Third Party Dealers                        1,400       118        20        -      -
Number of Contracts Outstanding                      8,430     2,733       726        -      -
RETAINED PORTFOLIO:
Allowance as % of Outstanding Principal               12.7%      7.2%      9.8%       -      -
Average Principal Balance Outstanding              $ 5,252   $ 5,051   $ 2,232  $     - $    -
Average Yield on Contracts                            25.8%     26.7%     30.9%       -      -
DELINQUENCIES:
Principal Balances 31 to 60 days                       3.1%      1.2%      6.0%       -      -
Principal Balances over 60 days                        1.1%      0.4%      2.6%       -      -
PER CONTRACT PURCHASED:
Average Discount                                   $   660   $   551   $   504  $     - $    -
Average Percent Discount                              11.4%     10.1%     12.5%       -      -
(1) n/a - not available
</TABLE>

<PAGE>  20
     ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

FORWARD  LOOKING  STATEMENTS

     This  report  contains  forward looking statements. Additional written or
oral  forward  looking statements may be made by the Company from time to time
in filings with the Securities and Exchange Commission or otherwise. Such for-
ward  looking statements are within the meaning of that term in Section 27A of
the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").  Such statements may include, but not be limited
to,  projections  of  revenues, income, or loss, estimates of capital expendi-
tures,  plans for future operations, products or services, and financing needs
or  plans,  as  well  as  assumptions  relating  to  the foregoing.  The words
"believe,"  "expect," "anticipate," "estimate," "project," and similar expres-
sions identify forward looking statements, which speak only as of the date the
statement was made. Forward looking statements are inherently subject to risks
and  uncertainties,  some of which cannot be predicted or quantified.   Future
events  and  actual  results could differ  materially from those set forth in,
contemplated  by,  or underlying the forward looking statements. The following
disclosures,  as  well  as other statements in the Company's report, including
those  contained below in Item 7.  "Management's  Discussion  and  Analysis of
Financial  Condition  and  Results of Operations," in Item 5.  "Market for the
Registrant's  Common  Equity Securities and Related Stockholders Matters," and
in  the  Notes  to  the  Company's Consolidated Financial Statements, describe
factors,  among others, that could contribute to or cause such differences, or
that could affect the Company's stock price.

INTRODUCTION

     General.   The Company commenced its used car sales and finance operations
with  the  acquisition  of  two  Company  Dealerships in 1992. During 1993, the
Company  acquired  three  additional  Company Dealerships. In 1994, the Company
constructed and opened four new Company Dealerships that were built specifically
to meet the Company's new standards of appearance, reconditioning capabilities,
size,  and  location.   During  1994, the Company closed one Company Dealership
because  the  facility failed to satisfy these new standards and, at the end of
1995,  closed  its  Gilbert, Arizona dealership (the "Gilbert Dealership").  In
July, 1996, the Company opened a small dealership in Prescott, Arizona.

     For  substantially  all  of  1995  the Gilbert Dealership was used by the
Company  to  evaluate  the  sale  of  later model used cars. These cars had an
average  age  of  approximately three years, which is two to seven years newer
than  the cars typically sold at Company Dealerships, and cost more than twice
that  of  typical  Company  Dealership  cars.  The Company determined that its
standard financing program could not be implemented on these higher cost cars.
Furthermore,  operation  of  this  dealership  required  additional  corporate
infrastructure  to  support its market niche, such as distinct advertising and
marketing  programs, which the Company was unable to leverage across its other
operations.  Accordingly,  the  Company  terminated this program, and sold the
land,  dealership  building,  and other improvements to a third party for $1.7
million.  Pursuant  to  this  sale  and  the  disposition of other assets, the
Company recognized a loss of approximately $221,000.  During fiscal year 1995,
the  Gilbert  Dealership produced sales of $9.5 million (average of $8,946 per
car  sold)  and gross profits (Sales of Used Cars less Cost of Used Cars Sold)
of  $2.2  million  (average  of $2,060 per car sold), and the Company incurred
selling and marketing expenses of $627,000 (average of $593 per car sold). The
results  of  operations  discussed  below have been adjusted as if the Gilbert
Dealership had been terminated as of December 31, 1994, as management believes
<PAGE>  21
these   pro   forma   results  are  more  indicative  of  ongoing  operations.
Accordingly,  1995  amounts  followed  by  "(pro forma)" have been adjusted to
eliminate  Gilbert  Dealership  operations.

     In  1994,  the  Company  acquired  Champion  Financial Services, Inc., an
independent automobile finance company, primarily for its management expertise
and  contract  servicing  software  and systems. Champion had one office and a
portfolio  of  approximately  $1.9  million  in  sub-prime contracts averaging
approximately $2,000 in principal amount. For the balance of 1994, the Company
purchased  an  additional  $1.7  million  in  contracts.

     In  April  1995,  the  Company initiated an aggressive plan to expand the
number  of contracts purchased from its Third Party Dealer network. By the end
of  1996  the  Company  had  35  branch  offices in 12 states.  This expansion
enabled  the  Company to leverage its existing infrastructure and increase its
contract  portfolio  much  more quickly than it could through the expansion of
its  Company  Dealerships.  The Company is in the process of further expanding
its  Third  Party Dealer operations and diversifying its earning asset base by
implementing  the  Cygnet  Dealer  Program  pursuant to which the Company will
provide  Third  Party  Dealers  with  operating  credit  lines  secured by the
dealers'  retail  installment  contract  portfolios.

     In  1996 the Company completed an initial public offering and a secondary
offering  in  which  it  sold  common  stock  for  a  total  of $82.3 million.

     The  following discussion and analysis provides information regarding the
Company's  consolidated  financial position as of December 31, 1996, and 1995,
and  its results of operations for the years ended December 31, 1996, 1995 and
1994.

     Growth  in  Finance  Receivables.    As  a  result of the Company's rapid
expansion, contract receivables serviced increased by 129.0% to $109.9 million
at  December 31, 1996 (including $51.7 million in contracts serviced under the
Company's  Securitization  Program)  from  $48.0 million at December 31, 1995,
which  was  an  increase  of  123.3%  from $21.5 million at December 31, 1994.

     The  following  tables  reflect  the  growth  in contract originations by
Company Dealerships and contract purchases from Third Party Dealers as well as
the  period  end  balances  measured  in terms of the principal amount and the
number  of  contracts.
<TABLE>
<CAPTION>
                                  TOTAL CONTRACTS ORIGINATED/PURCHASED
                                 (IN THOUSANDS, EXCEPT NUMBER OF CONTRACTS)
                                         YEARS ENDED DECEMBER 31,
                            -------------------------------------------------------------------
                                    1996                   1995                   1994
                            ---------------------  ---------------------  ---------------------
                            PRINCIPAL    NO. OF    PRINCIPAL    NO. OF    PRINCIPAL    NO. OF
                              AMOUNT    CONTRACTS    AMOUNT    CONTRACTS    AMOUNT    CONTRACTS
                            ----------  ---------  ----------  ---------  ---------   ---------
<S>                         <C>         <C>        <C>         <C>        <C>         <C>
Company Dealerships         $   48,996      6,929  $   36,568      6,129  $   23,589      4,731
Third Party Dealers             56,770      9,825      16,455      3,012       3,607      1,423
                            ----------  ---------  ----------  ---------  ----------  ---------
  Total                     $  105,766     16,754  $   53,023      9,141  $   27,196      6,154
                            ==========  =========  ==========  =========  ==========  =========
</TABLE>

<PAGE>  22
<TABLE>
<CAPTION>
                                                 TOTAL CONTRACTS OUTSTANDING
                                      (IN THOUSANDS, EXCEPT NUMBER OF CONTRACTS)
                                                 YEARS ENDED DECEMBER 31,
                            --------------------------------------------------------------------
                                     1996                     1995                   1994
                            -----------------------  ---------------------  --------------------
                             PRINCIPAL     NO. OF    PRINCIPAL    NO. OF    PRINCIPAL    NO. OF
                              AMOUNT     CONTRACTS     AMOUNT    CONTRACTS    AMOUNT    CONTRACTS
                            -----------  ----------  ---------   ---------  ----------  ---------
<S>                         <C>          <C>         <C>         <C>        <C>         <C>
Company Dealerships         $   49,066       9,615   $   34,226      8,049  $   19,881      5,515
Third Party Dealers             60,878      12,942       13,805      2,733       1,620        726
                            -----------  ----------  ----------  ---------  ----------  ---------
Total Portfolio Serviced    $  109,944      22,557   $   48,031     10,782  $   21,501      6,241
                            -----------  ----------  ----------  ---------  ----------  ---------
Less Portfolio Securitized
  and Sold                     (51,663)    (10,612)           -          -           -          -
                            -----------  ----------  ----------  ---------  ----------  ---------
  Company Total             $   58,281      11,945   $   48,031     10,782  $   21,501      6,241
                            ===========  ==========  ==========  =========  ==========  =========
</TABLE>

     The  first  table,  reflecting Third Party Dealer purchases excludes $5.6
million  in  principal  balances  (2,095  contracts) acquired in a single bulk
purchase  in  late  December  1996  and  also  excludes  $1.6 million in lease
contracts  acquired in October 1996 as part of a purchase of certain assets of
a used car dealership in Las Vegas, Nevada. The second table, reflecting Third
Party  Dealer principal  balances, includes $5.5 million in principal balances
related  to  this  bulk  purchase and includes $1.4 million (375 contracts) in
balances  related  to  these  leases. There were no material bulk purchases in
1995  or  1994.

RESULTS  OF  OPERATIONS

     The  prices  at  which  the Company sells its cars and the interest rates
that  it  charges  to  finance  these  sales  take into consideration that the
Company's  primary  customers are high-risk borrowers, many of whom ultimately
default. The Provision for Credit Losses reflects these factors and is treated
by  the  Company  as  a cost of both the future interest income derived on the
contract  receivables  originated  at Company Dealerships as well as a cost of
the  sale  of  the  cars  themselves.  Accordingly,  unlike  traditional  car
dealerships,  the  Company does not present gross profits in its Statements of
Operations  calculated  as  Sales  of  Used  Cars less Cost of Used Cars Sold.

  YEARS  ENDED  DECEMBER  31,  1996,  1995  AND  1994

     Sales  of  Used  Cars.    Sales  of Used Cars increased by 40.1% to $53.8
million  for  the  year ended December 31, 1996 from $38.4 million (pro forma)
for  the year ended December 31, 1995 and by 38.1% for the year ended December
31,  1995 from $27.8 million for the year ended December 31, 1994. This growth
reflects  increases  in the average unit sales price and the average number of
units  sold  by  each  Company  Dealership.

     The average sales price per car increased by 17.2% to $7,107 for the year
ended  December  31,  1996 from $6,065 (pro forma) for the year ended December
31,  1995  compared  to  15.1%  from  $5,269  in  1994. This increase reflects
management's  decision  to  sell  higher  quality  vehicles  at  its  Company
<PAGE>  23
Dealerships.  Units sold per Company Dealership averaged 946, 904 (pro forma),
and  659  for the years ended December 31, 1996, 1995, and 1994, respectively.
The  Company  attributes  the increase in units sold per Company Dealership to
the  success  of the Company's business strategy, most notably its advertising
and  marketing  programs.

     Cost  of  Used  Cars  Sold  and Gross Margin.  The Cost of Used Cars Sold
increased  by 44.4% to $29.9 million for the year ended December 31, 1996 from
$20.7  million  (pro forma) for the year ended December 31, 1995, which was an
increase  of 64.3% from $12.6 million for the year ended December 31, 1994. On
a  per unit basis, the Cost of Used Cars Sold increased by 20.8% to $3,951 for
the  year  ended  December 31, 1996 from $3,270 (pro forma) for the year ended
December  31,  1995,  which  was an increase of 37.0% from $2,387 for the year
ended  December  31,  1994,  largely due to management's determination to sell
higher  quality  cars  throughout its operations. The gross margin on used car
sales  (Sales of Used Cars less Cost of Used Cars Sold excluding Provision for
Credit Losses) increased by 35.0% to $23.9 million for the year ended December
31,  1996 from $17.7 million (pro forma) for the year ended December 31, 1995,
which  was an increase of 16.4% from $15.2 million for the year ended December
31,  1994.  As  a  percentage of sales, the gross margin was 44.4%, 46.1% (pro
forma),  and  54.7%  for  the  years  ended December 31, 1996, 1995, and 1994,
respectively.  The  Company  attributes  the  decline  in  the  gross  margin
percentage  to management's strategy of increasing the quality and, therefore,
the  cost,  of cars sold at Company Dealerships while maintaining a consistent
dollar  gross margin per unit sold. The decline in the gross margin percentage
was  offset  by  corresponding  increases  in the quality of finance contracts
generated  (resulting in a lower Provision for Credit Losses) and greater unit
sales  per  Company  Dealership. On a per unit basis, the gross margin per car
sold  was  $3,156,  $2,795(pro forma), and $2,882 for the years ended December
31,  1996,  1995,  and  1994,  respectively.

     Provision  for  Credit  Losses.   A high percentage of Company Dealership
customers  ultimately  do  not  make  all  of  their  contractually  scheduled
payments,  requiring the Company to charge off the remaining principal balance
due.  As  a  result,  the  Company recognizes a Provision for Credit Losses in
order  to  establish  an  Allowance  for  Credit  Losses  sufficient to absorb
anticipated  future losses. The Provision for Credit Losses increased by 25.6%
to  $9.8  million  in  1996 over $7.8 million (pro forma) in 1995, which was a
decrease  of  $300,000  or  3.7%  from  $8.1 million in 1994. This includes an
increase  of  $153,000  in  the  Provision for Credit Losses in 1996 for third
party  receivables over 1995 when the Company recorded no Provision for Credit
Losses  for  third  party receivables. In 1994, the Company recorded Provision
for  Credit  Losses totaling $116,000 for its third party loan portfolio. On a
percentage  basis,  the  Provision  for  Credit  Losses per unit originated at
Company  Dealerships  increased by 3.1% to $1,277 per unit in 1996 over $1,239
(pro forma) per unit in 1995, which was a decrease of 18.7% from 1994 when the
average  was $1,523 per unit. As a percentage of contract balances originated,
the  Provision  for Credit Losses averaged 19.7%, 22.8% (pro forma), and 34.5%
in  1996,  1995,  and 1994, respectively. This decrease reflects the Company's
strengthened  underwriting  requirements, the higher quality of the cars sold,
and  the  Company's  improved  collection  efforts.

     The Company charges its Provision for Credit Losses to current operations
and  does  not  recognize  any  portion  of  the unearned interest income as a
component  of  its  Allowance  for  Credit  Losses. Accordingly, the Company's
unearned  finance  income  is  comprised  of  the  full annual percentage rate
("APR")  on  its  contracts  less  amortization  of  loan  origination  costs.


<PAGE>  24
     Interest  Income.  Interest Income consists primarily of interest on both
finance  receivables from Company Dealership sales and interest on Third Party
Dealer  finance  receivables.

     Company  Dealership  Sales  -  Interest  Income increased by 2.4% to $8.4
million  for  the  year ended December 31, 1996 from $8.2 million for the year
ended  December 31, 1995, which increased by 74.5% compared to $4.7 million in
the  year  ended  December  31,  1994.  Interest  Income during the year ended
December  31,  1996  was  affected  by  the  sale of $58.2 million in contract
principal  balances  pursuant to the Securitization Program, and will continue
to  be  affected  in  future  periods by additional securitizations. A primary
element  of  the Company's sales strategy is to provide financing to customers
with  poor  credit  histories  who  are  unable to obtain automobile financing
through  traditional  sources. The Company financed 91.1% of sales revenue and
91.6% of the used cars sold at Company Dealerships for the year ended December
31,  1996 compared to 89.7% (pro forma) of sales revenue and 91.2% (pro forma)
of the used cars sold for the year ended December 31, 1995, and 85.0% of sales
revenue  and  89.8% of used cars sold in the year ended December 31, 1994. The
average  amount  financed  increased to $7,071 for the year ended December 31,
1996 from $5,966 for the year ended December 31, 1995 which had increased from
$4,986  for  the  year ended December 31, 1994. The effective yield on Finance
Receivables from Company Dealerships was 29.2%, 28.0%, and 28.2% for the years
ended December 31, 1996, 1995, and 1994, respectively. The Company operated 8,
7  (pro  forma),  and  8  dealerships  at  December  31, 1996, 1995, and 1994,
respectively.

     Third Party Dealers - Interest Income increased by 305.6% to $7.3 million
for  the  year ended December 31, 1996 from $1.8 million in 1995, which was an
increase  of  153.5%  from  $710,000  in 1994. Interest Income during the year
ended  December 31, 1996 was effected by the sale of $10.0 million in contract
principal  balances  pursuant to the Securitization Program, and will continue
to  be  effected  in  future  periods  by additional securitizations. Interest
income  has  increased in conjunction with the increases in Third Party Dealer
contracts  purchased  and  outstanding.  As  noted above, the Company began to
significantly  expand its Third Party Dealer branch office operations in April
1995.  Further,  subsequent  to June 30, 1995, as a result of its migration to
higher quality contracts and expansion into markets with interest rate limits,
the  Company's  yield on its Third Party Dealer contract portfolio has trended
downward.  Portfolio  yield  was approximately 25.8%, 26.7%, and 30.9% for the
years  ended  December  31,  1996,  1995,  and 1994, respectively. The Company
operated  35,  8  and 1 branch office(s) at December 31, 1996, 1995, and 1994,
respectively.

     Gain  on  Sale  of  Loans.  During the first quarter of 1996, the Company
initiated  a  Securitization  Program  with SunAmerica under which the Company
sells  securities  backed  by  contracts  to SunAmerica. The Company retains a
residual  in  the contracts sold and records a gain on the sale. The amount of
the  gain  on  sale  reflects  the  difference between the yield earned on the
contract  portfolio  securitized  and  the  return on the securities sold. The
amount  of  any  gain  on  sale is based upon certain estimates, which may not
subsequently  be  realized.  To  the  extent  that  actual  cash  flows  on  a
securitization  are  materially below estimates, the Company would be required
to  revalue  the  residual portion of the securitization which it retains, and
record  a  charge  to  earnings  based  upon  the  reduction.

     Through  December  31,  1996, the Company had securitized an aggregate of
$68.2 million in contracts, issuing $53.5 million in securities to SunAmerica.
Pursuant  to  these transactions, the Company reduced its Allowance for Credit
Losses  by  $10.0 million during 1996 and retained a residual in the contracts
<PAGE>  25
sold  of  $9.9 million at December 31, 1996. The Company also recorded Gain on
Sale  of  Loans  during  1996  of  $4.4  million,  net  of  expenses.

     The  Company's  net earnings may fluctuate from quarter to quarter in the
future  as  a  result  of  the  timing  and  size  of  its  securitizations.

     Servicing  Income.    The Company services the $51.7 million in contracts
sold  in  the  securitization  for  monthly  fees ranging from .33% to .42% of
beginning of period principal balances (4% to 5% annualized). Servicing Income
for  the  year  ended  December  31,  1996  totaled  $921,000.

     Other Income.  Other Income consists primarily of franchise fees from the
Company's rent-a-car franchisees and insurance premiums earned on force placed
insurance  policies.  This income increased by 111.0% to $650,000 for the year
ended  December  31,  1996 from $308,000 for the year ended December 31, 1995,
which was a decrease of 44.6% from the $556,000 in 1994. The Company no longer
actively  engages  in  the  rent-a-car  franchise  business.

     Income before Operating Expenses.  As a result of the Company's continued
expansion, Income before Operating Expenses grew by 77.7% to $35.9 million for
the  year  ended December 31, 1996 from $20.2 million (pro forma) for the year
ended  December 31, 1995, which was an increase of 54.2% from $13.1 million in
1994.  Interest  Income  on the loan portfolios and Gain on Sale of Loans were
the  primary  contributors  to  the  increase.  The increase also reflects the
growth  of  Sales  of  Used  Cars.

     Operating  Expenses.  Operating Expenses consist of Selling and Marketing
Expenses,   General   and   Administrative   Expenses,  and  Depreciation  and
Amortization.  The  allocation  of  these  expenses  to  each of the Company's
business  segments (Company Dealerships, Company Dealership Receivables, Third
Party  Dealers,  and  Corporate  and  Other)  is  shown  at  Note  20  to  the
Consolidated  Financial  Statements.

     Selling  and  Marketing Expenses.  For the years ended December 31, 1996,
1995,  and 1994, Selling and Marketing Expenses were comprised almost entirely
of   advertising   costs   and  commissions  relating  to  Company  Dealership
operations.  Selling and Marketing Expenses increased by 12.5% to $3.6 million
for  the  year  ended  December 31, 1996 from $3.2 million (pro forma) for the
year ended December 31, 1995, which was an increase of 33.3% from $2.4 million
in  1994. As a percentage of Sales of Used Cars, these expenses averaged 6.7%,
8.3%  (pro  forma),  and 8.6% for the years ended December 31, 1996, 1995, and
1994,  respectively.  On a per unit sold basis, Selling and Marketing Expenses
of  Company  Dealerships decreased by 7.1% to $474 per unit for the year ended
December  31,  1996 from $510 (pro forma) per unit for the year ended December
31,  1995,  which  was  an  increase  of  18.9%  from  $429  per unit in 1994.

     General and Administrative Expenses.  General and Administrative Expenses
increased  by 45.5% to $19.5 million for the year ended December 31, 1996 from
$13.4  million  (pro forma) for the year ended December 31, 1995, which was an
increase of 47.3% from $9.1 million in 1994. These expenses represented 25.8%,
27.5%,  and  27.0%  of  total  revenues for the years ended December 31, 1996,
1995,  and  1994, respectively. For the year ended December 31, 1996, 42.5% of
General  and  Administrative  Expenses were attributable to Company Dealership
sales,  15.6%  to  the  Company  Dealership Receivables' financing activities,
20.2%  to  Third  Party Dealer activities and 21.7% to Corporate overhead. For
the year ended December 31, 1995, 55.8% of General and Administrative Expenses
were attributable to Company Dealership sales, 18.2% to the Company Dealership
Receivables'  financing  activities, 7.9% to Third Party Dealer activities and
18.1%  to  Corporate  overhead.  The  increase  in  General and Administrative
<PAGE>  26
Expenses  is  a  direct  result  of the Company's significant expansion of its
Third  Party  Dealer  financing  operations  as well as continued expansion of
infrastructure  to  administer  growth.

     Depreciation and Amortization.  Depreciation and Amortization consists of
depreciation  and  amortization  on  the  Company's property and equipment and
amortization  of  the  Company's  trademarks.  Depreciation  and  amortization
increased  by  23.1% to $1.6 million for the year ended December 31, 1996 from
$1.3  million  for  the year ended December 31, 1995, which was an increase of
62.5%  from  $777,000  in  1994  .  The  increase  was  due  primarily  to the
construction  of  Company servicing facilities, which opened in June 1995, and
the  purchase  of  associated equipment. For the year ended December 31, 1996,
20.2%  of  these expenses were attributable to Company Dealership sales, 48.7%
to  the  Company  Dealership receivables' financing activities, 12.4% to Third
Party  Dealer  activities  and 18.7% to Corporate overhead. For the year ended
December  31,  1995,  21.2%  of  these  expenses  were attributable to Company
Dealership  sales,  36.5%  to  the  Company  Dealership receivables' financing
activities,  6.8%  to  Third  Party  Dealer  activities and 35.5% to Corporate
overhead.  Amortization  of  Covenants was $296,000 and $296,000 for the years
ended  December  31, 1995, and 1994 respectively. As of December 31, 1995, all
existing  covenants  had  been  fully  amortized.

     Interest Expense.  Interest expense decreased by 11.7% to $5.3 million in
1996  from  $6.0  million  in  1995, which was an increase of 100.0% from $3.0
million  in  1994. The decrease in 1996, despite significant growth in Company
assets, is the direct result of the two public offerings that were completed in
1996  which  generated $79.4 million in cash, and the Company's Securitization
Program which generated $39.0 million in cash from the sale of Finance Receiv-
ables which the Company utilized to pay down debt. Further, concurrent with the
Company's  initial  public offering on June 21, 1996, the Company restructured
its  Subordinated  Notes Payable reducing the borrowing rate on that debt from
18% to 10% per annum.

     Income  Taxes.  Income tax expense totaled $100,000 in 1996, up from zero
in 1995. In 1994, the Company realized a tax benefit of $334,000. In 1996, the
Company  utilized  all  of  the  Valuation  Allowance that existed against its
deferred  income  tax  assets  as of December 31, 1995. Therefore, the Company
anticipates incurring income tax expense in the future at the statutory income
tax  rates.

ALLOWANCE  FOR  CREDIT  LOSSES

     The  Company has established an Allowance for Credit Losses ("Allowance")
to  cover  anticipated  credit  losses  on  the  contracts  currently  in  its
portfolio. The Allowance has been established through the Provision for Credit
Losses  on  contracts  originated  at  Company  Dealerships,  and  through
nonrefundable  acquisition  discounts  and  Provision  for  Credit  Losses  on
contracts  purchased  from  Third  Party  Dealers.  The Allowance on contracts
originated  at Company Dealerships increased to 23.0% of outstanding principal
balances  as  of  December 31, 1996 compared to 21.9% as of December 31, 1995.
The  Allowance  as  a  percentage of Third Party Dealer contracts increased to
12.7%  from  7.2% over the same period. However, the Allowance as a percentage
of  the  Company's  combined contract portfolio decreased to 13.9% at December
31,  1996  from  17.7% at December 31, 1995 reflecting the fact that a greater
portion  of the Company's overall contract portfolio, represented by contracts
purchased  from  Third  Party Dealers, for which a lower level of Allowance is
required.


<PAGE>  27
     The  following  table  reflects  activity  in  the  Allowance, as well as
information  regarding  charge  off activity, for the years ended December 31,
1996  and  1995,  in  thousands.
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                        ----------------------------------------
                                                        COMPANY DEALERSHIPS  THIRD PARTY DEALERS
                                                        -------------------  -------------------
                                                          1996      1995         1996      1995
                                                        -------   -------      -------   -------
<S>                                                     <C>       <C>         <C>       <C>
Allowance Activity:
Balance, Beginning of Period                            $ 7,500   $ 6,050      $ 1,000   $   159
Provision for Credit Losses                               9,658     8,359          153         -
Discount Acquired                                             -         -        8,963     1,660
Reduction Attributable to Loans Sold                     (9,331)        -         (650)        -
Net Charge Offs                                          (6,202)   (6,909)      (2,966)     (819)
                                                        -------   -------       ------   -------
Balance, End of Period                                  $ 1,625   $ 7,500      $ 6,500   $ 1,000
                                                        =======   =======      =======   ==-====
Allowance as Percent of Period Ended Principal Balance     23.0%     21.9%        12.7%      7.2%
                                                        =======   =======      =======   =======
Charge off Activity:
Principal Balances:
  Collateral Recovered                                  $ 6,256   $ 6,686      $ 3,618   $   806
  Collateral Not Recovered                                1,859     2,478          717       220
                                                        -------   -------      -------   -------
  Total Principal Balances                                8,115     9,164        4,335   $ 1,026
  Accrued Interest                                          487       653          123        59
  Recoveries, Net                                        (2,400)   (2,908)      (1,492)     (266)
                                                        -------   -------       ------   -------
Net Charge Offs                                         $ 6,202   $ 6,909      $ 2,966   $   819
                                                        =======   =======      =======   =======
Net Charge Offs as % of Average Principal Outstanding      23.0%     24.0%        10.7%    11.9%
                                                        =======   =======      =======   =======
</TABLE>

     The  Company's  policy  is  to  charge off contracts when they are deemed
uncollectible,  but  in any event at such time as a contract is delinquent for
90  days.

     Net  Charge  Offs  -  Company Dealerships.  Net Charge Offs for contracts
originated  at Company dealerships in 1996 were 23.0% of the average principal
balance  outstanding  compared to 24.0% in 1995. As discussed above, beginning
in  1995  and  continuing  in  1996 the Company has migrated to selling higher
quality  cars  at  its  dealerships.  Accordingly,  repossessions  have  less
frequently  met  Company  standards  for resale and, therefore, have been sold
primarily  at  wholesale  auction.

     Recoveries  averaged  29.6%  of  principal  balances  charged off in 1996
compared  to  31.7% in 1995, primarily reflecting reductions in the percentage
of  repossessed  cars sold at Company Dealerships of 11.0% in 1996 compared to
33.6%  in  1995.

     The  Company's  net  charge  offs  on contracts generated through Company
Dealerships  are favorably affected by a reduction in sales tax liability as a
result  of  loan  defaults.

<PAGE>  28
     Net  Charge  Offs  -  Third Party Dealers.  Net Charge Offs for contracts
purchased from Third Party Dealers in 1996 were 10.7% of the average principal
balance  outstanding  compared  to  11.9%  in  1995.  Prior to April 1995, the
Company  purchased  from  Third  Party  Dealers, at discounts of approximately
15.0%  to  25.0%,  contracts  with average principal balances of approximately
$4,000 bearing a typical APR of 29.9%. In April 1995 the Company significantly
revised  and  expanded  its  Third  Party  Dealer  program.  Under the current
program,  which  is  aimed  at  more creditworthy borrowers, it purchases from
Third  Party  Dealers,  at  discounts averaging approximately 11.0%, contracts
with average principal balances of approximately $5,800 bearing an average APR
of  24.5%.

     Recoveries  averaged 34.4% of principal balances charged off on contracts
purchased  from  Third  Party  Dealers  in 1996 compared to 25.9% for the year
ended  December  31,  1995.  The  increase  is  due to both an increase in the
percent  of  charged  off  collateral actually recovered to 83.5% in 1996 from
78.6%  in  1995  and  an  increase  in the percent realized from the resale of
recovered  collateral  to  41.2%  in  1996  from  33.0%  in  1995.

The Company's Net Charge Offs on its Third Party Dealer contract portfolio are
significantly  lower  than  those  incurred on its Company Dealership contract
portfolio.  This  is  attributable  to  the relationship of the average amount
financed to the underlying collateral's wholesale value and to a lesser degree
the  generally  more  creditworthy customers served by Third Party Dealers. In
its  Third  Party  Dealer  portfolio,  the Company generally limits the amount
financed to not more than 120.0% of the wholesale value of the underlying car,
although  the  Company will make exceptions on a case-by-case basis. For 1996,
the  amount  financed  to  wholesale  book on the Third Party Dealer portfolio
averaged  116.0%,  as  compared to 191.9% for the Company Dealership portfolio
(112.3%  of  Kelly  Blue  Book retail value). For 1995, the amount financed to
wholesale  book  on  the  Third  Party  Dealer  portfolio  averaged 117.0%, as
compared  to 184.0% for the Company Dealership portfolio (105.0% of Kelly Blue
Book retail value). See Item 1. "Business - Comparison of Contracts Originated
at  Company  Dealerships  and  Third  Party  Dealers."

     Net  Charge  Off  percentage  trends  for  the  respective portfolios are
considered  by  management  in  determining the adequacy of the Allowance as a
percentage  of  contract  principal  balances  outstanding.

     Static Pool Analysis.  To monitor contract performance, beginning in June
1995,  the  Company  implemented  "static  pool"  analysis  for  all contracts
originated  since  January  1,  1993.  Static  pool  analysis  is a monitoring
methodology  by which each month's originations and subsequent charge offs are
assigned  a  unique  pool  and  the  pool performance is monitored separately.
Improving  or  deteriorating performance is measured based on cumulative gross
and  net  charge offs as a percentage of original principal balances, based on
the  number  of  complete payments made by the customer before charge off. The
tables  herein  set  forth  the  cumulative net charge offs as a percentage of
original contract cumulative balances, based on the quarter of origination and
segmented  by  the  number  of  payments made prior to charge off. For periods
denoted  by  "x",  the  pools  have  not  seasoned  sufficiently  to allow for
computation  of  cumulative losses. For periods denoted by "-", the pools have
not  yet attained the indicated cumulative age. While the Company monitors its
static  pools on a monthly basis, for presentation purposes the information in
the  tables  are  presented  on  a  quarterly  basis.




<PAGE>  29
CONTRACTS  ORIGINATED  AT  COMPANY  DEALERSHIPS

     The  following  table  sets  forth  the  cumulative  net charge offs as a
percentage  of  original contract cumulative balances, based on the quarter of
origination  and  segmented  by  the  number of monthly payments made prior to
charge  off.

         POOL'S CUMULATIVE NET LOSSES AS PERCENTAGE OF POOL'S ORIGINAL
                          AGGREGATE PRINCIPAL BALANCE
<TABLE>
<CAPTION>
MONTHLY PAYMENTS COMPLETED BY CUSTOMER  BEFORE CHARGE OFF
---------------------------------------------------------
              0      3      6     12     18     24
             ----  -----  ----- -----  -----  -----
<S>          <C>   <C>    <C>    <C>    <C>    <C>
1993:
1st Quarter  6.6%  18.3%  26.6%  33.2%  35.1%  35.3%
2nd Quarter  7.7%  18.4%  26.2%  30.6%  32.1%  32.3%
3rd Quarter  8.5%  19.9%  25.2%  30.4%  31.5%  31.7%
4th Quarter  7.1%  16.9%  23.4%  27.7%  28.9%  29.5%

1994:
1st Quarter  3.5%  10.8%  14.3%  17.7%  19.3%  21.4%
2nd Quarter  3.7%  11.3%  15.3%  19.7%  21.7%  22.8%
3rd Quarter  3.5%   8.5%  12.9%  17.0%  19.4%  20.0%
4th Quarter  2.9%   9.1%  13.3%  18.0%  20.1%     x

1995:
1st Quarter  1.6%   8.3%  13.8%  18.2%  20.6%     -
2nd Quarter  2.5%   7.9%  12.7%  17.2%     x      -
3rd Quarter  1.9%   6.5%  11.3%  18.3%     -      -
4th Quarter  1.1%   5.8%  11.0%     x      -      -

1996:
1st Quarter  1.4%   7.6%  13.3%     -      -      -
2nd Quarter  2.2%   9.3%     x      -      -      -
3rd Quarter  1.5%     -      -      -      -      -
</TABLE>

     Analysis  of portfolio delinquencies is also considered in evaluating the
adequacy  of  the  Allowance. Principal balances 31 to 60 days delinquent as a
percentage  of  total outstanding contract principal balances totaled 2.3% and
4.2%  as of December 31, 1996 and 1995, respectively. Principal balances 61 to
90  days  delinquent  as  a percentage of total outstanding contract principal
balances totaled 0.6% and 1.1% as of December 31, 1996 and 1995, respectively.
In accordance with the Company's charge off policy, there are no accounts more
than  90  days  delinquent  as  of  December  31,  1996  and  1995.

CONTRACTS  PURCHASED  FROM  THIRD  PARTY  DEALERS

     Non-refundable  acquisition  discount  ("Discount") acquired totaled $9.0
million  and  $1.7  million  for  the  years ended December 31, 1996 and 1995,
respectively.  The  Discount,  attributable  to  Third  Party  Dealer  branch
purchases,  averaged  11.4% as a percentage of principal balances purchased in
1996,  compared to 10.1% in 1995. Beginning in 1996, the Company expanded into
markets  with  interest rate limits. While contractual interest rates on these
contracts  are  limited  by  law,  the Company has been able to purchase these
contracts  at  a reasonably consistent effective yield and therefore Discounts
<PAGE>  30
have  trended  upward.  To  date,  the  Company has credited the Allowance for
Credit  Losses all Discount acquired with the purchase of contracts from Third
Party  Dealers.


     The  following  table sets forth the cumulative net charge offs as a per-
centage  of  original  contract  cumulative  balances, based on the quarter of
origination  and  segmented  by  the number  of monthly payments made prior to
charge off.

         POOL'S CUMULATIVE NET LOSSES AS PERCENTAGE OF POOL'S ORIGINAL
                          AGGREGATE PRINCIPAL BALANCE
<TABLE>
<CAPTION>
MONTHLY PAYMENTS COMPLETED BY CUSTOMER  BEFORE CHARGE OFF
---------------------------------------------------------
              0     3     6     12    18   24
             ----  ----  ----  ----  ---- ----
<S>          <C>   <C>   <C>   <C>   <C>  <C>
1995:
2nd Quarter  0.9%  4.1%  5.7%  7.8%   x   -
3rd Quarter  1.4%  4.0%  5.2%  7.0%   -   -
4th Quarter  1.0%  4.4%  6.8%    x    -   -

1996:
1st Quarter  0.8%  3.7%  6.9%    -    -   -
2nd Quarter  1.6%  6.3%    x     -    -   -
3rd Quarter  1.4%    -     -     -    -   -
</TABLE>

     Beginning  April  1, 1995, the Company initiated a new purchasing program
for  Third  Party  Dealer contracts which included a rapid migration to higher
quality  contracts.  As  of  March  31, 1995, the Third Party Dealer portfolio
originated under the prior program had a principal balance of $2.0 million and
has  a  remaining  balance  of  $133,000  as of December 31, 1996. Static pool
results  under  the  prior  program  are  not  a  material  consideration  for
management evaluation of the current Third Party Dealer portfolio and contract
performance  under  this prior program has been excluded from the table above.

     While  the static pool information is developing, management augments its
evaluation  of  the  adequacy of the Allowance for Third Party Dealers through
comparisons in the characteristics of collateral ratios and borrowers on Third
Party  Dealer  contracts  versus those of the Company Dealership contracts, as
well  as  through  comparisons  of  portfolio  delinquency,  actual  contract
performance  and, to the extent information is available, industry statistics.

     Analysis  of portfolio delinquencies is also considered in evaluating the
adequacy  of  the  Allowance. Principal balances 31 to 60 days delinquent as a
percentage  of  total outstanding contract principal balances totaled 3.1% and
1.2%  as of December 31, 1996 and 1995, respectively. Principal balances 61 to
90  days  delinquent  as  a percentage of total outstanding contract principal
balances totaled 1.1% and 0.4% as of December 31, 1996 and 1995, respectively.
In  accordance  with the Company's charge off policy, there are no Third Party
Dealer  contracts  more  than  90  days delinquent as of December 31, 1996 and
1995.

     At December 31, 1995 the average number of days a customer was delinquent
when  repossession  took place was under 30 days for both contracts originated
at Company  Dealerships and those purchased from Third Party Dealers. In 1996,
<PAGE>  31
the  Company  elected to extend the time period before repossession is ordered
with respect to those customers who exhibit a willingness and capacity to bring
their  contracts  current.  As  a  result of this revised repossession policy,
delinquencies  increased  slightly,  as  expected.

LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company  requires  capital  to  support  increases  in  its contract
portfolio,  expansion  of Company Dealerships and Branch Offices, the purchase
of  inventories,  the  purchase  of  property  and  equipment, and for working
capital  and  general  corporate  purposes.  The  Company  funds  its  capital
requirements  through  equity  offerings,  operating  cash  flow,  the sale of
finance  receivables,  and  supplemental  borrowings.

The  Company's  Net  Cash Provided by Operating Activities increased by 122.2%
from  $6.3 million for 1995 to $14.0 in 1996, compared to an increase of 85.3%
from  $3.4 million in 1994. The increase was primarily due to increases in Net
Earnings,  and  the  Provision  for  Credit  Losses, net of increases in Other
Assets, and the Gain on Sale of Finance Receivables. The increase in 1995 over
1994  was  primarily  a  result  of  a  smaller  increase in Inventory of $1.5
million,  and  an  increase  in  Accounts  Payable, Accrued Expenses and Other
Liabilities  of  $2.0  million.

     Net  Cash  Used  in  Investing  Activities  increased  by 1.6% from $36.4
million in the year ended December 31, 1995 to $37.0 million in the year ended
December  31, 1996. The $39.0 million increase provided by the sale of Finance
Receivables  and the $29.4 million increase provided by collections on Finance
Receivables  were  offset  by  the  $60.8 million increase in cash used in the
increase  in  Finance  Receivables,  $3.5  million  used  for  the increase in
Investments Held in Trust, and $2.9 million increase used for the purchases of
Property  and Equipment. Cash used in investing activities increased from 1994
to  1995  by  $15.8  million  or 76.7% primarily as a result of an increase in
Finance  Receivables  of  $25.8  million  net of increased collections of $7.6
million.

     The  Company's  Net  Cash  Provided  by Financing Activities increased by
28.1%  from $31.3 million in the year ended December 31, 1995 to $40.1 million
in the year ended December 31, 1996. This increase was the result of the $79.4
million  in  proceeds from the Company's public offerings of common stock, net
of the $28.6 million of repayment of Notes Payable and the redemption of $10.0
million  of  Preferred  Stock.  The  Company's  Net Cash Provided by Financing
Activities increased by 80.9% or $14.0 million from 1994 to 1995 due primarily
to  a  net  increase  in  Notes  Payable  of  $12.3  million.

     Revolving  Facility.   The Company maintains a Revolving Facility with GE
Capital  that  has  a  maximum  commitment  of  up to $50.0 million. Under the
Revolving  Facility,  the  Company  may  borrow  up  to 65.0% of the principal
balance  of  eligible  Company  Dealership  contracts  and  up to 90.0% of the
principal  balance  of  eligible  Third  Party Dealer contracts. The Revolving
Facility  expires  in September 1997, at which time the Company has the option
to  renew  the  Revolving  Facility  for  one additional year. The facility is
secured by substantially all of the Company's assets. As of December 31, 1996,
the  Company's  borrowing  capacity  under  the  Revolving  Facility was $50.0
million,  the  aggregate  principal  amount  outstanding  under  the Revolving
Facility  was  $4.6 million, and the amount available to be borrowed under the
facility  was  $45.4  million.  The  Revolving  Facility bears interest at the
30-day  LIBOR plus 3.60%, payable daily (total rate of 9.0% as of December 31,
1996).

<PAGE>  32
     The Revolving Facility contains covenants that, among other things, limit
the  Company's  ability to, without GE Capital's consent: (i) incur additional
indebtedness;  (ii)  engage  in securitization transactions; (iii) merge with,
consolidate  with,  acquire,  or  otherwise  combine  with any other person or
entity,  transfer  any division or segment of its operations to another person
or  entity,  or  form  new  subsidiaries;  (iv)  make  changes  in its capital
structure;  (v)  pay  dividends or make certain other distributions; (vi) make
certain  investments  and  capital  expenditures;  and (vii) engage in certain
transactions  with  affiliates.  These  covenants  also require the Company to
maintain  specified  financial ratios and comply with all laws relating to the
Company's  business.  The  Revolving Facility also provides that a transfer of
ownership  of  the  Company  that  results in less than 15.0% of the Company's
voting  stock being owned by Mr. Ernest C. Garcia, II, will result in an event
of  default  under  the  Revolving  Facility.

     Subordinated  Indebtedness  and  Preferred  Stock.    The  Company  has
historically  borrowed  substantial  amounts  from  Verde  Investments  Inc.
("Verde"),  an  affiliate  of  the  Company.  The  Subordinated  Notes Payable
balances  outstanding  to  Verde totaled $14.6 million as of December 31, 1995
($24.6  million prior to the conversion of $10.0 million to Preferred Stock as
discussed below), and $14.0 million as of December 31, 1996. Prior to June 21,
1996,  these borrowings accrued interest at an annual rate of 18.0%. Effective
June  21,  1996  the  annual  interest rate on these borrowings was reduced to
10.0%. The Company is required to make monthly payments of interest and annual
payments  of  principal  in the amount of $2.0 million. This debt is junior to
all  of  the Company's other indebtedness and the Company may suspend interest
and  principal  payments  in  the event it is in default on obligations to any
other  creditors.

     On  December 31, 1995, Verde converted $10.0 million of subordinated debt
to Preferred Stock of the Company. Prior to June 21, 1996, the Preferred Stock
accrued  a dividend of 12.0% annually, increasing one percent per year up to a
maximum of 18.0%. Effective June 21, 1996, the dividend on the Preferred Stock
was  decreased  from  12.0% to 10.0%. During 1996, the Company paid a total of
$916,000  in  dividends to Verde on the Preferred Stock, which was redeemed in
November  1996.

     Convertible  Note.    In  August  1995,  the  Company entered into a note
purchase  agreement  with  SunAmerica pursuant to which SunAmerica purchased a
$3.0  million  convertible  subordinated note. The convertible note, which was
due  June  30,  1998, bore interest at a rate of 12.5%, payable quarterly, and
was  secured  by  a  pledge  of  the  Common  Stock of the Company held by the
Company's   Chairman,  Chief  Executive  Officer  and  principal  stockholder.
Effective  June  21,  1996,  SunAmerica  converted  the note into Common Stock
(444,444  shares  at the initial public offering price of $6.75 per share). In
return  for  the conversion, the Company granted SunAmerica a ten-year warrant
to  purchase  116,000  shares  of  Common Stock at the initial public offering
price  per  share  and  paid  fees  to  SunAmerica  totaling  $150,000.

     Securitizations.    SunAmerica  and  the  Company  have  entered into the
Securitization  Program  under  which  SunAmerica  may  purchase  up to $175.0
million  of  certificates  secured  by  contracts.  The Securitization Program
provides  the  Company  with  a source of funding in addition to the Revolving
Facility.  At the closing of each securitization, the Company receives payment
from  SunAmerica for the certificates sold (net of Investments Held in Trust).
The Company also generates cash flow under this program from ongoing servicing
fees  and excess cash flow distributions resulting from the difference between
the payments received from customers on the contracts and the payments paid to
SunAmerica.  In  addition,  securitization  allows  the  Company  to  fix  its
<PAGE>  33
borrowing  cost for a given contract portfolio, broadens the Company's capital
source  alternatives,  and  provides a higher advance rate than that available
under  the  Revolving  Facility.

   Capital Expenditures and Commitments. The Company is pursuing an aggressive
growth strategy. In the fourth quarter of 1996, the Company acquired the lease-
hold rights to an existing dealership in Las Vegas, Nevada, and has four other
dealerships  (one in Phoenix, Arizona, two in Albuquerque, New Mexico, and one
in Tampa,  Florida) and a reconditioning facility (in Albuquerque, New Mexico)
currently  under  development.   In  addition, the Company opened thirteen new
Branch  Offices  during  the  fourth  quarter  of  1996, and has substantially
completed expansion of its contract servicing and collection facility.

    In January 1997, the Company acquired selected operating assets of a group
of  companies  engaged in the business of selling and financing used vehicles,
including  four  dealerships  located  in the Tampa Bay/St. Petersburg market.
See Item 1.  "Business - Recent Acquisitions."

     On  March  5,  1997,  the  Company  entered into an agreement to purchase
substantially  all  of  the  assets  of  a  company engaged in the business of
selling  and financing used motor vehicles, including seven dealerships in San
Antonio  and a contract portfolio of approximately $27 million.  The unaudited
book  value  of  the assets to be acquired was approximately $40 million as of
December 31, 1996. The purchase, which is scheduled to close on or about April
1, 1997, is subject to  various conditions, including regulatory approval.  No
assurance  can  be  given  that  such conditions will be satisfied or that the
purchase  will  be  completed.   In addition to the facilities currently under
development,  the  Company  intends  to open 15 or more new Branch Offices and
three  or  more  Company  Dealerships  through  the  end  of 1997. The Company
believes  that  it  will  expend  approximately  $50,000 to establish each new
Branch Office. New Company Dealerships cost approximately $1.5 to $1.7 million
to  construct  (excluding  inventory).  The  Company  intends to finance these
expenditures  through  equity offerings, operating cash flows and supplemental
borrowings,  including  amounts  available  under  the  Revolving Facility and
Securitization  Program.

SEASONALITY

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

INFLATION

     Increases  in inflation generally result in higher interest rates. Higher
interest rates on the Company's borrowings would decrease the profitability of
the  Company's  existing  portfolio.  The Company will seek to limit this risk
through  its  Securitization  Program  and,  to  the  extent market conditions
permit,  for contracts originated at Company Dealerships, either by increasing
the  interest  rate  charged,  or  the profit margin on, the cars sold, or for
contracts  acquired from Third Party Dealers, either by acquiring contracts at
a  higher  discount  or  with  a  higher APR. To date, inflation has not had a
significant  impact  on  the  Company's  operations.



<PAGE>  34
ACCOUNTING  MATTERS

     Statement  of  Financial  Accounting  Standards  No. 125, "Accounting for
Transfers  and  Servicing  of  Financial  Assets  and  Extinguishments  of
Liabilities"  (SFAS No. 125), which the Company will adopt for its fiscal year
beginning  January 1, 1997, establishes accounting and reporting standards for
transfers   and   servicing   of   financial  assets  and  extinguishments  of
liabilities.  Management  has  not determined the impact that adoption of SFAS
No.  125  will  have  on  the  Company.

FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS  AND  FINANCIAL  CONDITION

     The  Company's  future  operating  results  and  financial  condition are
dependent  upon,  among  other things,  the Company's ability to implement its
business  strategy.    The  Company  began  operations  in  1992  and incurred
significant  losses  in  1994 and 1995. In 1996, however, the Company achieved
profitability  with net earnings of approximately $5.9 million (including $4.4
million  of gains recognized from the sale of contract receivables pursuant to
the  Securitization  Program) on total revenues of $75.6 million. There can be
no  assurance  that  the  Company will remain profitable.  Potential risks and
uncertainties  that  could  affect  the  Company's profitability are set forth
below.

     Dependence  on Securitizations.  In recent periods, a significant portion
of  the  Company's  net  earnings  have been attributable to gains on sales of
contract  receivables  under  its  Securitization  Program,  which the Company
expects  to  continue  for the foreseeable future. Consequently, the Company's
net  earnings  may fluctuate from quarter to quarter as a result of the timing
and  size  of  its  securitizations.  The  Company's  ability  to successfully
complete  securitizations  in  the  future may be affected by several factors,
including  the  condition  of  securities markets generally, conditions in the
asset-backed  securities  markets  specifically, and the credit quality of the
Company's  portfolio.  The  amount  of  any gain on sale is based upon certain
estimates,  which  may not subsequently be realized. To the extent that actual
cash  flows  on  a  securitization are materially below estimates, the Company
would  be required to revalue the residual portion of the securitization which
it  retains,  and  record  a  charge  to earnings based upon the reduction. In
addition,  the Company records ongoing income based upon the cash flows on its
residual  portion.  The income recorded on the residual portion will vary from
quarter  to  quarter  based  upon  cash  flows  received  in  a  given period.

     Poor  Creditworthiness of Borrowers; High Risk of Credit Losses. Substan-
tially  all  of  the  contracts  that  the Company services are with Sub-Prime
Borrowers.   Due  to  their  poor credit  histories,  Sub-Prime  Borrowers are
generally  unable  to  obtain  credit from traditional financial institutions,
such  as banks, savings and loans, credit unions, or captive finance companies
owned  by  automobile  manufacturers.  The  Company  typically  charges  fixed
interest  rates ranging from 21.0% to 29.9% on contracts originated at Company
Dealerships,  while  rates range from 17.6% to 29.9% on the Third Party Dealer
contracts  it purchases. In addition, the Company has established an Allowance
for  Credit  Losses,  which approximated 13.9% and 17.7% of contract principal
balances  for  1996 and 1995, respectively, to cover anticipated credit losses
on  the  contracts  currently in its portfolio. At December 31, 1996 and 1995,
the  principal  balance  of  delinquent  contracts  as  a  percentage of total
outstanding  contract  principal balances was 3.7% and 4.2%, respectively. The
Company's net charge offs as a percentage of average principal outstanding for
the years ended December 31, 1996 and 1995 were 16.7% and 21.7%, respectively.
The  Company  believes  its current Allowance for Credit Losses is adequate to
absorb  anticipated credit losses. However, no assurance can be given that the
<PAGE>  35
Company  has  adequately  provided  for,  or will adequately provide for, such
credit  risks  or  that  credit  losses  in excess of its Allowance for Credit
Losses  will not occur in the future. A significant variation in the timing of
or  increase in credit losses on the Company's portfolio would have a material
adverse  effect  on  the  Company's  profitability. See - Allowance for Credit
Losses"  and  Item  1.  "Business  -  Monitoring  and  Collections."

     Risks  Associated  with  Growth  Strategy and New Product Offerings.  The
Company's  business  strategy  calls  for  aggressive  growth in its sales and
financing  activities  through  the development and acquisition of new Company
Dealerships and Branch Offices and the expansion of its existing operations to
include  additional financing and insurance services. The Company's ability to
remain  profitable  as  it pursues this business strategy will depend upon its
ability   to:   (i)   expand  its  revenue  generating  operations  while  not
proportionately  increasing  its  administrative  overhead; (ii) originate and
purchase  contracts with an acceptable level of credit risk; (iii) effectively
collect payments due on the contracts in its portfolio; (iv) locate sufficient
financing,  with acceptable terms, to fund the expansion of used car sales and
the  origination  and  purchase  of additional contracts; and (v) adapt to the
increasingly competitive market in which it operates. Outside factors, such as
the economic, regulatory, and judicial environments in which it operates, will
also  have  an  effect  on  the Company's business. The Company's inability to
achieve  or  maintain  any or all of these goals could have a material adverse
effect  on  the  Company's  operations, profitability, and growth. See Item 1.
"Business  -  Business  Strategy."

    The Company has initiated its Cygnet Dealer Program, pursuant to which the
Company  intends to provide qualified Third Party Dealers with operating lines
of  credit  secured  by  such dealers' retail installment contract portfolios.
While the Company will require Third Party Dealers to meet certain minimum net
worth  and  operating  history  criteria to be considered for inclusion in the
Cygnet  Dealer Program, the Company will, nevertheless, be extending credit to
dealers  who  are not otherwise able to obtain debt financing from traditional
lending   institutions  such  as  banks,  credit  unions,  and  major  finance
companies.  Consequently,  as with its other financing activities, the Company
will  be  subject  to  a high risk of credit losses that could have a material
adverse  effect on the Company's financial condition and results of operations
and  on  the Company's ability to meet its own financing obligations. Further,
there  can  be  no  assurance  that  the  Company  will  be able to obtain the
financing necessary to fully implement the Cygnet Dealer Program. In addition,
there  can  be no assurance that the Company will be successful in its efforts
to  expand  its insurance services. See Item 1. "Business - Third Party Dealer
Operations  -  Collateralized  Dealer Financing" and Item 1. "Business - Third
Party  Dealer  Operations  -  Insurance  Services."

     No Assurance of Successful Acquisitions.  The Company intends to consider
acquisitions  of  and alliances with other companies that could complement the
Company's existing business.  There can be no assurance that suitable acquisi-
tion or joint venture candidates can be identified, or that if identified, any
such transactions will be consummated.  Furthermore, there can be no assurance
that the Company will be able to integrate successfully such acquired companies
into  its  existing  operations,  which could increase the Company's operating
expenses  in  the short-term and materially and adversely affect the Company's
results of operations.  Moreover, any acquisition by the Company may result in
potentially  dilutive  issuances of equity securities, the incurrence of addi-
tional  debt,  and amortization of expenses related to goodwill and intangible
assets, all of which could adversely affect the Company's profitability. Acqui-
sitions  involve numerous risks, such as the diversion of the attention of the
Company's management from other business concerns, the entrance of the Company
<PAGE>  36
into markets in which it has had no or only limited experience, and the poten-
tial  loss of key employees of the acquired company, all of which could have a
material  adverse  effect  on the Company's business, financial condition, and
results of operations.  See Item 1.  "Business - Recent Acquisitions."

     Highly  Competitive  Industry.   Although the used car sales industry has
historically  been  highly  fragmented, it has attracted significant attention
recently  from  a  number of large companies, including AutoNation, U.S.A. and
Driver's  Mart,  which  have  entered the used car sales business or announced
plans  to  develop  large  used  car sales operations. Many franchised new car
dealerships  have  also  increased  their  focus  on  the used car market. The
Company  believes  that  these  companies are attracted by the relatively high
gross  margins  that can be achieved in this market and the industry's lack of
consolidation.   Many  of these companies and franchised dealers have signifi-
cantly  greater  financial,  marketing,  and other resources than the Company.
Among  other things, increased competition could result in increased wholesale
costs for used cars, decreased retail sales prices, and lower margins.

     Like  the  sale  of  used  cars, the business of purchasing and servicing
contracts  originated  from  the  sale  of used cars to Sub-Prime Borrowers is
highly  fragmented  and  very  competitive.  In recent years, several consumer
finance  companies  have  completed  public  offerings  in  order to raise the
capital  necessary  to  fund  expansion  and  support  increased  purchases of
contracts.  These companies have increased the competition for the purchase of
contracts,  in  many  cases  purchasing  contracts  at prices that the Company
believes  are  not  commensurate  with the associated risk. There are numerous
financial  services  companies  serving,  or  capable of serving, this market,
including traditional financial institutions such as banks, savings and loans,
credit unions, and captive finance companies owned by automobile manufacturers,
and  other non-traditional consumer finance companies, many of which have sig-
nificantly  greater financial and other resources than the Company.  Increased
competition  may  cause downward  pressure  on  the interest rates the Company
Dealerships charges on contracts originated by its Company or cause the Company
to reduce or eliminate the nonrefundable acquisition discount on the contracts
it  purchases  from  Third  Party Dealers, which could have a material adverse
effect on the Company's profitability. See Item 1. "Business - Competition."

     The  Company  believes  that  recent  demographic, economic, and industry
trends  favor  growth  in  the used car sales and Sub-Prime Borrower financing
markets.  To  the  extent  such trends do not continue, however, the Company's
profitability  may be materially and adversely affected. See Item 1. "Business
-  Overview  of  Used  Car  Sales  and  Finance  Industry."

General  Economic Conditions.  The Company's business is directly related
to  sales  of  used  cars,  which are affected by employment rates, prevailing
interest  rates,  and  other  general  economic  conditions. While the Company
believes  that  current  economic  conditions  favor  continued  growth in the
markets  it  serves  and  those in which it seeks to expand, a future economic
slowdown or recession could lead to decreased sales of used cars and increased
delinquencies,  repossessions,  and  credit  losses  that  could  hinder  the
Company's business. Because of the Company's focus on the sub-prime segment of
the  automobile  financing  industry,  its  actual  rate  of  delinquencies,
repossessions, and credit losses could be higher under adverse conditions than
those  experienced  in the used car sales and finance industry in general. See
Item  1.    "Business - Company Dealership Operations" and Item 1. "Business -
Third  Party  Dealer  Operations."

     Industry  Considerations.    In  recent  periods,  several major used car
finance companies have announced major downward adjustments to their financial
<PAGE>  37
statements, violations of loan covenants, related litigation and other events.
In addition, one of these companies has filed for bankruptcy protection. These
announcements  have  had  and  may continue to have a disruptive effect on the
market  for securities of sub-prime automobile finance companies, are expected
to result in a tightening of credit to the sub-prime markets and could lead to
enhanced  regulatory  oversight.  Furthermore,  companies  in  the  used  car
financing market have been subject to an increasing number of lawsuits brought
by  customers alleging violations of various federal and state consumer credit
and  similar  laws  and  regulations.  Although  the  Company is not currently
subject  to any such lawsuits, no assurance can be given that such claims will
not  be  asserted  against  the  Company  in  the future or that the Company's
operations  will  not  be  subject  to  enhanced regulatory oversight.  See "-
Regulation,  Supervision  &  Licensing."

     Need  to  Establish  and Maintain Relationships with Third Party Dealers.
The  Company  enters  into  nonexclusive  agreements with Third Party Dealers,
which  may  be  terminated  by either party at any time, pursuant to which the
Company purchases contracts originated by such dealers that meet the Company's
established  terms  and conditions. Pursuant to the Cygnet Dealer Program, the
Company  will  also enter into financing agreements with qualified Third Party
Dealers. The Company's Third Party Dealer financing activities depend in large
part  upon  its  ability  to  establish  and  maintain relationships with such
dealers.  While the Company believes that it has been successful in developing
and  maintaining relationships with Third Party Dealers in the markets that it
currently  serves,  there  can  be  no  assurance  that  the  Company  will be
successful  in maintaining or increasing its existing Third Party Dealer base,
that  such  dealers will continue to generate a volume of contracts comparable
to the volume of contracts historically generated by such dealers, or that any
such  dealers  will  become involved in the Cygnet Dealer Program. See Item 1.
"Business  -  Third  Party  Dealer  Operations"  and  Item  1.  "Business  -
Collateralized  Dealer  Program."

     Geographic  Concentration.    Company Dealership operations are currently
concentrated  in Arizona and Florida. In addition, a majority of the Company's
Branch  Offices  are  located  in Arizona, Texas, Florida, and Indiana. Of the
$109.9  million  in  total  contracts  serviced by the Company at December 31,
1996,  approximately $66.8 million were originated in Arizona. Because of this
concentration,  the  Company's business may be adversely affected in the event
of  a  downturn  in  the general economic conditions existing in the Company's
primary  markets.  See  Item 1. "Business - Company Dealership Operations" and
Item  1.  "Business  -  Third  Party  Dealer  Operations."

     Dependence  on  External  Financing.   The Company has borrowed, and will
continue  to borrow, substantial amounts to fund its operations from financing
companies  and  other  lenders, some of which are affiliated with the Company.
Currently,  the  Company receives financing pursuant to the Revolving Facility
with  GE  Capital,  which has a maximum commitment of $50.0 million. Under the
Revolving  Facility,  the  Company  may  borrow  up  to 65.0% of the principal
balance  of  eligible  Company  Dealership  contracts  and  up to 90.0% of the
principal  balance  of  eligible  Third  Party Dealer contracts. The Revolving
Facility  expires  in September 1997, at which time the Company has the option
to  renew  it  for  one  additional year. The Revolving Facility is secured by
substantially all of the Company's assets. In addition, the Revolving Facility
contains  various  covenants  that  limit,  among  other things, the Company's
ability  to engage in mergers and acquisitions, incur additional indebtedness,
and  pay  dividends or make other distributions, and also requires the Company
to  meet  certain  financial  tests.  As  of  December 31, 1996, the aggregate
principal  amount  outstanding  under the Revolving Facility was $4.6 million,
and  the  amount  available  to  be  borrowed  was $45.4 million. Although the
<PAGE>  38
Company  believes  it is currently in compliance with the terms and conditions
of  the Revolving Facility, there can be no assurance that the Company will be
able  to  continue  to satisfy such terms and conditions or that the Revolving
Facility will be extended beyond its current expiration date. In addition, the
Company  and  SunAmerica have entered into the Securitization Program pursuant
to  which  SunAmerica  may  purchase  up  to  $175.0  million of the Company's
asset-backed  securities.  The  Securitization  Program is subject to numerous
terms   and   conditions,   including   the  Company's   ability   to  achieve
investment-grade  ratings  on  its asset-backed securities. As of December 31,
1996,  the  Company had securitized an aggregate of $58.2 million in contracts
originated  through  Company Dealerships and $10.0 million in loans originated
at  Third  Party  Dealers  and  purchased by the Company, and had issued $53.5
million  in  asset-backed  securities  to  SunAmerica in 1996. There can be no
assurance, however, that any further securitizations will be completed or that
the  Company  will  be  able  to  secure  additional  financing, including the
financing  necessary to fully implement the Cygnet Dealer Program, when and as
needed  in the future, or on terms acceptable to the Company. See "- Liquidity
and  Capital  Resources."

     Sensitivity  to  Interest  Rates.  A substantial portion of the Company's
financing  income  results from the difference between the rate of interest it
pays  on  the  funds  it  borrows  and  the  rate  of interest it earns on the
contracts  in  its  portfolio.  While  the contracts the Company services bear
interest  at  a fixed rate, the indebtedness that the Company incurs under its
Revolving  Facility  bears  interest  at  a  floating  rate.  In the event the
Company's  interest  expense  increases,  it would seek to compensate for such
increases  by  raising the interest rates on its Company Dealership contracts,
increasing  the  acquisition discount at which it purchases Third Party Dealer
contracts,  or raising the retail sales prices of its used cars. To the extent
the  Company  were  unable  to do so, the Company's net interest margins would
decrease,  thereby  adversely  affecting  the  Company's  profitability.

     Impact of Usury Laws.  The Company typically charges fixed interest rates
ranging   from   21.0%  to  29.9%  on  the  contracts  originated  at  Company
Dealerships,  while  rates range from 17.6% to 29.9% on the Third Party Dealer
contracts  it purchases. Currently, a majority of the Company's used car sales
activities  are  conducted  in,  and  a  majority of the contracts the Company
services  are  originated  in,  Arizona,  which  does not impose limits on the
interest rate that a lender may charge. However, the Company has expanded, and
will  continue to expand, its operations into states that impose usury limits,
such  as  Florida  and  Texas.  The  Company  attempts  to mitigate these rate
restrictions  by  purchasing  contracts originated in these states at a higher
discount.  The  Company's  inability  to  achieve adequate discounts in states
imposing  usury  limits would adversely affect the Company's planned expansion
and  its  results  of  operations.  There  can  be no assurance that the usury
limitations  to  which the Company is or may become subject or that additional
laws,  rules,  and  regulations  that  may  be  adopted in the future will not
adversely  affect  the Company's business. See Item 1. "Business - Regulation,
Supervision,  and  Licensing."

     Dependence  Upon Key Personnel.  The Company's future success will depend
upon  the continued services of the Company's senior management as well as the
Company's  ability  to  attract additional members to its management team with
experience  in  the used car sales and financing industry. The unexpected loss
of  the  services  of  any  of  the Company's key management personnel, or its
inability  to  attract  new  management  when necessary, could have a material
adverse  effect  upon  the  Company.  The  Company has entered into employment
agreements  (which  include  non-competition  provisions)  with certain of its
officers.
<PAGE> 39
     Regulation,  Supervision,  and  Licensing.   The Company's operations are
subject  to  ongoing  regulation,  supervision,  and  licensing  under various
federal,  state,  and local statutes, ordinances, and regulations. Among other
things,  these  laws  require  that  the  Company  obtain and maintain certain
licenses  and  qualifications,  limit or prescribe terms of the contracts that
the  Company  originates  and/or  purchases,  require specified disclosures to
customers,  limit  the  Company's  right to repossess and sell collateral, and
prohibit  the  Company  from  discriminating  against  certain  customers. The
Company  is  also subject to federal and state franchising and insurance laws.
See  Item  1.  "Business  -  Regulation,  Supervision,  and  Licensing."

     The  Company believes that it is currently in substantial compliance with
all applicable federal, state, and local laws and regulations. There can be no
assurance, however, that the Company will be able to remain in compliance with
such  laws,  and  such  failure  could  have  a material adverse effect on the
operations  of  the  Company. In addition, the adoption of additional statutes
and  regulations,  changes  in  the  interpretation  of  existing statutes and
regulations,  or the Company's entrance into jurisdictions with more stringent
regulatory  requirements could have a material adverse effect on the Company's
business.

      ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                      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, 1996 and 1995, 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,
1996.  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, 1996 and 1995, and
the  results of their operations and their cash flows for each of the years in
the  three-year  period  ended  December 31, 1996 in conformity with generally
accepted  accounting  principles.

                                                   KPMG  PEAT  MARWICK  LLP
Phoenix,  Arizona
January  31,  1997,  except
  for  Note  19  to  the  Consolidated
  Financial  Statements  which  is
  as  of  February  13,  1997
<PAGE>  40
                 UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                       -------------------
                                                         1996       1995
                                                       --------   --------
                                                       (in thousands)
                                   ASSETS
<S>                                                  <C>         <C>
Cash  and  Cash  Equivalents                         $  18,455   $   1,419
Finance  Receivables:
  Held  for  Investment                                 52,188      49,226
  Held  for  Sale                                        7,000           -
                                                     ---------    --------
        Principal  Balances,  Net                       59,188      49,226

  Less:  Allowance  for  Credit  Losses                 (8,125)     (8,500)
                                                     ---------    --------
        Finance  Receivables,  Net                      51,063      40,726

Residuals in Finance Receivables Sold                    9,889           -
Investments Held in Trust                                3,479           -
Inventory                                                5,752       6,329
Property  and  Equipment,  Net                          20,652       7,797
Goodwill  and  Trademarks,  Net                          2,150         269
Other  Assets                                            6,643       4,250
                                                     ---------    --------
                                                     $ 118,083    $ 60,790
                                                     =========    ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY


Liabilities:
  Accounts  Payable                                  $   2,132    $    595
  Accrued Expenses and Other Liabilities                 6,728       5,557
  Notes  Payable                                        12,904      35,201
  Subordinated  Notes  Payable                          14,000      14,553
                                                     ---------    --------
     Total  Liabilities                                 35,764      55,906

Stockholders'  Equity:
  Preferred  Stock                                           -      10,000
  Common  Stock                                         82,612         127
  Accumulated  Deficit                                    (293)     (5,243)
                                                     ---------    --------
     Total  Stockholders'  Equity                       82,319       4,884
Commitments, Contingencies and Subsequent Events
                                                     ---------    --------
                                                     $ 118,083    $ 60,790
                                                     =========    ========





See  accompanying  notes  to  Consolidated  Financial  Statements.
<PAGE>  41
                  UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

</TABLE>
<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                     1996       1995        1994
                                                  --------------------------------
                                      (in thousands, except earnings per share amounts)
<S>                                               <C>        <C>        <C>
Sales of Used Cars                                $  53,768  $  47,824   $  27,768
Less:
  Cost of Used Cars Sold                             29,890     27,964      12,577
  Provision for Credit Losses                         9,811      8,359       8,140
                                                  --------------------------------
                                                     14,067     11,501       7,051
                                                  --------------------------------
Interest Income                                      15,856     10,071       5,449
Gain on Sale of Loans                                 4,434          -           -
                                                  --------------------------------
                                                     20,290     10,071       5,449
                                                  --------------------------------
Servicing Income                                        921          -           -
Other Income                                            650        308         556
                                                  --------------------------------
                                                      1,571        308         556
                                                  --------------------------------
Income before Operating Expenses                     35,928     21,880      13,056
Operating Expenses:
  Selling and Marketing                               3,585      3,856       2,402
  General and Administrative                         19,538     14,726       9,141
  Depreciation and Amortization                       1,577      1,314         777
                                                  --------------------------------
                                                     24,700     19,896      12,320
                                                  --------------------------------
Income before Interest Expense                       11,228      1,984         736
Interest Expense                                      5,262      5,956       3,037
                                                  --------------------------------
Earnings (Loss) before Income Taxes                   5,966     (3,972)     (2,301)
Income Taxes (Benefit)                                  100          -        (334)
                                                  --------------------------------
Net Earnings (Loss)                               $   5,866    $(3,972)   $ (1,967)
                                                  ================================
Earnings (Loss) per Share                         $    0.60    $ (0.67)   $  (0.35)
                                                  ================================
Shares Used in Computation                            8,283      5,892       5,584
                                                  ================================
</TABLE>










See  accompanying  notes  to  Consolidated  Financial  Statements.
<PAGE> 42
<TABLE>
<CAPTION>
                                                        UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                      YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
                                                                      (in thousands)
                                                                                       RETAINED       TOTAL
                                                SHARES              AMOUNT             EARNINGS   STOCKHOLDERS'
                                          -------------------   -----------------    (ACCUMULATED     EQUITY
                                          PREFERRED    COMMON   PREFERRED  COMMON      DEFICIT)     (DEFICIT)
                                          ---------    ------   ---------  -------   ------------  -----------
<S>                                       <C>          <C>      <C>       <C>        <C>           <C>
Balances at December 31, 1993                    -      4,640   $      -  $      1   $       696   $       697
Issuance of Common Stock for Purchase
  of Subsidiary                                  -        174          -        15             -            15
Issuance of Common Stock for Cash                -        708          -        61             -            61
Net Loss for the Year                            -          -          -         -        (1,967)       (1,967)
                                           -------     ------    -------   -------   ------------  ------------

Balances at December 31, 1994                    -      5,522          -        77        (1,271)       (1,194)
Issuance of Common Stock                         -         58          -        50             -            50
Conversion of Subordinated Notes
  Payable to Preferred Stock                 1,000          -     10,000         -             -        10,000
Net Loss for the Year                            -          -          -         -        (3,972)       (3,972)
                                            ------     ------     -------  -------    ----------  -------------

Balances at December 31, 1995                1,000      5,580     10,000       127        (5,243)        4,884
Issuance of Common Stock for Cash                -      7,281          -    79,335             -        79,335
Conversion of Debt to Common  Stock              -        444          -     3,000             -         3,000
Issuance of Common Stock to Board of
  Directors                                      -         22          -       150             -           150
Redemption of Preferred Stock               (1,000)         -    (10,000)        -             -       (10,000)
Preferred Stock Dividends                        -          -          -         -          (916)         (916)
Net Earnings for the Year                        -          -          -         -         5,866         5,866
                                            ------     ------     ------     -----     ---------  ------------

Balances at December 31, 1996                    -     13,327    $     -  $ 82,612     $    (293) $     82,319
                                           =======     ======     ======  =======      =========  ============
</TABLE>


















See accompanying notes to Consolidated Financial Statements.

<PAGE> 43
<TABLE><CAPTION>         UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS                    DECEMBER 31,
                                                                             ----------------------------
                                                                                1996      1995      1994
                                                                             --------   --------  -------
                                                                                   (in thousands)
<S>                                                                          <C>        <C>       <C>
Cash Flows from Operating Activities:
  Net Earnings (Loss)                                                      $   5,866   $ (3,972)  $ (1,967)
     Adjustments to Reconcile Net Earnings (Loss) to Net
       Cash Provided by Operating Activities:
     Provision for Credit Losses                                               9,811      8,359      8,140
     Gain on Sale of Finance Receivables                                      (4,434)         -          -
     Decrease (Increase) in Deferred Income Taxes                                249        449       (461)
     Depreciation and Amortization                                             1,577      1,314        777
     Decrease (Increase) in Inventory                                            577     (1,500)    (3,098)
     Increase in Other Assets                                                 (3,150)      (529)      (294)
     Increase in Accounts Payable, Accrued Expenses, and Other Liabilities     2,949      3,035      1,064
     Increase (Decrease) in Income Taxes Receivable/Payable                      534       (984)      (809)
     Other, Net                                                                    -        169         25
                                                                           ----------  --------   --------
          Net Cash Provided by Operating Activities                           13,979      6,341      3,377
                                                                           ----------  --------   --------
Cash Flows from Investing Activities:
  Increase in Finance Receivables                                           (113,792)   (53,023)   (27,196)
  Collections of Finance Receivables                                          49,201     19,795     12,202
  Proceeds from Sale of Finance Receivables                                   38,989          -          -
  Increase in Investments Held in Trust                                       (3,479)         -          -
  Purchase of Property and Equipment                                          (6,111)    (3,195)    (5,334)
  Other, Net                                                                  (1,809)         -       (270)
                                                                           ---------   --------   --------
          Net Cash Used in Investing Activities                              (37,001)   (36,423)   (20,598)
                                                                           ---------   --------   --------
Cash Flows from Financing Activities:
  Additions to Notes Payable                                                   1,000     22,259      9,942
  Repayments of Notes Payable                                                (28,610)         -     (2,027)
  Net Issuance (Repayment) of Subordinated Notes Payable                        (553)     6,262      9,350
  Redemption of Preferred Stock                                              (10,000)         -          -
  Proceeds from Issuance of Common Stock                                      79,435          5         61
  Other, Net                                                                  (1,214)     2,807        (16)
                                                                           ---------   --------   --------
          Net Cash Provided by Financing Activities                           40,058     31,333     17,310
                                                                           ---------   --------   --------
Net Increase in Cash and Cash Equivalents                                     17,036      1,251         89
Cash and Cash Equivalents at Beginning of Year                                 1,419        168         79
                                                                           ---------   --------   --------
Cash and Cash Equivalents at End of Year                                   $  18,455   $  1,419   $    168
                                                                           =========   ========   ========
Supplemental Statement of Cash Flows Information:
  Interest Paid                                                            $   5,144   $  5,890   $  3,031
                                                                           =========   ========   ========
  Income Taxes Paid                                                        $     450   $    535   $    960
                                                                           =========   ========   ========
  Conversion of Note Payable to Common Stock                               $   3,000   $      -   $      -
                                                                           =========   ========   ========
  Purchase of Property and Equipment with Notes Payable                    $   8,313   $      -   $      -
                                                                           =========   ========   ========
  Purchase of Property and Equipment with Capital Leases                   $      57   $    792   $    399
                                                                           =========   ========   ========
</TABLE>See  accompanying  notes  to  Consolidated  Financial  Statements.
                UGLY  DUCKLING  CORPORATION  AND  SUBSIDIARIES
               NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
            YEARS  ENDED  DECEMBER  31,  1996,  1995  AND  1994

(1)    ORGANIZATION  AND  PURPOSE

     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.  Contemporaneous with the
formation  of  the Company, UDH was merged into the Company with each share of
UDH's  common  stock  exchanged for 1.16 shares of common stock in the Company
and  each  share of UDH's preferred stock exchanged for one share of preferred
stock in the Company under identical terms and conditions. UDH was effectively
dissolved   in   the  merger.  The  resulting  effect  of  the  merger  was  a
recapitalization increasing the number of authorized shares of common stock to
20,000,000  and  a  1.16-to-1 common stock split effective April 24, 1996. The
stockholders' equity section of the Consolidated Balance Sheets as of December
31,  1996  and  1995,  reflects  the  number of authorized shares after giving
effect  to  the  merger  and  common  stock  split.  The  Company's  principal
stockholder  is  also the sole stockholder of Verde Investments, Inc. (Verde).
The  Company's  subordinated  debt is held by, and the land for certain of its
car  dealerships  and  loan  servicing facilities was leased from, Verde until
December  31,  1996,  see  Note  13.

(2)    SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

  Operations

     The  Company,  through  its subsidiaries, owns and operates sales finance
companies,  used  car  sales  dealerships,  a  property and casualty insurance
company,  and is a franchiser of rental car operations. Additionally, Champion
Receivables Corporation, a "bankruptcy remote entity" is the Company's wholly-
owned  special purpose securitization subsidiary. Its assets include residuals
in  finance receivables sold, and investments held in trust, in the amounts of
$9,889,000  and  $2,843,000,  respectively,  at  December  31,  1996.

  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.

  Concentration  of  Credit  Risk

     Champion  Acceptance  Corporation  and  Champion Financial Services (CFS)
provide  sales  finance  services in connection with the sales of used cars to
individuals  residing  primarily  in  the  metropolitan  areas  of Phoenix and
Tucson,  Arizona. The Company operated three, three and two dealerships in the
Tucson metropolitan area in 1996, 1995 and 1994, respectively; and five, five,
and three dealerships in the Phoenix metropolitan area in 1996, 1995 and 1994,
respectively  (company  dealerships).  As  of December 31, 1996, CFS maintains
relationships  with  approximately  1,400 third party car dealers (third party
dealers)  in twelve states from whom it purchases sales finance contracts from
35  branch  offices.

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


<PAGE>  45
  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

     Interest  income  is  recognized  using  the interest method. Direct loan
origination  costs  related to contracts originated at company dealerships are
deferred  and  charged  against  finance  income  over the life of the related
installment sales contract as an adjustment of yield. Pre-opening and start-up
costs  incurred  on third party dealer branch offices are deferred and charged
to expense over a twelve month period. The accrual of interest is suspended if
collection  becomes  doubtful  and  is  resumed when the loan becomes current.
Interest  income also includes income on the Company's residual interests from
its  Securitization  Program.

     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.

  Gain  on  Sale  of  Loans

     In  1996,  the  Company initiated a Securitization Program under which it
sells  (securitizes)  finance  receivables  to  a trust which uses the finance
receivables  to  create  asset  backed  securities  (certificates)  which  are
remitted  to the Company in consideration for the sale. The Company then sells
senior   certificates  to  third  party  investors  and  retains  subordinated
certificates.  In  consideration  of  such  sale,  the  Company  receives cash
proceeds   from  the  sale  of  certificates  collateralized  by  the  finance
receivables  and  the  right  to  future  cash  flows  under  the subordinated
certificates  (residual in finance receivables sold, or residual) arising from
those  receivables  to  the extent not required to make payments on the senior
certificates  sold  to  a  third  party  or  to  pay  associated  costs.

     Gains  or  losses  are  determined  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 allocates 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.

  Servicing  Income

     Servicing  Income  is recognized when earned. Servicing costs are charged
to  expense  as  incurred.  In  the  event  delinquencies and/or losses on the
portfolio  serviced  exceed  specified  levels,  the  trustee  may require the
transfer  of  servicing  of  the  portfolio  to  another  servicer.

  Finance  Receivables,  Allowance  for  Credit  Losses  and  Nonrefundable
Acquisition  Discount

     The  Company  originates  installment  sales  contracts  from its company
dealerships   and  purchases  contracts  from  third  party  dealers.  Finance
receivables consist of contractually scheduled payments from installment sales
contracts net of unearned finance charges, accrued interest receivable, direct
loan  origination  costs,  and  an  allowance  for  credit  losses,  including
nonrefundable  acquisition  discount.

<PAGE>  46
     Finance  receivables  held  for  investment represent finance receivables
that  the Company expects to hold until they have matured. Finance receivables
held  for  sale  represent  finance  receivables  that  the Company expects to
securitize  within  the  next  twelve  months.

     Unearned  finance  charges  represent  the  balance  of  finance  income
(interest)  remaining  from  the  capitalization  of  the total interest to be
earned  over  the  original  term  of  the related installment sales contract.
Direct  loan  origination  costs  represent  the  unamortized balance of costs
incurred  in  the  origination  of  contracts  at  the  Company's dealerships.

     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" for
contracts  originated  at  its  company  dealerships.

     An allowance for credit losses (allowance) is established by charging the
provision  for  credit  losses and the allocation of nonrefundable acquisition
discount. For contracts generated by the company dealerships, the allowance is
established  by  charging the provision for credit losses. Contracts purchased
from  third  party  dealers  are  generally  purchased  with  a  nonrefundable
acquisition  discount  (discount). The discount is negotiated with third party
dealers  pursuant  to  a  financing  program that bases the discount on, among
other things, the credit risk of the borrower and the amount to be financed in
relation  to  the  car's  wholesale  value.  The discount is allocated between
discount  available  for credit losses and discount available for accretion to
interest  income.  The portion of discount allocated to the allowance is based
upon  historical  performance  and write-offs of contracts acquired from third
party  dealers,  as well as the general credit worthiness of the borrowers and
the  wholesale  value  of  the  vehicle.  The  remaining  discount, if any, is
deferred  and accreted to income using the interest method. To the extent that
the  allowance  is considered insufficient to absorb anticipated losses on the
third  party  dealer  portfolio,  additions  to  the allowance are established
through  a  charge  to  the provision for credit losses. The evaluation of the
discount and allowance considers such factors as the performance of each third
party  dealer's  loan  portfolio,  the Company's historical credit losses, the
overall  portfolio  quality  and  delinquency  status,  the review of specific
problem  loans,  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 and is valued at the
lower  of  cost  or  market. Vehicle reconditioning costs are capitalized as a
component of inventory cost. The cost of used vehicles sold is determined on a
specific  identification  basis.  Repossessed  vehicles  are  valued at market
value.

  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
<PAGE> 47
general  use. Amortization is computed using the straight-line method over the
estimated  economic  life  of  five  years.

  Trademarks,  Trade  Names,  Logos,  and  Contract  Rights

     The  registered  trade  names,  "Ugly Duckling Car Sales," "Ugly Duckling
Rent-A-Car,"  "America's Second Car," "Putting You on the Road to Good Credit"
and  related  trademarks,  logos,  and contract rights are stated at cost. The
cost  of trademarks, trade names, logos, and contract rights is amortized on a
straight-line  basis  over  their  estimated  economic  lives  of  ten  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  years.  The Company
assesses  the  recoverability  of this intangible asset by determining whether
the  amortization  of  the  goodwill  balance  over  its remaining life can be
recovered  through  undiscounted  future  operating cash flows of the acquired
operation.  The  amount  of  goodwill impairment, if any, is measured based on
projected  discounted  future  operating  cash  flows  using  a  discount rate
reflecting  the  Company's  average  cost  of  funds.  The  assessment  of the
recoverability of goodwill will be impacted if estimated future operating cash
flows  are  not  achieved.

  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.

  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.

  Advertising

     All  costs  related  to  production  and  advertising are expensed in the
period  incurred  or  ratably over the year in relation to revenues or certain
other  performance  measures. The Company had no advertising costs capitalized
as  of  December  31,  1996.

  Stock  Option  Plan

     Prior to January 1, 1996, the Company accounted 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 would be recorded on the date
<PAGE> 48
of grant only if the current market price of the underlying stock exceeded the
exercise  price.  On  January  1,  1996,  the  Company  adopted  SFAS No. 123,
Accounting  for  Stock-Based Compensation, which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the  date  of  grant.  Alternatively,  SFAS  No.  123  also allows entities to
continue  to  apply the provisions of APB Opinion No. 25 and 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
defined  in SFAS No. 123 had been applied. The Company has elected to continue
to  apply  the  provisions  of  APB  Opinion  No. 25 and provide the pro forma
disclosure  provisions  of  SFAS  No.  123.

  Earnings  Per  Share

     Earnings  per  share  is based upon the weighted average number of common
shares  outstanding plus dilutive common stock equivalents after giving effect
to  the  payment  of  dividends  on  preferred  stock.

  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.

  Impairment  of  Long-Lived  Assets  and  Long-Lived Assets to Be Disposed Of

     The  Company  adopted  the provisions of SFAS No. 121, Accounting for the
Impairment  of  Long-Lived  Assets and Long-Lived Assets to be Disposed Of, on
January  1,  1996.  The  Statement requires that long-lived assets and certain
identifiable intangibles be 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 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 exceed 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. Adoption of this Statement did not have a materiel
impact  on  the  Company's  financial  position,  results  of  operations,  or
liquidity.

Transfers and Servicing of Financial Assets and Extinguishments of Liabilities

     In  June  1996,  the Financial Accounting Standards Board issued SFAS No.
125,  Accounting  for  Transfers  and  Servicing   of  Financial  Assets   and
Extinguishments  of  Liabilities.  SFAS No. 125 is effective for transfers and
servicing  of  financial  assets  and extinguishments of liabilities occurring
after  December  31,  1996  and is to be applied prospectively. This Statement
provides  accounting  and  reporting  standards for transfers and servicing of
financial  assets  and  extinguishments  of  liabilities  based  on consistent
application  of  a  financial-components  approach that focuses on control. It
distinguishes transfers of financial assets that are sales from transfers that
are  secured  borrowings.  Management  of  the  Company  does  not expect that
adoption  of  SFAS  No.  125  will  have  a  material  impact on the Company's
financial  position,  results  of  operations,  or  liquidity.

<PAGE>  49
(3)    FINANCE  RECEIVABLES  AND  ALLOWANCE  FOR  CREDIT  LOSSES

     A  summary  of  Net  Finance  Receivables  at  December 31, 1996 and 1995
follows  (in  thousands):
<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                               -------------------
                                                 1996      1995
                                               --------  ---------
<S>                                            <C>        <C>
Contractually Scheduled Payments               $ 77,982   $ 66,425
Less: Unearned Finance Income                   (19,701)   (18,394)
                                               --------   --------
Installment Sales Contract Principal Balances    58,281     48,031
Add: Accrued Interest Receivable                    718        613
     Loan Origination Costs, Net                    189        582
                                               --------   --------
Principal Balances, Net                          59,188     49,226
Less: Allowance for Credit Losses                (8,125)    (8,500)
                                               ---------  --------
Finance Receivables, Net                       $ 51,063   $ 40,726
                                               ========   ========
Held for Investment                            $ 52,188   $ 49,226
Held for Sale                                     7,000          -
                                               --------   --------
                                                 59,188     49,226
Less: Allowance for Credit Losses                (8,125)    (8,500)
                                               --------   --------
                                               $ 51,063   $ 40,726
                                               ========   ========
</TABLE>
     Allowance  for  Credit  Losses as a percent of principal balances totaled
13.9%  and  17.7%  at  December  31,  1996  and  1995,  respectively.

     The  changes  in  the  Allowance  for  Credit  Losses for the years ended
December  31,  1996,  1995  and  1994  follow  (in  thousands):
<TABLE><CAPTION>
                                                      DECEMBER 31,
                                           -------------------------------
                                             1996        1995       1994
                                           -------     -------     -------
<S>                                        <C>         <C>         <C>
Balances,  Beginning  of  Year             $ 8,500     $ 6,209     $ 2,876
  Provision  for  Credit  Losses             9,811       8,359       8,140
  Allowance  Acquired  from  Discount        8,963       1,660         579
  Net  Charge  Offs                         (9,168)     (7,728)     (5,386)
  Sale  of  Finance  Receivables            (9,981)          -           -
                                           -------     -------     -------
Balances, End of Year                      $ 8,125     $ 8,500     $ 6,209
                                           =======     =======     =======
</TABLE>
(4)    RESIDUALS  IN  FINANCE  RECEIVABLES  SOLD

     The  valuation of the Residual in Finance Receivables Sold as of December
31,  1996  totaled  $9,889,000  which  represents  the  present  value  of the
Company's  interest  in  the  anticipated  future cash flows of the underlying
portfolio,  discounted  at  rates  ranging  from 16% to 25%, after taking into
consideration  anticipated  prepayments  and  net  charge  offs.
<PAGE>  50
     At December 31, 1996, the Company  serviced  Finance Receivables totaling
$51,663,000  which  serves as collateral on $40,770,000 in senior certificates
issued  to  one  investor. Approximately 89% of these finance receivables were
originated  in  the  state  of  Arizona.

(5)    INVESTMENTS  HELD  IN  TRUST

     In  connection  with  its  securitization  transactions,  the  Company is
required  to  make an initial cash deposit into an account held by the trustee
(spread  account)  and  to  pledge this cash to the trust to which the finance
receivables  were  sold.  The  trust  in turn invests the cash in high quality
liquid  investment  securities. In addition, the Company (through the trustee)
deposits  additional  cash  flows  from  the residual to the spread account as
necessary  to attain and maintain the spread account at a specified percentage
of  the  underlying  finance  receivables  principal  balance.

     In  the  event  that  the cash flows generated by the Finance Receivables
sold  to the trust 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  spread  account as necessary to pay the
obligations of the trust. The spread 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 spread account exceeds the specified percentage, the
trustee  will  release  the excess cash to the Company from the pledged spread
account. Except for releases in this manner, the cash in the spread account is
restricted from use by the Company. Investments Held in Trust, which are funds
deposited  in an interest-bearing, money market account, totaled $2,843,000 at
December  31,  1996.

     In  connection with certain other agreements, the Company has deposited a
total  of  $636,000  in  an  interest  bearing  trust  account.

(6)    PROPERTY  AND  EQUIPMENT

     A  summary  of  Property  and  Equipment as of December 31, 1996 and 1995
follows  (in  thousands):
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                                ------------------
                                                  1996      1995
                                                --------   -------
<S>                                             <C>        <C>
Land                                            $  7,811   $    15
Buildings and Leasehold Improvements               5,699     5,143
Furniture and Equipment                            5,696     3,401
Software Development Costs                           693       533
Vehicles                                             156       133
Construction in Process                            3,536        11
                                                --------   -------
                                                  23,591     9,236
Less Accumulated Depreciation and Amortization    (2,939)   (1,439)
                                                --------   -------
Property and Equipment, Net                     $ 20,652   $ 7,797
                                                ========   =======
</TABLE>


<PAGE>  51
     No Interest Expense was capitalized in 1996. Interest Expense capitalized
in  1995  and  1994  totaled  $54,000  and  $142,000,  respectively.

(7)    GOODWILL  AND  TRADEMARKS

     In  October, 1996, the Company acquired the operating lease of a used car
dealership. In connection with this acquisition, the Company recorded goodwill
totaling  $1,944,000.

     A  summary  of  Trademarks  as of December 31, 1996 and 1995 follows (in
thousands):

<TABLE>
<CAPTION>
                           DECEMBER 31,
                          --------------
                           1996    1995
                          -----   -----
<S>                       <C>     <C>
Original Cost             $ 581   $ 581
Accumulated Amortization   (375)   (312)
                          -----   -----
Trademarks, Net           $ 206   $ 269
                          =====   =====
</TABLE>

     Amortization  expense  relating to Trademarks totaled $63,000 for each of
the  years  ended  December  31,  1996,  1995  and  1994.

(8)    OTHER  ASSETS

     A  summary  of  Other Assets as of December 31, 1996 and 1995 follows (in
thousands):

<TABLE>
<CAPTION>
                                         DECEMBER 31,
                                      ----------------
                                        1996    1995
                                      -------  -------
<S>                                   <C>      <C>
Note Receivable                       $ 1,063  $     -
Pre-opening and Startup Costs           1,242        -
Escrow Deposits                           900        -
Prepaid Expenses                          796      643
Deferred Income Taxes                     676      925
Income Taxes Receivable                   316      850
Property and Equipment Held for Sale        -    1,086
Other Assets                            1,650      746
                                      -------  -------
                                      $ 6,643  $ 4,250
                                      =======  =======
</TABLE>






<PAGE>  52
(9)    ACCRUED  EXPENSES  AND  OTHER  LIABILITIES

     A  summary  of  Accrued Expenses and Other Liabilities as of December 31,
1996  and  1995  follows  (in  thousands):
<TABLE>
<CAPTION>
               DECEMBER 31,
             ---------------
               1996     1995
             -------  ------
<S>          <C>      <C>
Sales Taxes  $ 2,904  $2,258
Others         3,824   3,299
             -------  ------
             $ 6,728  $5,557
             =======  ======
</TABLE>
     In  connection  with the retail sale of vehicles, the Company is required
to  pay  sales  taxes  to  certain  government  jurisdictions. The Company has
elected  to pay these taxes using the "cash basis", which requires the Company
to  pay  the  sales  tax  obligation  for  a  sale transaction as principal is
collected  over  the  life  of  the  related  finance  receivable  contract.

(10)    NOTES  PAYABLE

     A  summary  of  Notes  Payable  at  December  31,  1996 and 1995 follows:
<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                            ------------------
                                                                              1996      1995
                                                                            ------------------
                                                                                (in thousands)
<S>                                                                         <C>       <C>
50,000,000 revolving loan with a finance company, interest payable daily
at 30 day LIBOR (5.40% at December 31, 1996) plus 3.60% through
September 1997, at which time the Company retains the right to extend
the loan for one additional year, secured by substantially all assets
of the Company                                                              $  4,602  $ 32,201

Two notes payable to a finance company totaling $7,450,000, monthly
interest payable at the prime rate (8.25% at December 31, 1996) plus
1.50% through January 1998; thereafter, monthly payments of $89,000
plus interest through January 2002 when balloon payments totaling
3,282,000 are due, secured by first deeds of trust and assignments of
rents on certain real property                                                 7,444         -

3,000,000 note payable to an insurance company, interest payable
quarterly at 12.5% per annum. Converted to common stock concurrent with
the Company's initial public offering in 1996                                      -     3,000

Others bearing interest at rates ranging from 9% to 11% due through April
2007, secured by certain real property and certain property and
equipment                                                                        858         -
                                                                            --------  --------
          Total                                                             $ 12,904  $ 35,201
                                                                            ========  ========
</TABLE>

<PAGE>  53
     The  aforementioned  revolving  loan agreement contains various reporting
and  performance  covenants  including  the  maintenance  of  certain  ratios,
limitations  on additional borrowings from other sources, and a restriction on
the  payment  of  dividends  under  certain  circumstances. The Company was in
compliance  with  the  covenants  at  December  31,  1996  and  1995.

     A  summary  of  future  minimum principal payments required (assuming the
Company  exercises  its  right  to extend the revolving loan through September
1998)  under  the aforementioned notes payable as of December 31, 1996 follows
(in  thousands):
<TABLE>
<CAPTION>
                DECEMBER 31, 1996
                ------------------
<S>                 <C>
1997                $       86
1998                     5,673
1999                     1,169
2000                     1,179
2001                     1,191
Thereafter               3,606
                    ----------
                    $   12,904
                    ==========
</TABLE>

(11)    SUBORDINATED  NOTES  PAYABLE

     The  Company  has  executed two subordinated notes payable with Verde. As
discussed  in  the  following  paragraphs, the balance outstanding under these
notes  totaled $14,553,000 at December 31, 1995. There was no accrued interest
payable  related  to  these  notes  at  December  31,  1995.

     In  August  1993,  the Company entered into a ten-year, subordinated note
payable  agreement  with Verde. This unsecured $15,000,000 note bears interest
at an annual rate of 18%, with interest payable monthly and is subordinated to
all  other  Company  liabilities.  The  note  also  provides for suspension of
interest  payments  should the Company be in default with any other creditors.
The  Company  had  $10,000,000  outstanding  related  to  this note payable at
December  31,  1995.

     In December 1995, the Company amended  its  five-year junior subordinated
revolving  note  payable  agreement  with  Verde.  The note was increased from
$3,000,000  to  $5,000,000,  bears  interest  at  an  annual rate of 18%, with
interest  payable  monthly,  and  is scheduled to mature in December 1999. The
Company  had  $4,553,000  outstanding related to this note payable at December
31,  1995.

     Interest  expense  related  to  the subordinated notes payable with Verde
totaled  $1,933,000, $3,492,000 and $2,569,000 during the years ended December
31,  1996,  1995  and  1994,  respectively.

     On  December  31, 1995, Verde converted $10,000,000 of subordinated notes
payable  to  preferred  stock  of  the  Company.  Verde  agreed  to  waive any
prepayment  penalties  associated with the reduction of the subordinated notes
payable  in  connection  with  the  conversion.



<PAGE>  54
     In  conjunction with the closing of the Company's initial public offering
in  June  1996, the two previously outstanding subordinated notes payable were
exchanged  for  a new subordinated note payable. The new $14,000,000 unsecured
note  bears  interest  at an annual rate of 10%, with interest payable monthly
and  is subordinate to all other Company indebtedness. The note also calls for
annual  principal  payments of $2,000,000 through June 2003 when the loan will
be  paid  in  full.  The  Company  had $14,000,000 outstanding under this note
payable  at  December  31,  1996.

(12)    INCOME  TAXES

     Income  tax  expense  (benefit) amounted to $100,000, zero and $(334,000)
for  the  years  ended  December  31,  1996,  1995  and 1994, respectively (an
effective  tax  rate  of  1.7%,  0% and 14.5%, respectively). A reconciliation
between  taxes  computed  at  the  federal  statutory  rate  of 34% and at the
effective  tax  rate  on  earnings  (loss)  before  income  taxes  follows (in
thousands):
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                            --------------------------
                                              1996      1995     1994
                                            ------    --------  ------
<S>                                         <C>       <C>        <C>
Computed "Expected" Tax Expense (Benefit)   $ 2,028   $ (1,350)  $ (782)
State Income Taxes, Net of Federal Effect        41         -       (30)
Change in Valuation Allowance                (2,315)     1,418      897
Other, Net                                      346        (68)    (419)
                                            -------   --------   ======
                                            $   100   $      -   $(334)
                                            =======   ========   ======
</TABLE>

     Components  of  income tax expense (benefit) for the years ended December
31,  1996,  1995  and  1994  follow  (in  thousands):
<TABLE>
<CAPTION>
            CURRENT    DEFERRED    TOTAL
           ---------  ----------  -------
<S>        <C>        <C>         <C>
1996:
  Federal  $   (149)  $     187   $   38
  State           -          62       62
           ---------  ----------  -------
           $   (149)  $     249   $  100
           =========  ==========  =======
1995:
  Federal  $   (449)  $     449   $    -
  State           -           -        -
           ---------  ----------  -------
           $   (449)  $     449   $    -
           =========  ==========  =======
1994:
  Federal  $     79   $    (367)  $ (288)
  State          48         (94)     (46)
           ---------  ----------  -------
           $    127   $    (461)  $ (334)
           =========  ==========  =======
</TABLE>
<PAGE>  55
     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,  1996  and  1995  are  presented  below  (in  thousands):
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                         --------------
                                                              1996         1995
                                                         --------------
<S>                                                      <C>             <C>
Deferred Tax Assets:
  Finance Receivables, Principally Due to the Allowance
    for Credit  Losses                                   $         131   $ 2,987
  Federal and State Income Tax Net Operating Loss
    Carryforwards                                                  995       317
  Residual in Finance Receivables                                  140         -
  Other                                                            279       443
                                                         --------------  --------
  Total Gross Deferred Tax Assets                                1,545     3,747
  Less: Valuation Allowance                                          -    (2,315)
                                                         --------------  --------
          Net Deferred Tax Assets                                1,545     1,432
                                                         --------------  --------
Deferred Tax Liabilities:
  Acquisition Discount                                            (112)        -
  Software Development Costs                                      (192)      (96)
  Other Assets                                                    (490)        -
  Loan Origination Fees                                            (75)     (198)
  Inventory                                                          -      (213)
                                                         --------------  --------
     Total Gross Deferred Tax Liabilities                         (869)     (507)
                                                         --------------  --------
          Net Deferred Tax Asset                         $         676   $   925
                                                         ==============  ========
</TABLE>

     The  valuation  allowance for deferred tax assets as of December 31, 1996
and  1995 was zero and $2,315,000, respectively.  The  net change in the total
Valuation  Allowance  for  the  year ended December 31, 1996 was a decrease of
$2,315,000,  and  an  increase  of  $1,418,000 for the year ended December 31,
1995.  In  assessing  the  realizability  of  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 scheduled 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 existing Valuation
Allowance.

     At  December  31,  1996, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $2,249,000, which, subject to
annual  limitations,  are  available  to offset future taxable income, if any,
through  2011  and  net  operating  loss  carryforwards  for  state income tax
purposes  of  $3,543,000,  which are available to offset future taxable income
through  2001.
<PAGE>  56
(13)    LEASE  COMMITMENTS

     The  Company  leases an operating facility, offices, a vehicle and office
equipment  from unrelated entities under operating leases which expire through
August  2001.  The  leases  require  monthly  rental  payments  aggregating
approximately  $155,000  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.

     The  Company purchased six car lots, a vehicle reconditioning center, and
two  office  buildings from Verde. These properties had previously been rented
from  Verde  pursuant  to  various  leases which called for base monthly rents
aggregating  approximately  $123,000  plus  contingent  rents  as  well as all
occupancy  and  maintenance costs, including real estate taxes, insurance, and
utilities.  In  connection with the purchase, Verde returned security deposits
which  totaled $364,000. The security deposits are included in Other Assets in
the  accompanying  Consolidated  Balance  Sheet  as  of  December  31,  1995.

     Rent  expense  for  the  year ended December 31, 1996 totaled $2,394,000.
Rents paid to Verde totaled $1,498,000 including contingent rents of $440,000.
There was  no  accrued  rent  payable  to  Verde  at  December  31,  1996.

     Rent  expense  for  the  year ended December 31, 1995 totaled $2,377,000.
Rents  paid  to  Verde  totaled  $1,889,000,  including  contingent  rents  of
$465,000, and $113,000 of rent capitalized during the construction period of a
facility.  Accrued rent payable to Verde totaled $101,000 at December 31, 1995
and  is included in Accrued Expenses and Other Liabilities on the accompanying
Consolidated  Balance  Sheets.

     Rent  expense  for  the  year ended December 31, 1994 totaled $1,400,000.
Rents paid to Verde totaled $1,221,000 including contingent rents of $310,000,
and  $127,000  of  rent capitalized during the construction period of two used
car  dealership  facilities.

     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,  1996  follows  (in  thousands):
<TABLE>
<CAPTION>
                 DECEMBER 31, 1996
                 ------------------
<S>                   <C>
1997                  $ 1,788
1998                    1,547
1999                    1,190
2000                      533
2001                      378
Thereafter                104
                      -------
          Total       $ 5,540
                      =======
</TABLE>

 (14)    STOCKHOLDERS'  EQUITY

     On  April  24, 1996, the Company effectuated a 1.16-to-1 stock split. The
effect of this stock split has been reflected for all periods presented in the
Consolidated  Financial  Statements.

<PAGE>  57
     The Company  has  authorized  20,000,000 shares of $.001 par value common
stock.  There  were  13,327,000 and 5,580,000 shares issued and outstanding at
December 31, 1996 and 1995, respectively. The common stock consists of $13,000
of common stock and $82,599,000  of additional paid-in capital at December 31,
1996.  The  common  stock  consists  of $6,000 of common stock and $121,000 of
additional  paid-in  capital  as  of  December  31,  1995.

     During  1996,  the  Company  completed  two  public offerings in which it
issued  a  total  of  7,245,000  shares  of  common  stock  for  approximately
$79,435,000  cash  net  of  stock  issuance  costs.

     Warrants to acquire 116,000 shares of the Company's common stock at $6.75
per  share and 170,000 shares of the Company's common stock at $9.45 per share
were  outstanding  at  December  31,  1996.

     The Company has authorized 10,000,000 shares of $.001 par value preferred
stock. There were zero and 1,000,000 shares issued and outstanding at December
31,  1996,  and  1995,  respectively.

     On  December 31, 1995, the Company exchanged 1,000,000 shares of Series A
preferred  stock  for  $10,000,000  of  subordinated notes payable with Verde.
Cumulative  dividends were payable at a rate of 12% per annum through June 21,
1996,  at  which  time  the  Series  A  preferred  stock  was  exchanged  on a
share-for-share  basis  for  1,000,000 shares of Series B preferred stock. The
dividends  were  payable  quarterly upon declaration by the Company's Board of
Directors.  In  November  1996,  the  Company redeemed the 1,000,000 shares of
Series  B  preferred  stock.

     The  Company's  Board  of  Directors  declared  quarterly  dividends  on
preferred stock totaling approximately $916,000 during the year ended December
31,  1996.  There  were  no  cumulative unpaid dividends at December 31, 1996.

(15)    STOCK  OPTION  PLAN

     In  June,  1995,  the  Company  adopted a long-term incentive plan (stock
option  plan).  The stock option plan, as amended, sets aside 1,300,000 shares
of  common  stock  to  be  granted  to employees at a price not less than fair
market  value  of  the  stock at the date of grant. Options are to vest over a
period  to  be  determined  by  the  Board  of  Directors  upon grant and will
generally expire ten years after the date of grant. The options generally vest
over  a  period  of  five  years.

     At  December 31, 1996, there were 388,000 additional shares available for
grant  under  the  Plan.  The  per  share weighted-average fair value of stock
options  granted during 1996 and 1995 was $8.39 and $1.10, respectively on the
date  of grant using the Black-Scholes option-pricing model with the following
weighted-average  assumptions:  1996  -  expected dividend yield 0%, risk-free
interest rate of 6.3%, expected volatility of 56.5%, and an expected life of 7
years;  1995  -  expected  dividend yield 0%, risk-free interest rate of 6.1%,
expected  volatility  of  56.5%  and  an  expected  life  of  7  years.

     The  Company  applies  APB  Opinion  25  in  accounting for its Plan, 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 and earnings per share would have
been  reduced  to  the  pro  forma  amounts  indicated  below:


<PAGE>  58
<TABLE>
<CAPTION>
                                               DECEMBER 31,
                                         --------------------------
                                             1996           1995
                                         -------------  ------------
<S>                         <C>          <C>            <C>
Net Earnings (Loss)         As reported  $ 5,866,000    $(3,972,000)
                            Pro forma    $ 5,748,000    $(3,985,000)
Earnings (Loss) per Share   As reported  $      0.60    $     (0.67)
                            Pro forma    $      0.58    $     (0.68)
</TABLE>


     The  full impact of calculating compensation cost for stock options under
SFAS  No.  123  is  not reflected in the pro forma net earnings (loss) amounts
presented  above  because  compensation  cost  is  reflected over the options'
vesting  period  of  five  years.

     A  summary  of  the  aforementioned  stock  plan  follows:
<TABLE>
<CAPTION>
                                       WEIGHTED
                                       AVERAGE
                                      PRICE PER
                             NUMBER     SHARE
                            --------  ----------
<S>                         <C>       <C>
Balance December 31, 1994         -            -
Granted                     459,000   $     1.72
Forfeited                   (17,000)        2.16
                            --------  ----------
Balance, December 31, 1995  442,000         1.70
Granted                     539,000        13.41
Forfeited                   (30,000)        3.26
Exercised                   (39,000)        1.00
                            --------  ----------
Balance, December 31, 1996  912,000   $     8.60
                            ========  ==========
</TABLE>

     A  summary  of  stock  options  granted  at  December  31,  1996  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 12/31/96 CONTRACTUAL LIFE      PRICE       AT 12/31/96    PRICE
-----------------   ----------- ----------------   ------------  ------------ -------------
<S>                   <C>          <C>                <C>            <C>        <C>
 $  .50 to $ 1.00     130,000       8.0 years         $ 0.86              -     $    -
 $ 1.50 to $ 2.60     247,000       8.5 years         $ 2.16         51,000       2.15
 $ 3.45 to $ 9.40     192,000       9.5 years         $ 6.73              -          -
 $11.88 to $17.69     343,000      10.0 years         $17.22              -          -
                      -------                         ------         ------     ------
                      912,000                         $ 8.60         51,000     $ 2.15
                      =======                         ======         ======     ======
</TABLE>
<PAGE>  59
(16)    COMMITMENTS  AND  CONTINGENCIES

     The  Company  has  executed  an  agreement  to  sell up to $50,000,000 in
finance  receivable  backed  certificates  through  December  31,  1996  to an
insurance  company.  In addition, the purchaser has the right of first refusal
to  purchase  up  to an additional $125,000,000 of finance receivables through
December 31, 1998. The Company completed the sale of approximately $58,000,000
in  receivable-backed  certificates  during  the year ended December 31, 1996.

     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  materially  adverse  effect  on  the  Company.

(17)    RETIREMENT  PLAN

     During  1995,  the Company established a qualified 401(k) retirement plan
(defined  contribution  plan)  which  became effective on October 1, 1995. The
plan  covers  substantially  all  employees  having  no  less than one year 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
10% of the participants' contributions. 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. Pension
expense  totaled  $23,000  and $5,000 during the years ended December 31, 1996
and  1995,  respectively.

(18)    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, 1996 and 1995, the
amounts  that  will  actually  be  realized  or  paid  in  settlement  of  the
instruments  could  be  significantly  different.

  Cash  and  Cash  Equivalents  and  Investments  Held  in  Trust

     The  carrying  amount  is  assumed  to  be  the fair value because of the
liquidity  of  these  instruments.




<PAGE> 60
  Finance  Receivables  and  Residuals  in  Finance  Receivables  Sold

     The  carrying  amount  is  assumed  to  be  the fair value because of the
relative  short  maturity  and repayment terms of the portfolio as compared to
similar  instruments.

  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.

(19)    SUBSEQUENT  EVENTS

     Subsequent to year end, the Company acquired the operating assets of five
used  car  dealerships  and  a  finance  company  for a total of approximately
$32,130,000.  The  acquisition,  which  was  financed with cash and borrowings
under  the  Company's  revolving  loan  will  be  accounted for as a purchase.

     On  February  13,  1997,  the  Company  completed  a private placement of
5,075,500  shares  of  unregistered common stock for approximately $88,850,000
cash,  net  of  stock  issuance  costs.

(20)    BUSINESS  SEGMENTS

     Operating  results  and  other  financial  data  are  presented  for  the
principal  business  segments  of the Company for the years ended December 31,
1996,  1995,  and  1994,  respectively. The Company has four distinct business
segments.  These consist of retail car sales operations (Company dealerships),
the  income  generated  from  the finance receivables generated at the Company
dealerships,  finance  income  generated from third party finance receivables,
and  corporate and other operations. In computing operating profit by business
segment,  the  following  items  were  considered  in  the Corporate and Other
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>  61
<TABLE>
<CAPTION>
                                                           COMPANY         THIRD
                                            COMPANY       DEALERSHIP       PARTY       CORPORATE
                                          DEALERSHIPS    RECEIVABLES    RECEIVABLES    AND OTHER    TOTAL
                                        ---------------  ------------   -----------   -----------  --------
                                                               (in thousands)
<S>                                     <C>              <C>           <C>            <C>          <C>
December 31, 1996:
  Sales of Used Cars                    $        53,768  $          -  $          -   $        -   $ 53,768
  Less: Cost of Cars Sold                        29,890             -             -            -     29,890
           Provision for Credit Losses            9,658             -           153            -      9,811
                                        ---------------  ------------  -------------  -----------  --------
                                                 14,220             -          (153)           -     14,067
  Interest Income                                     -         8,426         7,259          171     15,856
  Gain on Sale of Loans                               -         3,925           509            -      4,434
  Other Income                                      195           921             -          455      1,571
                                        ---------------  ------------  -------------  -----------  --------
     Income before Operating
       Expenses                                  14,415        13,272         7,615          626     35,928
                                        ---------------  ------------  -------------  -----------  --------
  Operating Expenses:
     Selling and Marketing                        3,568             -             -           17      3,585
     General and Administrative                   8,295         3,042         3,955        4,246     19,538
     Depreciation and Amortization                  318           769           195          295      1,577
                                        ---------------  ------------  -------------  -----------  --------
                                                 12,181         3,811         4,150        4,558     24,700
                                        ---------------  ------------  -------------  -----------  --------
Income before Interest Expense          $         2,234  $      9,461  $      3,465   $   (3,932)  $ 11,228
                                        ===============  ============  =============  ===========  ========
Capital Expenditures                    $         4,530  $        455  $        621   $      505   $  6,111
                                        ===============  ============  =============  ===========  ========
Identifiable Assets                     $        20,698  $     12,775  $     45,558   $   39,052   $118,083
                                        ===============  ============  =============  ===========  ========
December 31, 1995:
  Sales of Used Cars                    $       47,824   $          -   $          -   $        -   $47,824
  Less: Cost of Cars Sold                       27,964              -              -            -    27,964
           Provision for Credit Losses           8,359              -              -            -     8,359
                                        ---------------  -------------  -------------  -----------  -------
                                                11,501              -              -            -    11,501
  Interest Income                                    -          8,227          1,844            -    10,071
  Other Income                                       -              -              -          308       308
                                        ---------------  -------------  -------------  -----------  -------
     Income before Operating
       Expenses                                 11,501          8,227          1,844          308    21,880
                                        ---------------  -------------  -------------  -----------   ------
  Operating Expenses:
     Selling and Marketing                       3,856              -              -            -     3,856
     General and Administrative                  8,210          2,681          1,163        2,672    14,726
     Depreciation and Amortization                 279            479             89          467     1,314
                                        ---------------  -------------  -------------  -----------  -------
                                                12,345          3,160          1,252        3,139    19,896
                                        ---------------  -------------  -------------  -----------  -------
Income before Interest Expense          $         (844)  $      5,067   $        592   $   (2,831)  $ 1,984
                                        ===============  =============  =============  ===========  =======
Capital Expenditures                    $        1,195   $      1,561   $        216   $      223   $ 3,195
                                        ===============  =============  =============  ===========  =======
Identifiable Assets                     $       11,452   $     32,187   $     13,419   $    3,732   $60,790
                                        ===============  =============  =============  ===========  =======
</TABLE><PAGE>  62
<TABLE><CAPTION>
                                                            COMPANY         THIRD
                                            COMPANY       DEALERSHIP        PARTY       CORPORATE
                                          DEALERSHIPS     RECEIVABLES    RECEIVABLES    AND OTHER    TOTAL
                                        ---------------  ------------    -----------   -----------  -------
                                                                  (in thousands)
<S>                                     <C>              <C>            <C>            <C>          <C>
December 31, 1994:
  Sales of Used Cars                    $       27,768   $          -   $          -   $        -   $27,768
  Less: Cost of Cars Sold                       12,577              -              -            -    12,577
           Provision for Credit Losses           7,190            834            116            -     8,140
                                        ---------------  -------------  -------------  -----------  -------
                                                 8,001           (834)          (116)           -     7,051
  Interest Income                                    -          4,683            766            -     5,449
  Other Income                                       -              -              -          556       556
                                        ---------------  -------------  -------------  -----------  -------
     Income before Operating
       Expenses                                  8,001          3,849            650          556    13,056
                                        ---------------  -------------  -------------  -----------  -------
  Operating Expenses:
     Selling and Marketing                       2,263              -              -          139     2,402
     General and Administrative                  5,069          1,631            240        2,201     9,141
     Depreciation and Amortization                 131            159             64          423       777
                                        ---------------  -------------  -------------  -----------  -------
                                                 7,463          1,790            304        2,763    12,320
                                        ---------------  -------------  -------------  -----------  -------
Income before Interest Expense          $          538   $      2,059   $        346   $   (2,207)  $   736
                                        ===============  =============  =============  ===========  =======
Capital Expenditures                    $        3,905   $        757   $        302   $      370   $ 5,334
                                        ===============  =============  =============  ===========  =======
Identifiable Assets                     $        8,788   $     16,764   $      1,558   $    2,601   $29,711
                                        ===============  =============  =============  ===========  =======
</TABLE>

 (21)    QUARTERLY  FINANCIAL  DATA  -  UNAUDITED

     A summary of the quarterly data for the years ended December 31, 1996 and
1995  follows:

<TABLE><CAPTION>
                                         FIRST        SECOND      THIRD     FOURTH
                                        QUARTER       QUARTER    QUARTER    QUARTER    TOTAL
                                    ---------------  ---------  ---------  ---------  ------
                                                       (in thousands)
<S>                                 <C>              <C>        <C>        <C>        <C>
1996:
  Total Revenue                     $       19,396   $ 20,081   $ 18,259   $ 17,893   $75,629
                                    ===============  =========  =========  =========  ========
  Income before Operating Expenses           8,442      9,005      8,741      9,740    35,928
                                    ===============  =========  =========  =========  ========
  Operating Expenses                         5,694      6,296      5,522      7,188    24,700
                                    ===============  =========  =========  =========  ========
  Income before Interest Expense             2,716      2,721      3,157      2,634    11,228
                                    ===============  =========  =========  =========  ========
  Net Earnings                      $        1,065   $  1,083   $  1,967   $  1,751   $ 5,866
                                    ===============  =========  =========  =========  ========
  Earnings Per Share                $         0.13   $   0.13   $   0.19   $   0.14   $  0.60
                                    ===============  =========  =========  =========  ========

<PAGE>  63
1995:
  Total Revenues                    $       11,546   $ 14,975   $ 16,944   $ 14,738   $58,203
                                    ===============  =========  =========  =========  ========
  Income before Operating Expenses           4,628      5,601      5,858      5,793    21,880
                                    ===============  =========  =========  =========  ========
  Operating Expenses                         3,970      4,646      5,366      5,914    19,896
                                    ===============  =========  =========  =========  ========
  Income before Interest Expense               658        955        492       (121)    1,984
                                    ===============  =========  =========  =========  ========
  Net Loss                          $         (465)  $   (283)  $ (1,169)  $ (2,055)  $(3,972)
                                    ===============  =========  =========  =========  ========
  Loss Per Share                    $        (0.08)  $  (0.05)  $  (0.20)  $  (0.35)  $ (0.67)
                                    ===============  =========  =========  =========  ========
</TABLE>
            ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                    ON ACCOUNTING AND FINANCIAL DISCLOSURES

     The  Company has had no disagreements with its independent 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 regarding (i) directors and executive officers of the Company
is set forth under the caption "Information Concerning Directors and Executive
Officers"  and  (ii)    compliance  with  Section 16(a) is set forth under the
caption  "Section  16(a)  Beneficial  Ownership  Reporting Compliance," in the
Company's  Proxy Statement relating to its 1997 Annual Meeting of Stockholders
(the  "1997  Proxy  Statement")  incorporated by reference into this Form 10-K
Report, which has been filed with the Commission in accordance with Rule 14a-6
promulgated  under  the  Exchange  Act.    With the exception of the foregoing
information  and other information specifically incorporated by reference into
this  report,  the Company's 1997 Proxy Statement is not being filed as a part
hereof.

                       ITEM 11 - EXECUTIVE COMPENSATION

    Information regarding executive compensation is set forth under the caption
"Executive  Compensation"  in  the  1997 Proxy Statement, which information is
incorporated  herein  by  reference; provided, however, that the "Compensation
Committee  Report  on Executive Compensation" and the "Stock Price Performance
Graph" contained in the 1997 Proxy Statement are not incorporated by reference
herein.

    ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Information regarding security ownership of certain beneficial owners and
management is  set  forth  under  the  caption "Security Ownership of Certain
Beneficial  Owners  and  Management"  in  the  1997  Proxy  Statement,  which
information  is  incorporated  herein  by  reference.

           ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information  regarding certain relationships and related transactions of
management is set forth under the caption "Certain Transactions and Relation-
ships"  in the 1997 Proxy Statement, which information is incorporated herein
by  reference.
<PAGE>  64
                                    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>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                <C>
Independent Auditors' Report                                                         40

Consolidated Financial Statements and Notes thereto of Ugly Duckling Corporation:

Consolidated Balance Sheets - December 31, 1996 and 1995                             41

Consolidated Statements of Operations - for the years ended December 31, 1996,
 1995, and 1994                                                                      42

Consolidated Statements of Stockholders' Equity - for the years ended
 December 31, 1996, 1995, and 1994                                                   43

Consolidated Statements of Cash Flows - for the years ended December 31, 1996,
 1995, and 1994                                                                      44

Notes to Consolidated Financial Statements                                           45
</TABLE>

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 or otherwise in the Form 10K.

(b)          REPORTS  ON  FORM  8-K.

     No  report  on  Form  8-K was filed during the last quarter of the period
covered  by  this  report.

(c)          Exhibits.

     The  following  exhibits  are  filed  as  part  of  this  Form  10-K.
<TABLE><CAPTION>
<S>      <C>
EXHIBIT
NUMBER   DESCRIPTION
-------------------------------------------------------------------------------------------------------------------
3.1      Certificate of Incorporation of the Registrant(1)
3.1(a)   Amendment to Certificate of Incorporation of the Registrant(1)
3.2      Bylaws of the Registrant(1)
3.2(a)   Amendment to Bylaws of the Registrant(1)
4.1      Certificate of Incorporation of the Registrant filed as Exhibit 3.1(1)
4.2      Series A Preferred Stock Agreement(1)
4.3      18% Subordinated Debenture of the Registrant issued to Verde Investments, Inc.(1)


<PAGE>  65
4.4      18% Junior Subordinated Revolving Debenture of the Registrant issued to Verde Investments, Inc., as
         amended(1)
4.5      Convertible Note of the Registrant issued to SunAmerica Life Insurance Company(1)
4.6      Form of Certificate representing Common Stock(1)
4.7      Form of Warrant issued to Cruttenden Roth Incorporated as Representative of the several underwriters(1)
4.8      Form of Warrant issued to SunAmerica Life Insurance Company(1)
10.1     Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant and General Electric
         Capital Corporation(1)
10.1(a)  Amendment to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant and
         General Electric Capital Corporation(1)
10.1(b)  Amendment to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant and
         General Electric Capital Corporation(1)
10.1(c)  Amendment No. 3 to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant
         and General Electric Capital Corporation(1)
10.1(d)  Amendment No. 4 to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant
         and General Electric Capital Corporation(1)
10.1(e)  Amendment No. 5 to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant
         and General Electric Capital Corporation(1)
10.1(f)  Amendment No. 6 to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant
         and General Electric Capital Corporation(2)
10.1(g)  Assumption and Amendment Agreement between the Registrant and General Electric Capital Corporation(2)
10.1(h)  Amendment No. 7 to Motor Vehicle Installment Contract Loan and Security Agreement between the Registrant
         and General Electric Capital Corporation
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)
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     Registration Rights Agreement between the Registrant and SunAmerica Life Insurance Company(1)
10.3(a)  Amended and Restated Registration Rights Agreement between the Registrant and SunAmerica Life Insurance
         Company(1)
10.4     Form of Pooling and Servicing Agreement relating to SunAmerica securitization program(1)
10.5     Form of Certificate Purchase Agreement relating to SunAmerica securitization program(1)
10.6     Form of Origination Agreement and Assignment relating to SunAmerica securitization program(1)
10.7     Form of Purchase Agreement and Assignment relating to SunAmerica securitization program(1)
10.8     Form of Servicing Guaranty relating to SunAmerica securitization program(1)
10.9     Ugly Duckling Corporation Long-Term Incentive Plan*
10.10    Employment Agreement between the Registrant and Ernest C. Garcia, II(1)*
10.11    Employment Agreement between the Registrant and Steven T. Darak(1)*
10.12    Employment Agreement between the Registrant and Wally Vonsh(1)*
10.13    Employment Agreement between the Registrant and Donald Addink(1)*
10.14    Lease Agreement between the Registrant and Camelback Esplanade Limited Partnership for corporate offices
         in Phoenix, Arizona(1)
10.15    Land Lease Agreement between the Registrant and Verde Investments, Inc. for property located at 5104 West
         Glendale Avenue in Glendale, Arizona(1)
10.16    Building Lease Agreement between the Registrant and Verde Investments, Inc. for property and buildings
         located at 9630 and 9650 North 19th Avenue in Phoenix, Arizona (1)
10.17    Land Lease Agreement between the Registrant and Verde Investments, Inc. for property located at 330 North
         24th Street in Phoenix, Arizona (1)
10.18    Land Lease Agreement between the Registrant and Verde Investments, Inc. for property located at 333 South
         Alma School Road in Mesa, Arizona (1)
10.19    Lease Agreements between the Registrant and Blue Chip Motors, the Registrant and S & S Holding Corporation
         and the Registrant and Edelman Brothers for certain properties located at 3901 East Speedway Boulevard in
         Tucson, Arizona (1)
10.20    Real Property Lease between the Registrant and Peter and Alva Keesal for property located at 3737 South Park
         Avenue in Tucson, Arizona (1)

<PAGE>  66
10.21    Land Lease Agreement between the Registrant and Verde Investments, Inc. for property located at 2301 North
         Oracle Road in Tucson, Arizona (1)
10.22    Related Party Transactions Modification Agreement between the Registrant and Verde Investments, Inc. (1)
10.23    Sublease Agreement between the Registrant and Envirotest Systems Corp. for corporate offices in Phoenix,
         Arizona (1)
10.24    Form of Indemnity Agreement between the Registrant and its directors and officers(1)
10.25    Ugly Duckling Corporation 1996 Director Incentive Plan (1)*
10.26    Purchase Agreement, dated February 10, 1997 between the Registrant and Friedman Billings, Ramsey & Co., Inc.(4)
10.27    Agreement of Purchase and Sale of Assets dated as of December 31, 1996 (3)
10.28    Agreement of Purchase and Sale of Assets dated as of March 5, 1997
11       Earnings (Loss) per Share Computation (4)
22       List of Subsidiaries (4)
23       Independent Auditors' Consent
24.1     Power of Attorney of Robert J. Abrahams
24.2     Power of Attorney of Christopher D. Jennings
24.3     Power of Attorney of John N. MacDonough
24.4     Power of Attorney of Arturo R. Moreno
24.5     Power of Attorney of Frank P. Willey
27       Financial Data Schedule
</TABLE>
__________

(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 Current Report on Form 8-K,
          filed January 30, 1997.

(4)       Incorporated by reference to the Company's Registration Statement on
          Form S-1 (Registration  No. 333-22237).






*          Indicates a management contract or compensation plan.



















<PAGE>  67
                                  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/  Ernest  C.  Garcia,  II
                               Ernest  C.  Garcia,  II
                               Chairman  of  the  Board  and
                               Chief  Executive  Officer
                               Date:    March  ___,  1997

     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>
<S>                        <C>                           <C>
Name and Signature         Title                         Date
-------------------------  ----------------------------  ---------------

/s/  ERNEST C. GARCIA, II  Chief Executive Officer and   March 26, 1997
-------------------------
Ernest C. Garcia, II       Director (Principal

/s/  STEVEN T. DARAK       Senior Vice President and     March 26, 1997
-------------------------
Steven T. Darak            Chief Financial Officer
                           (Principal financial and
                           accounting officer)

                      *    Director                      March 26, 1997
-------------------------
Robert J. Abrahams

                      *    Director                      March 26, 1997
-------------------------
Christopher D. Jennings

                      *    Director                      March 26, 1997
-------------------------
John N. MacDonough

                      *    Director                      March 26, 1997
-------------------------
Arturo R. Moreno

                      *    Director                      March 26, 1997
-------------------------
Frank P. Willey
</TABLE>

*  By:      /s/  Ernest  C.  Garcia,  II
                 Ernest  C.  Garcia,  II
                 Attorney-in-Fact
<PAGE>  68