================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 ---------------

                                    FORM 10-Q

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

                                       or

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

               For the quarterly period ended: September 30, 2001

                        Commission File Number 000-20841

                            UGLY DUCKLING CORPORATION
             (Exact name of registrant as specified in its charter)

                               Delaware 86-0721358
                (State or other jurisdiction of (I.R.S. employer
                  incorporation or organization) Identification
                                      no.)

                           4020 E. Indian School Road
                             Phoenix, Arizona 85018
                   (Address of principal executive (Zip Code)
                                    offices)

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

     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.

                                 [X] Yes [ ] No
                                 ---------------

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

     At November 12, 2001, there were approximately  12,274,000 shares of Common
Stock,  $0.001 par value,  outstanding.

     This  document  serves both as a resource for analysts,  shareholders,  and
other  interested  persons,  and as the  quarterly  report  on Form 10-Q of Ugly
Duckling  Corporation (Ugly Duckling) to the Securities and Exchange Commission,
which has taken no action to approve or  disapprove  the report or pass upon its
accuracy or adequacy.  Additionally,  this document is to be read in conjunction
with the  consolidated  financial  statements and notes thereto included in Ugly
Duckling's  Annual  Report on Form 10-K,  for the year ended  December 31, 2000.
================================================================================

<PAGE>



                            UGLY DUCKLING CORPORATION

                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                        Page
                          Part I - FINANCIAL STATEMENTS
<S>                  <C>                                                                                                   <C>

  Item 1.            FINANCIAL STATEMENTS
                     Condensed Consolidated Balance Sheets-- September 30, 2001 and December 31, 2000                       1
                     Condensed Consolidated Statements of Operations-- Three and Nine Months Ended
                     September 30, 2001 and 2000                                                                            2
                     Condensed Consolidated Statements of Cash Flows-- Nine Months Ended
                         September 30, 2001 and 2000                                                                        3
                     Notes to Condensed Consolidated Financial Statements                                                   4
  Item 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                 10
  Item 3.            MARKET RISK                                                                                           24

                     Part II.-- OTHER INFORMATION
  Item 1.            LEGAL PROCEEDINGS                                                                                     24
  Item 2.            CHANGES IN SECURITIES                                                                                 25
  Item 3.            DEFAULTS UPON SENIOR SECURITIES                                                                       25
  Item 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                   25
  Item 5.            OTHER INFORMATION                                                                                     25
  Item 6.            EXHIBITS AND REPORTS ON FORM 8-K                                                                      25
                     SIGNATURES                                                                                            25
</TABLE>












<PAGE>



                                     ITEM 1.

                            UGLY DUCKLING CORPORATION
                           Consolidated Balance Sheets
                      (In thousands, except share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                            September 30,        December 31,
                                                                2001                 2000
                                                          ------------------   -----------------
<S>                                                              <C>                 <C>
ASSETS
Cash and Cash Equivalents                                        $    7,384          $    8,805

Finance Receivables, Net                                            501,048             500,469

Note Receivable from Related Party                                   12,000              12,000

Inventory                                                            47,414              63,742

Property and Equipment, Net                                          39,487              38,679

Intangible Assets, Net                                               11,808              12,527

Other Assets                                                         34,555              11,724

Net Assets of Discontinued Operations                                 4,044               4,175
                                                          ------------------   -----------------
                                                                $   657,740          $  652,121
                                                          ==================   =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accounts Payable                                              $    3,104          $    2,239

   Accrued Expenses and Other Liabilities                            42,268              36,830

   Notes Payable - Portfolio                                        386,572             406,551

   Other Notes Payable                                               41,646              16,579

   Subordinated Notes Payable                                        32,600              34,522
                                                          ------------------   -----------------
     Total Liabilities                                              506,190             496,721
                                                          ------------------   -----------------
Stockholders' Equity:
 Preferred Stock $.001 par value, 10,000 shares
          authorized none issued and outstanding                          -                   -
 Common Stock $.001 par value, 100,000 shares
          authorized; 18,764 issued; and 12,275 and
          12,292 outstanding, respectively                              19                  19
   Additional Paid-in Capital                                       173,741             173,723
   Retained Earnings                                                 18,141              21,772
   Treasury Stock, at cost                                         (40,351)            (40,114)
                                                          ------------------   -----------------
     Total Stockholders' Equity                                     151,550             155,400
   Commitments and Contingencies                                          -                   -
                                                          ------------------   -----------------
                                                                $   657,740          $  652,121
                                                          ==================   =================





                                See accompanying notes to Condensed Consolidated Financial Statements.

</TABLE>
                                        1
<PAGE>

                  UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             Three and Nine Months Ended September 30, 2001 and 2000
         (In thousands, except cars sold and earnings per share amounts)
                               (Unaudited)

<TABLE>
<CAPTION>
                                                Three Months Ended              Nine Months Ended
                                                   September 30,                  September 30,
                                            ----------------------------  ------------------------------
                                                2001          2000             2001           2000
                                            ============================  ==============================
<S>                                              <C>          <C>              <C>            <C>
Sales of Used Cars                               $110,237     $ 126,636        $ 346,342      $ 380,949
Less:
   Cost of Used Cars Sold                          62,622        70,760          196,102        212,119
   Provision for Credit Losses                     48,755        36,092          119,985        102,877
                                            ----------------------------  ------------------------------
                                                  (1,140)        19,784           30,255         65,953
                                            ----------------------------  ------------------------------
Other Income (Expense):
   Interest Income                                 35,000        31,436          103,744         86,838
   Portfolio Interest Expense                     (7,489)       (7,318)         (23,500)       (18,344)
                                            ----------------------------  ------------------------------
   Net Interest Income                             27,511        24,118           80,244         68,494
                                            ----------------------------  ------------------------------

Income before Operating Expenses                   26,371        43,902          110,499        134,447
Operating Expenses:
  Selling and Marketing                             6,084         7,187           19,945         22,748
  General and Administrative                       26,807        27,523           81,462         78,253
  Depreciation and Amortization                     2,339         2,285            7,181          6,724
                                            ----------------------------  ------------------------------
       Operating Expenses                          35,230        36,995          108,588        107,725
                                            ----------------------------  ------------------------------
Income (loss) before Other Interest Expense       (8,859)         6,907            1,911         26,722
Other Interest Expense                              2,695         2,360            8,648          7,237
                                            ----------------------------  ------------------------------

Earnings (loss) before Income Taxes              (11,554)         4,547          (6,737)         19,485
Income Taxes (Benefit)                            (4,737)         1,864          (2,762)          7,971
                                            ----------------------------  ------------------------------

Earnings (loss) before Extraordinary Item         (6,817)         2,683          (3,975)         11,514
Extraordinary Item - Gain on early
extinguishment of debt, net                             -             -              344              -
                                            ----------------------------  ------------------------------
Net Earnings (loss)                             $ (6,817)      $  2,683       $  (3,631)       $ 11,514
                                            ============================  ==============================

Earnings (loss) per Common Share before Extraordinary Item:
   Basic                                        $  (0.56)      $   0.21        $  (0.32)       $   0.83
                                            ============================  ==============================
   Diluted                                      $  (0.56)      $   0.21        $  (0.32)       $   0.82
                                            ============================  ==============================
Net Earnings (loss) per Common Share:
   Basic                                        $  (0.56)      $   0.21        $  (0.30)       $   0.83
                                            ============================  ==============================
   Diluted                                      $  (0.56)      $   0.21        $  (0.30)       $   0.82
                                            ============================  ==============================
Weighted Average Shares Used in Computation:
   Basic  Shares Outstanding                       12,276        12,597           12,289         13,847
                                            ============================  ==============================
   Diluted Shares Outstanding
                                                   12,276        12,747           12,289         14,044
                                            ============================  ==============================

                                See accompanying notes to Condensed Consolidated Financial Statements.

</TABLE>

                                       2
<PAGE>

                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months ended September 30, 2001 and 2000
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Nine Months Ended
                                                                                           September 30,
                                                                                    -----------------------------
                                                                                         2001          2000
                                                                                    -----------------------------
<S>                                                                                     <C>            <C>
Cash Flows from Operating Activities:
     Net Earnings (Loss)                                                                $  (3,631)     $  11,514
Adjustments to Reconcile Net Earnings to Net Cash Provided
     by Operating Activities:
     Provision for Credit Losses                                                           119,985       102,877
     Depreciation and Amortization                                                          10,632        10,453
     (Gain) Loss from Disposal of Property and Equipment                                       755             3
     Collections from Residuals in Finance Receivables Sold                                  1,136        13,055
     Decrease in Inventory                                                                  16,328        19,126
    (Increase) Decrease in Other Assets                                                   (16,068)           600
     Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Liabilities         (499)        14,040
     Increase (Decrease) in Income Taxes Payable                                             6,802         (558)
                                                                                    -----------------------------
         Net Cash Provided by Operating Activities                                         135,440       171,110
                                                                                    -----------------------------
Cash Flows Used in Investing Activities:
     Increase in Finance Receivables                                                     (313,376)     (392,788)
     Collections on Finance Receivables                                                    184,926       157,067
     Decrease in Investments Held in Trust on Finance Receivables Sold                       1,398         7,969
     Proceeds from Disposal of Property and Equipment                                        2,542         3,142
     Purchase of Property and Equipment                                                   (10,569)      (11,625)
                                                                                    -----------------------------
         Net Cash Used in Investing Activities                                           (135,079)     (236,235)
                                                                                    -----------------------------
Cash Flows from Financing Activities:
     Initial Deposits at Securitization into Investments Held in Trust                     (6,407)      (20,738)
     Additional Deposits into Investments Held in Trust                                   (69,358)      (10,849)
     Collections from Investments Held in Trust                                             81,118        17,544
     Additions to Notes Payable Portfolio                                                  447,328       554,153
     Repayment of Notes Payable Portfolio                                                (469,638)     (469,481)
     Additions to Other Notes Payable                                                       44,232         1,267
     Repayment of Other Notes Payable                                                     (19,873)      (20,133)
     Repayment of Subordinated Notes Payable                                               (9,333)       (1,500)
     Proceeds from Issuance of Common Stock                                                     18           437
     Acquisition of Treasury Stock                                                               -      (11,114)
                                                                                    -----------------------------
         Net Cash (Used)Provided by Financing Activities                                  (1,913)        39,586
                                                                                    -----------------------------
Net Cash Provided by Discontinued Operations                                                   131        28,411
                                                                                    -----------------------------
Net Increase (Decrease) in Cash and Cash Equivalents
                                                                                           (1,421)         2,872
Cash and Cash Equivalents at Beginning of Period                                             8,805         3,683
                                                                                    -----------------------------
Cash and Cash Equivalents at End of Period                                              $    7,384     $   6,555
                                                                                    =============================
Supplemental Statement of Cash Flows Information:
     Interest Paid                                                                      $   28,437     $  20,712
                                                                                    =============================
     Income Taxes Paid                                                                  $    4,258     $   8,524
                                                                                    =============================
     Acquisition of Treasury Stock with Subordinated Debt                               $        -     $   8,005
                                                                                    =============================
     Acquisition of Treasury Stock in Conjunction with Severance Agreement              $     237      $       -
                                                                                    =============================

                                See accompanying notes to Condensed Consolidated Financial Statements.


</TABLE>
                                       3

<PAGE>

                            UGLY DUCKLING CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.  Basis of Presentation

     Our accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and pursuant to rules
and regulations of the Securities and Exchange Commission.  Accordingly, they do
not include all of the  information  and footnotes  required by such  accounting
principles  generally  accepted  in the United  States of America for a complete
financial  statement  presentation.  In  our  opinion,  such  unaudited  interim
information  reflects  all  adjustments,  consisting  only of  normal  recurring
adjustments,  necessary  to  present  our  financial  position  and  results  of
operations  for the periods  presented.  Our results of  operations  for interim
periods are not necessarily  indicative of the results to be expected for a full
fiscal year.  Our Condensed  Consolidated  Balance Sheet as of December 31, 2000
was derived from our audited  consolidated  financial statements as of that date
but does not include all the  information  and footnotes  required by accounting
principles  generally  accepted in the United States of America.  For a complete
financial statement  presentation,  we suggest that these condensed consolidated
financial  statements  be read in  conjunction  with  the  audited  consolidated
financial  statements  included in our Annual Report on Form 10-K,  for the year
ended  December 31, 2000. All amounts are in thousands with the exception of per
share, per unit and per car data, unless otherwise noted.

Note 2.  Summary of Finance Receivables

    A summary of Finance Receivables, net, follows:
<TABLE>
<CAPTION>

                                                        September 30,      December 31,
                                                          2001                2000
                                                    -----------------   -----------------
<S>                                                      <C>                  <C>
Contractually Scheduled Payments                         $   727,051          $  696,220
Unearned Finance Charges                                   (189,105)           (181,274)
                                                    -----------------   -----------------
Principal Balances, net                                      537,946             514,946
Accrued Interest                                               5,981               5,655
Loan Origination Costs                                         7,233               7,293
                                                    -----------------   -----------------
     Principal Balances, net                                 551,160             527,894
Investments Held in Trust                                     64,388              71,139
Residuals in Finance Receivables Sold                              -               1,136
                                                    -----------------   -----------------
Finance Receivables                                          615,548             600,169
Allowance for Credit Losses                                (114,500)            (99,700)
                                                    -----------------   -----------------
Finance Receivables, net                                 $   501,048          $  500,469
                                                    =================   =================

Allowance as % of Ending Principal Balances, net               21.3%               19.4%
                                                    =================   =================
</TABLE>
Investments  Held in Trust  represent  funds held by  trustees  on behalf of our
securitization bondholders.

Note 3.  Related Party Transactions

     On September 21, 2001,  Mr. Ernest C. Garcia II, the Company's  Chairman of
the Board and  largest  shareholder,  confirmed  to the Board of  Directors  the
withdrawal of his offer to purchase all of the outstanding  stock of the Company
not owned by him.

     In May 2001,  Verde  purchased  one of the Company  properties  at its book
value of  approximately  $1,650,000.  Verde has leased the property  back to the
Company under a 20-year lease, which expires May 2021. The lease is a triple net
lease with an increase  approximately  2% in year two and annual CPI adjustments
thereafter.

     The Note Receivable - Related Party originated from the Company's  December
1999 sale of its Cygnet Dealer Finance subsidiary to Cygnet Capital Corporation,
an entity controlled by Ernest C. Garcia II, Chairman and principal  shareholder
of the Company.  The $12.0 million note from Cygnet  Capital  Corporation  has a
10-year term, with interest payable quarterly at 9%, due December 2009. The note
is secured by the capital stock of Cygnet Capital  Corporation and guaranteed by
Verde Investments,  Inc. ("Verde"),  an affiliate of Mr. Garcia. Under the terms
of the agreement,  Mr. Garcia will be allowed to reduce


                                       4
<PAGE>

the  principal  balance up to a maximum of $8.0 million by  surrendering  to the
Company  shares of Ugly  Duckling  common stock (valued at 98% of the average of
the closing  prices of the stock on NASDAQ for the ten trading days prior to the
surrender)  as long as Mr.  Garcia's  ownership  interest of the Company  voting
stock does not fall below 15% and the  acceptance  of such stock by the  Company
does not result in a breach of a covenant.

Note 4.  Notes Payable
<TABLE>

Notes Payable, Portfolio
A summary of Notes Payable, Portfolio at September 30, 2001 and December 31, 2000:
<CAPTION>
                                                                                                   September 30,      December 31,
                                                                                                        2001               2000
                                                                                                  ----------------  ----------------
<S>                                                                                               <C>               <C>
Revolving Facility for $125.0 million with GE Capital, secured by substantially all
     assets of the Company, terminated April 2001                                                 $              -        $   53,326
Revolving Facility for $75.0 - $100.0 million with Greenwich Capital Financial Products,
     Inc, secured by substantially all assets of the Company, not otherwise pledged                         64,476                 -
Class A obligations issued pursuant to the Company's Securitization Program,
     secured by underlying pools of finance receivables and investments held in trust
     totaling $482.5 million and $543.0 million at September 30, 2001, and December 31,
     2000, respectively                                                                                    325,024           355,972
                                                                                                  ----------------  ----------------
     Subtotal                                                                                              389,500           409,298
     Less:  Unamortized Loan Fees                                                                            2,928             2,747
                                                                                                  ----------------  ----------------
     Total                                                                                              $  386,572        $  406,551
                                                                                                  ================  ================
</TABLE>

     Effective  April  2001,  the Company  replaced  the  warehouse  receivables
portion  of the GE  Capital  facility.  The new  warehouse  allows  for  maximum
borrowings of $75 million during the period May 1 through November 30 increasing
to $100 million  during the period  December 1 through April 30. The term of the
facility  is 364  days  with a  renewal  option,  upon  mutual  consent,  for an
additional  364-day  period.  The  borrowing  base  consists of up to 65% of the
principal  balance of eligible loans  originated from the sale of used cars. The
lender  maintains  an option to adjust the  advance  rate to reflect  changes in
market conditions or portfolio performance. The interest rate on the facility is
LIBOR plus 2.80% (6.18% at September  30,  2001).  At  September  30, 2001,  the
Company was not in compliance with the interest  coverage ratio covenant of this
facility  and received a waiver from the lender.  The Company was in  compliance
with all other required covenants.

     Class A  obligations  have interest  payable  monthly at rates ranging from
3.44% to 7.26%. See "Management's Discussion and Analysis of Financial Condition
and Results of  Operations -  Securitizations"  for further  information  on the
Class A bonds.

    Other Notes Payable
A summary of Other Notes Payable at September 30, 2001 and December 31, 2000
follows:
<TABLE>
<CAPTION>
                                                                                              September 30,      December 31,
                                                                                                  2001              2000
                                                                                            ----------------- -----------------
<S>                                                                                                <C>               <C>
Note payable, secured by the capital stock of UDRC II, UDRC III, UDRC IV, and
     certain other receivables                                                                     $  29,000         $  11,141
Revolving Facility for $36.0 million with Automotive Finance Corporation, secured by the
     Company's automobile inventory                                                                    7,105                 -
Other notes payable bearing interest at rates ranging from 7.5% to 11% due through
     October 2015, secured by certain real property and certain property and equipment                 6,340             5,637
                                                                                            ----------------- -----------------
     Subtotal                                                                                         42,445            16,778
     Less:  Unamortized Loan Fees                                                                        799               199
                                                                                            ----------------- -----------------
     Total                                                                                         $  41,646         $  16,579
                                                                                            ================= =================
</TABLE>

     Effective  August 31,  2001,  the Company  replaced the  inventory  line of
credit portion of the GE Capital facility.  The new revolving inventory facility
is for $36 million, an $11 million increase from the prior facility, and expires
in June of 2003.  The borrowing base is calculated on advance rates on inventory
purchased,  ranging from 80% to 100% of the purchase price. The interest rate on
the facility is PRIME plus 6.0% (12.0% at September 30,  2001).  The facility is
secured with the Company's  automobile  inventory.  At September  30, 2001,  the
Company was not in compliance with certain interest coverage ratios and received
a waiver from the lenders. The Company was in compliance with all other required
covenants.


                                       5
<PAGE>

    Subordinated Notes Payable
A summary of Subordinated Notes Payable at September 30, 2001 and December 31,
2000 follows:
<TABLE>
<CAPTION>
                                                                                             September 30,      December 31,
                                                                                                  2001              2000
                                                                                            ----------------- -----------------
<S>                                                                                                <C>               <C>

$13.5 million senior subordinated notes payable to unrelated parties, bearing
     interest at 15% per annum payable quarterly, principal due February 2003
     and is senior to subordinated debentures                                                      $   6,000         $  11,500
$17.5 million subordinated debentures, interest at 12% per annum
     (approximately 18.8% effective rate) payable semi-annually, principal
     balance due October 23, 2003                                                                     13,839            17,479
$11.9 million subordinated debentures, interest at 11% per annum
     (approximately 19.7% effective rate) payable semi-annually, principal
     balance due April 15, 2007                                                                       11,940            11,940
$7.0 million senior subordinated note payable to a related party, bearing
     interest at LIBOR plus 6% per annum payable quarterly, principal due February 2010                6,000                 -
                                                                                            ----------------- -----------------
     Subtotal
                                                                                                      37,779            40,919
     Less:  Unamortized Loan Fees                                                                          -               915
            Unamortized Discount - subordinated debentures                                             5,179             5,482
                                                                                            ----------------- -----------------
     Total                                                                                         $  32,600         $  34,522
                                                                                            ================= =================
</TABLE>

     In June 2001,  the  Company  repurchased  in the open  market  and  retired
approximately  $3.6 million of the $17.5 million in subordinated  debentures for
approximately  $2.6 million.  The after tax impact,  net associated  unamortized
discount,  of the  transaction  was a gain from  extinguishment  of debt of $0.3
million.  The gain has been  classified as  "Extraordinary  Item - Gain on Early
Extinguishment of Debt" on the Condensed Consolidated Statement of Operations.

Note 5.  Common Stock Equivalents
<TABLE>

    Net Earnings (Loss) per common share amounts are based on the weighted average number of common shares and common
stock equivalents outstanding for the three and nine-month periods ended September 30, 2001, and 2000.
<CAPTION>

    Net Earnings (Loss) per common share are as follows:
                                                                      Three Months Ended               Nine Months Ended
                                                                         September 30,                   September 30,
                                                                --------------------------------  -----------------------------
                                                                      2001           2000              2001          2000
                                                                --------------------------------  -----------------------------
<S>                                                                   <C>             <C>              <C>            <C>
Net Earnings (Loss) before Extraordinary Item                         $  (6,817)      $   2,683        $  (3,975)     $ 11,514
                                                                ================================  =============================
Net Earnings (Loss)                                                   $  (6,817)      $   2,683        $  (3,631)     $ 11,514
                                                                ================================  =============================
Basic Earnings (Loss) Per Share before Extraordinary Item             $   (0.56)      $    0.21        $   (0.32)     $   0.83
                                                                ================================  =============================
Diluted Earnings (Loss) Per Share before Extraordinary Item           $   (0.56)      $    0.21        $   (0.32)     $   0.82
                                                                ================================  =============================
Basic Net Earnings (Loss) Per Share                                   $   (0.56)      $    0.21        $   (0.30)     $   0.83
                                                                ================================  =============================
Diluted Net Earnings (Loss) Per Share                                 $   (0.56)      $    0.21        $   (0.30)     $   0.82
                                                                ================================  =============================
Basic EPS-Weighted Average Shares Outstanding
                                                                          12,276         12,597            12,289       13,847
Effect of Diluted Securities:
   Stock Options                                                               -            147                 -          187
   Warrants                                                                    -              3                 -           10
                                                                --------------------------------  -----------------------------
Dilutive EPS-Weighted Average Shares Outstanding
                                                                          12,276         12,747            12,289       14,044
                                                                ================================  =============================
Warrants Not Included in Diluted EPS Since Antidilutive                      351          1,124               351        1,124
                                                                ================================  =============================
Stock Options Not Included in Diluted EPS Since Antidilutive               1,430            845             1,453          857
                                                                ================================  =============================
</TABLE>

     In the  three-month  period  ending  September  30, 2001,  under  severance
agreements,  the Company  acquired  approximately  $237,000 of treasury stock in
satisfaction of three former officers' notes payable to the Company.

                                       6

<PAGE>

Note 6.  Business Segments

     The Company has three distinct business  segments.  These consist of retail
car sales operations (Retail Operations),  the income resulting from the finance
receivables  generated at the Company dealerships  (Portfolio  Operations),  and
corporate and other operations  (Corporate  Operations).  Identifiable assets by
business  segment are those assets used in each  segment of Company  operations.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations  -  Business  Segment   Information"  for  further  Business  Segment
information.

     A summary of  operating  activity  by  business  segment  for the three and
nine-month periods ended September 30, 2001 and 2000 follows:
<TABLE>

                                                                          Retail        Portfolio      Corporate        Total
                                                                       -------------  -------------  -------------  -------------
<S>                                                                    <C>            <C>            <C>            <C>
Three months ended September 30, 2001
Sales of Used Cars                                                     $     110,237  $           -  $           -  $     110,237
Less: Cost of Cars Sold                                                       62,622              -              -         62,622
    Provision for Credit Losses                                               23,223         25,532              -         48,755
                                                                       -------------  -------------  -------------  -------------
                                                                              24,392       (25,532)              -        (1,140)
Net Interest Income                                                                -         27,511              -         27,511
                                                                       -------------  -------------  -------------  -------------
Income before Operating Expenses                                              24,392          1,979              -         26,371
                                                                       -------------  -------------  -------------  -------------
Operating Expenses:
Selling and Marketing                                                          6,084              -              -          6,084
General and Administrative                                                    13,867          7,286          5,654         26,807
Depreciation and Amortization                                                  1,419            236            684          2,339
                                                                       -------------  -------------  -------------  -------------
                                                                              21,370          7,522          6,338         35,230
                                                                       -------------  -------------  -------------  -------------
Operating Income (Loss) before Other Interest Expense                  $       3,022  $     (5,543)  $     (6,338)  $     (8,859)
                                                                       =============  =============  =============  =============

Capital Expenditures                                                   $         273  $         131  $       2,043  $       2,447
                                                                       =============  =============  =============  =============
Identifiable Assets, Excluding Net Assets of Discontinued Operations   $      84,344  $     496,775  $      72,577  $     653,696
                                                                       =============  =============  =============  =============

                                                                          Retail        Portfolio      Corporate        Total
                                                                       -------------  -------------  -------------  -------------
Three months ended September 30, 2000:
Sales of Used Cars                                                     $     126,636  $           -  $           -  $       6,636
Less: Cost of Cars Sold                                                       70,760              -              -         70,760
    Provision for Credit Losses                                               26,162          9,930              -         36,092
                                                                       -------------  -------------  -------------  -------------
                                                                              29,714        (9,930)              -         19,784
Net Interest Income                                                                -         24,006            112         24,118
                                                                       -------------  -------------  -------------  -------------
Income before Operating Expenses                                              29,714         14,076            112         43,902
                                                                       -------------  -------------  -------------  -------------
Operating Expenses:
Selling and Marketing                                                          7,187              -              -          7,187
General and Administrative                                                    14,570          7,411          5,542         27,523
Depreciation and Amortization                                                  1,201            278            806          2,285
                                                                       -------------  -------------  -------------  -------------
                                                                              22,958          7,689          6,348         36,995
                                                                       -------------  -------------  -------------  -------------
Operating Income (Loss) before Other Interest Expense                  $       6,756  $       6,387  $     (6,236)  $       6,907
                                                                       =============  =============  =============  =============


Capital Expenditures                                                   $       2,161  $         615  $       2,338   $     5,114
                                                                       =============  =============  =============  =============
Identifiable Assets, Excluding Net Assets of Discontinued Operations   $      78,542  $     516,377  $      19,353   $   614,272
                                                                       =============  =============  =============  =============

</TABLE>


                                       7
<PAGE>
<TABLE>
<CAPTION>


                                                                           Retail        Portfolio      Corporate        Total
                                                                       -------------  -------------  -------------  -------------
<S>                                                                    <C>            <C>            <C>            <C>
Nine Months Ended September 30, 2001
Sales of Used Cars                                                     $     346,342  $           -  $           -  $     346,342
Less: Cost of Cars Sold                                                      196,102              -              -        196,102
    Provision for Credit Losses                                               71,773         48,212              -        119,985
                                                                       -------------  -------------  -------------  -------------
                                                                              78,467       (48,212)              -         30,255
Net Interest Income                                                                -         80,114            130         80,244
                                                                       -------------  -------------  -------------  -------------
Income before Operating Expenses                                              78,467         31,902            130        110,499
                                                                       -------------  -------------  -------------  -------------
Operating Expenses:
Selling and Marketing                                                         19,945              -              -         19,945
General and Administrative                                                    43,380         22,653         15,429         81,462
Depreciation and Amortization                                                  4,108          732            2,341          7,181
                                                                       -------------  -------------  -------------  -------------
                                                                              67,433         23,385         17,770        108,588
                                                                       -------------  -------------  -------------  -------------
Operating Income (Loss) before Other Interest Expense                  $      11,034  $       8,517  $     (17640)  $       1,911
                                                                       =============  =============  =============  =============
Capital Expenditures                                                   $       3,517  $       718    $       6,334  $      10,569
                                                                       =============  =============  =============  =============
Identifiable Assets, Excluding Net Assets of Discontinued Operations   $      84,344  $   496,775    $      72,577  $     653,696
                                                                       =============  =============  =============  =============

                                                                           Retail        Portfolio      Corporate        Total
Nine Months Ended September 30, 2000                                   -------------  -------------  -------------  -------------
Sales of Used Cars                                                     $     380,949  $           -  $           -        380,949
Less: Cost of Cars Sold                                                      212,119              -              -        212,119
    Provision for Credit Losses                                               77,994         24,883              -        102,877
                                                                       -------------  -------------  -------------  -------------
                                                                              90,836       (24,883)              -         65,953
Net Interest Income                                                                -         68,162            332         68,494
                                                                       -------------  -------------  -------------  -------------
Income before Operating Expenses                                              90,836         43,279            332        134,447
                                                                       -------------  -------------  -------------  -------------
Operating Expenses:
Selling and Marketing                                                         22,748              -              -         22,748
General and Administrative                                                    43,353         18,904         15,996         78,253
Depreciation and Amortization                                                  3,405            858          2,461          6,724
                                                                       -------------  -------------  -------------  -------------
                                                                              69,506         19,762         18,457        107,725
                                                                       -------------  -------------  -------------  -------------
Operating Income (Loss) before Other Interest Expense                  $      21,330  $      23,517  $    (18,125)  $      26,722
                                                                       =============  =============  =============  =============

Capital Expenditures                                                   $       5,654  $         909  $       5,062  $      11,625
                                                                       =============  =============  =============  =============
Identifiable Assets, Excluding Net Assets of Discontinued Operations   $      78,542  $     516,377  $      19,353  $     614,272
                                                                       =============  =============  =============  =============
</TABLE>

Note 7.  Use of Estimates

     The preparation of our condensed consolidated financial statements requires
us 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 our estimates.

Note 8.  Reclassifications

     We have made certain  reclassifications  to previously reported information
to conform to the current presentation.

Note 9.  Subsequent Events

     In October 2001, a special  transaction  committee of the board recommended
and the board approved a $10 million  repurchase program under which the company
is authorized to repurchase its common stock and/or subordinated debentures,  or
any combination of both, subject to certain  conditions,  including any required
lender approvals and further  committee and board approval of stock  repurchases
over $3 million.



                                       8
<PAGE>

     In October 2001, the Company completed its 21st securitization,  consisting
of  approximately  $145.9  million in  principal  balances  and the  issuance of
approximately $103.6 million in Class A bonds,  including a pre-funded amount of
approximately $25.9 million. The Company will subsequently provide an additional
$36.5 million of the $145.9  million in loans as collateral  for the  pre-funded
amount.  The coupon rate on the Class A bonds is 3.44%, the initial deposit into
the Reserve Account was 2.25% and the Reserve Account maximum is 8%.








































                                       9

<PAGE>

                                     ITEM 2.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                       AND
                              RESULTS OF OPERATIONS

Introduction

     We operate the largest chain of  buy-here/pay-here  used car dealerships in
the United States. At September 30, 2001, we operated 76 dealerships  located in
eleven metropolitan areas in eight states. We have one primary line of business:
to sell and finance  quality used vehicles to customers  within what is referred
to as the  sub-prime  segment of the used car market.  The  sub-prime  market is
comprised of customers who typically have limited credit histories,  low incomes
or past credit problems.  References to Ugly Duckling Corporation as the largest
chain  of  buy-here/pay-here  used  car  dealerships  in the  United  States  is
management's  belief  based upon the  knowledge  of the  industry and not on any
current independent third party study.

     As a  buy-here/pay-here  dealer,  we offer the customer certain  advantages
over more traditional financing sources including:

     o expanded  credit  opportunities,

     o flexible payment terms,  including  structuring loan payment due dates as
       weekly or biweekly,  often coinciding with the customer's  payday,

     o the  ability to make  payments  in person at  thedealerships.  This is an
       important feature to many sub-prime borrowers who may not have checking
       accounts or are otherwise unable to make payments by the due date through
       use of the mail due to the timing of paydays.

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

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

     We  finance  substantially  all  of the  used  cars  that  we  sell  at our
dealerships  through  retail  installment  loan  contracts.  Subject  to certain
underwriting  standards and the discretion of our dealership or sales  managers,
potential customers must meet our formal underwriting  guidelines before we will
agree to finance the purchase of a vehicle. Our employees analyze and verify the
customer credit  application  information and subsequently  make a determination
whether to provide financing to the customer.

     Our business is divided into three operating  segments:  Retail,  Portfolio
and Corporate  Operations.  Information  regarding our operating segments can be
found in Note (6) of the Notes to Condensed  Consolidated  Financial  Statements
contained   herein.   Operating   segment   information   is  also  included  in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Business Segment Information" found below.

     In December  1999, we sold the Cygnet Dealer  Finance (CDF)  subsidiary and
also decided to end any efforts to acquire third party loans or servicing rights
to additional third party portfolios. As a result, CDF, Cygnet Servicing and the
associated Cygnet Corporate segment assets and liabilities are classified as net
assets from  discontinued  operations.  We plan to complete the servicing of the
portfolios that we currently service.

     In the  following  discussion  and  analysis,  we  explain  the  results of
operations   and  general   financial   condition  of  Ugly   Duckling  and  its
subsidiaries.  In particular,  we analyze and explain the changes in the results
of  operations  of our business  segments for the three and  nine-month  periods
ended September 30, 2001 and 2000. All amounts are presented in thousands except
per share, per unit and per car data, unless otherwise noted.







                                       10
<PAGE>
<TABLE>


                                              UGLY DUCKLING CORPORATION
                                        SELECTED CONSOLIDATED FINANCIAL DATA
                ($ and shares in millions, except per share, per unit data and number of loan data)
                                                   (Unaudited)
<CAPTION>
                                                                                   At or For the Three Months Ended
                                                             --------------------------------------------------------------------
Selected Consolidated Financial Data                               Sept      June      Mar      Dec     Sept      June      Mar
                                                                   2001      2001     2001     2000     2000      2000     2000
                                                                ---------  -------  -------  -------  -------    ------   ------
<S>                                                             <C>          <C>     <C>       <C>     <C>       <C>      <C>
Operating Data:
Total Revenues                                                   $  145.2   $140.8   $164.0  $ 135.2   $158.1    $151.4   $158.3
Sales of Used Cars                                               $  110.2   $105.9   $130.2  $ 102.3   $126.6    $121.5   $132.8
Net Earnings (Loss) per Share                                    $ (0.56)   $ 0.11   $ 0.15  $(0.20)   $ 0.21    $ 0.31   $ 0.30
EBITDA                                                           $    1.0   $ 14.5   $ 17.1  $   8.7   $ 16.5    $ 18.2   $ 17.1
E-Commerce Sales as % of Sales of Used Cars                         14.2%    14.4%    11.6%    13.6%     9.5%      5.3%     4.3%

Number Dealerships in Operation                                        76       77       77       77       77        77       75

Average Sales per Dealership per Month                                 52       50       64       51       64        62       70

Number of Used Cars Sold                                           11,907   11,607   14,851   11,874   14,825    14,369   15,802
Sales Price - Per Car Sold                                       $  9,258   $9,125   $8,766   $8,618   $8,542    $8,458   $8,403
Cost of Sales - Per Car Sold                                     $  5,259   $5,224   $4,905   $4,727   $4,773    $4,761   $4,616
Gross Margin - Per Car Sold                                      $  3,999   $3,901   $3,861   $3,891   $3,769    $3,696   $3,787
Provision - Per Car Sold                                         $  4,095   $2,775   $2,627   $3,292   $2,435    $2,242   $2,188
Total Operating Expense - Per Car Sold                           $  2,959   $3,092   $2,523   $2,832   $2,495    $2,425   $2,271
Total Operating Income - Per Car Sold                            $  (744)   $  396   $  416   $(168)   $  466     $ 691    $ 626
Total Operating Income (Loss)                                    $  (8.9)   $  4.6   $  6.2  $ (2.0)   $  6.9    $  9.9   $  9.9
Earnings (Loss) before Income Taxes                              $ (11.6)   $  1.7   $  3.1  $ (4.2)   $  4.5    $  7.3   $  7.6
Cost of Used Cars as % of Sales                                     56.8%    57.3%    56.0%    54.8%    55.9%     56.3%    54.9%
Gross Margin as % of Sales                                          43.2%    42.7%    44.0%    45.2%    44.1%     43.7%    45.1%
Provision - % of Originations                                       44.7%    31.1%    31.0%    38.8%    29.0%     27.1%    27.0%
Total Operating Expense - % of Total Revenues                       24.3%    25.5%    22.8%    24.9%    23.4%     23.0%    22.7%
Segment Operating Expense Data:
Retail Operating Expense - Per Car Sold                          $  1,795   $1,934   $1,590   $1,710   $1,549    $1,611   $1,481
Retail Operating Expense -% of Used Car Sales                       19.4%    21.2%    18.1%    19.8%    18.1%     19.1%    17.6%
Corporate/Other Expense - Per Car Sold                           $    532   $  503   $  376   $  417   $  428    $  418   $  387
Corporate/Other Expense - % of Total Revenue                         4.4%     4.1%     3.4%     3.7%     4.0%      4.0%     3.9%
Portfolio Exp. Annualized - % of End of Period Managed Principal     5.6%     5.8%     6.2%     6.6%     5.9%      4.6%     5.5%
Balance Sheet Data:
Finance Receivables, net                                         $  501.0   $544.6   $522.9   $500.5   $491.9    $451.2   $407.3
Inventory                                                        $   47.4   $ 40.8   $ 43.4   $ 63.7   $ 43.7    $ 45.9   $ 49.1
Total Assets                                                     $  657.7   $679.0   $659.5   $652.1   $618.5    $577.5   $548.0
Notes Payable - Portfolio                                        $  386.6   $415.9   $390.6   $406.6   $362.3    $316.0   $282.9
Subordinated Notes Payable                                       $   32.6   $ 35.0   $ 40.8   $ 34.5   $ 36.1    $ 37.3   $ 28.9
Total Debt                                                       $  460.8   $493.3   $470.9   $457.7   $416.3    $381.0   $345.2
Common Stock                                                     $  173.8   $173.8   $173.7   $173.7   $173.7    $173.7   $173.7
Treasury Stock                                                   $ (40.4)  $(40.1)  $(40.1)  $(40.1)  $(39.4)   $(28.4)  $(20.3)
Total Stockholder's Equity                                       $  151.6   $158.6   $157.2   $155.4   $158.5    $166.8   $170.6

Common Shares Outstanding - End of Period                          12,275   12,302   12,292   12,292   12,378    13,899   14,980
Book Value per Share                                             $  12.35   $12.89   $12.79   $12.64   $12.81    $12.00   $11.39
Tangible Book Value per Share                                    $  11.38   $11.91   $11.79   $11.62   $11.78    $11.02   $10.43
Total Debt to Equity                                                  3.0      3.1      3.0      2.9      2.6       2.3      2.0
Loan Portfolio Data:
Interest Income                                                  $   35.0   $ 34.9   $ 33.8   $ 32.9   $ 31.4    $ 29.9   $ 25.5
Average Yield on Portfolio                                          26.5%    26.7%    26.3%    26.1%    26.1%     26.8%    26.2%
Portfolio Interest Expense                                       $    7.5   $  7.5   $  8.5   $  8.4   $  7.3    $  6.0   $  5.0
Average Borrowing Cost                                               8.0%     8.3%     8.9%     8.7%    10.7%      8.6%     8.0%
Principal Balances Originated                                    $  109.1   $103.6   $126.0   $100.8   $124.4    $118.8   $128.1
Principal Balances Originated as % of Sales                         99.0%    97.8%    96.8%    98.5%    98.2%     97.7%    96.5%

Number of Loans Originated                                         11,844   11,558   14,776   11,906   14,748    14,291   15,721
Average Original Amount Financed                                 $  9,215   $8,965   $8,528   $8,468   $8,433    $8,311   $8,150
Number of Loans Originated as % of Units Sold                       99.5%    99.6%    99.5%   100.3%    99.5%     99.5%    99.5%
Managed Portfolio Delinquencies:
     Current                                                        67.4%    76.4%    78.6%    66.1%    72.4%     71.9%    74.8%
     1 to 30 days                                                   24.0%    16.8%    15.7%    26.1%    19.3%     20.9%    19.9%
     31 to 60 days                                                   5.3%     4.1%     3.3%     4.7%     4.9%      4.5%     3.4%
     Over 60 days                                                    3.3%     2.7%     2.4%     3.1%     3.4%      2.7%     1.9%
Principal Outstanding - Managed                                  $  537.9   $534.8   $535.0   $519.0   $525.5    $500.0   $461.8
Principal Outstanding - Retained                                 $  537.9   $534.8   $535.0   $514.9   $512.8    $472.3   $418.9

Number of Loans Outstanding - Managed                              85,961   86,446   87,033   84,864   85,240    81,407   75,496

Number of Loans Outstanding - Retained                             85,961   86,446   87,033   82,598   79,848    71,518   62,459

</TABLE>
                                       11
<PAGE>
<TABLE>

Sales of Used Cars and Cost of Used Cars Sold
<CAPTION>
                                         Three Months Ended                               Nine Months Ended
                                           September 30,            Percentage             September 30,            Percentage
                                 -----------------------------                    ----------------------------
                                      2001           2000             Change           2001            2000           Change
                                 --------------  -------------    -------------   --------------  ------------     -------------

<S>                                      <C>            <C>          <C>                  <C>           <C>          <C>
Number of Used Cars Sold                 11,907         14,825       (19.7%)              38,365        44,996       (14.7%)
                                 ==============  =============                    ==============  ============
Sales of Used Cars                    $ 110,237      $ 126,636       (13.0%)           $ 346,342     $ 380,949        (9.1%)
Cost of Used Cars Sold                   62,622         70,760       (11.5%)             196,102       212,119        (7.6%)
                                 --------------  -------------                    --------------  ------------
Gross Margin                          $  47,615      $  55,876       (14.8%)           $ 150,240     $ 168,830       (11.0%)
                                 ==============  =============                    ==============  ============

Gross Margin %                            43.2%          44.1%                             43.4%         44.3%

Per Car Sold:
Sales                                 $   9,258      $   8,542         8.4%            $   9,028     $   8,466        6.6%
Cost of Used Cars Sold                    5,259          4,773        10.2%                5,112         4,714        8.4%
                                 --------------------------------                --------------------------------
Gross Margin                          $   3,999      $   3,769         6.1%            $   3,916     $   3,752        4.4%
                                 ================================                ================================
</TABLE>

     For the three and nine-month  periods ended  September 30, 2001, the number
of cars sold decreased by 19.7% and 14.7%,  respectively,  over the same periods
of the prior year and Sales of Used Cars decreased 13.0% and 9.1%, respectively,
over the same  periods in 2000.  During the latter half of 2000,  we developed a
risk management department,  which is focusing on developing credit risk models.
We believe the decrease in both units sold and revenues is primarily  the result
of initiatives  which have put more stringent  underwriting  guidelines in place
including income  qualifications  and down payment  requirements in an effort to
improve the quality of loans  generated from used car sales. To a lesser extent,
we believe a general softening of the economy has led to reduced retail activity
in the sub-prime market.

     Our Internet site continues to be a valuable tool  generating a steady flow
of credit  applications and sales. We accept credit  applications from potential
customers  via  our  website,  located  at  http://www.uglyduckling.com.  Credit
inquiries received over the web are reviewed by our employees,  who then contact
the  customers  and schedule  appointments.  Internet  applications  continue to
provide an increasing  amount of Sales of Used Cars. During the third quarter of
2001,  applications received via our internet site generated 1,730 cars sold and
$15.7  million in revenue,  up from 1,686 cars sold and $15.2 million in revenue
during the second quarter and1,725 cars sold and $15.1 million in revenue during
the first quarter of 2001.

     The Cost of Used Cars Sold for the  three  and  nine-month  periods  ended
September 30, 2001 decreased 11.5% and 7.6%,  respectively,  over the comparable
periods of the previous  year. The decrease is due to a decline in the number of
used cars sold,  partially  offset by an increase in the Cost of Used Cars Sold.
The Cost of Used Cars Sold on a per car basis  increased  10.2% and 8.4% for the
three and nine-month  periods ended September 30, 2001,  respectively,  over the
same  periods of the prior  year.  The  increase is due to an effort to purchase
higher quality vehicles as a result of research completed by our risk management
department, which indicated better loan performance on the loans associated with
the higher cost  inventory.  This  increase was offset by an increase in the per
unit sales  price.  The gross  margin on used car sales (Sales of Used Cars less
Cost of Used Cars Sold excluding Provision for Credit Losses) as a percentage of
related revenue decreased to 43.2% and 43.4% for the three and nine-months ended
September 30, 2001 versus 44.1% and 44.3% for the three and  nine-month  periods
ended  September 30, 2000. The decrease is due to the per unit cost of used cars
sold  rising at a higher  pace than the  related  sales  revenue.  For the three
months  ended  September  30,  2001 as  compared  with the  three  months  ended
September  30,  2000,  gross  margin on a per car sold basis  increased  $230 to
$3,999  per car  from  $3,769  for the same  quarter  of the  previous  year and
increased $164 to $3,916 for the nine month period ended September 30, 2001 from
$3,752 during the same period of the previous  year.  This increase is due to an
increase in the overall revenue earned per car, partially offset by the increase
in the per unit cost of used cars sold.




                                       12
<PAGE>

     We finance  substantially all of our used car sales. The percentage of cars
sold  financed  and the  percentage  of  sales  revenue  financed  has  remained
relatively  constant for both the three and nine-month  periods ended  September
30, 2001 versus the comparable  periods of 2000. The following  table  indicates
the percentage of sales units and revenue financed:

<TABLE>
<CAPTION>
                                             Three Months Ended         Nine Months Ended
                                                September 30,            September 30,
                                          -------------------------  -------------------------
                                              2001         2000          2001         2000
                                          ------------ ------------  ------------ ------------
<S>                                              <C>          <C>           <C>          <C>
Percentage of used cars sold financed            99.5%        99.5%         99.5%        99.5%
                                          ============ ============  ============ ============
Percentage of sales revenue financed             99.0%        98.2%         97.8%        97.5%
                                          ============ ============  ============ ============
</TABLE>

Provision for Credit Losses
<TABLE>
    The following is a summary of the Provision for Credit Losses:
<CAPTION>

                                           Three Months Ended                                  Nine Months
                                              September 30,             Percentage            September 30,            Percentage
                                    ---------------------------------               -------------------------------
                                          2001             2000           Change          2001            2000           Change
                                    ---------------- ----------------  ------------ --------------  --------------- -------------
<S>                                          <C>              <C>          <C>            <C>              <C>           <C>
Provision for Credit Losses                  $48,755          $36,092      35.1%          $119,985         $102,877      16.6%
                                    ================ ================               ==============  ===============
Provision per loan originated                 $4,116           $2,447      68.2%            $3,143           $2,298      36.8%
                                    ================ ================               ==============  ===============
Provision as a percentage of
  principal balances originated                44.7%            29.0%                        35.4%            27.7%
                                    ================ ================               ==============  ===============
</TABLE>

     The  Company's  results  for third  quarter of 2001  reflect a  significant
increase  in the  Provision  for Loan Losses  (Provision)  to 44.7% of the total
amount  financed versus 31% in the prior quarters of 2001, and versus 29% in the
third quarter of 2000. While early  indications  reflect actual  improvements in
loan loss experience on 2001 originations due to improvement in underwriting, it
was necessary to increase the quarter's  Provision as a percent of the quarter's
loan originations due to resulting lower loan origination volume. Company policy
is to maintain an Allowance for Credit Losses  (Allowance)  for all loans in its
portfolio to cover  estimated net charge offs for the next 12 months.  Our loans
have experienced lifetime losses in the 31% to 34% range for the past few years.
With origination growth over this time we have been able to maintain an adequate
Allowance in accordance  with Company policy and with GAAP by providing  between
27% to 31% of the quarter's  amount  financed.  As the speed of portfolio growth
has slowed due to the reduced loan originations, an increase to the Provision as
a percentage of lower  originations  is necessary  unless there is a significant
decrease in loss rates.

     The increase in the  Provision was also due to loss levels for prior years'
originations  emerging at levels higher than previously estimated as well as the
economic  environment and its likely effect on our portfolio  performance.  More
specifically,  with the economic  and  political  events  occurring in the third
quarter of 2001,  management  intensified  its  review of general  trends in the
economy,  specific economic events in many of its markets and the impact of such
factors on the market segments in which its customers are employed.  As a result
of this  evaluation,  management  concluded  that  these  factors  offset  other
evidence that  supported  that its 2001  originations  will  ultimately  perform
better than loans  originated  in fiscal  year 1999 and 2000.  While the Company
believes loans  originated in 2001 were  underwritten to higher credit standards
and its transition to a dealership centered collection  methodology will produce
more  effective  collection  results,  uncertainties  in  the  economy  and  our
customers' ongoing employment opportunities could offset these positive factors.
Accordingly,  the Company  adjusted  upward its  estimate of loan losses for its
2001  originations to a level generally equal to that actually being experienced
on its fiscal year 2000 originations.

     We will  continue to monitor the adequacy of our  Allowance  and  depending
upon our  Allowance  evaluations,  the rate of Provision  charged may need to be
increased  in future  quarters.  While we believe  the  Allowance  balance as of
September  30,  2001  remains at a level we estimate to be adequate to cover net
charge-offs over the next 12 months,  we currently expect to need a Provision in
excess of 31% again in the  fourth  quarter  of 2001  because  of  expected  net
charge-offs beyond this 12 month period.

     See "Static  Pool  Analysis"  below for further  Provision  for Credit Loss
discussion.


                                       13
<PAGE>
<TABLE>

Net Interest Income
<CAPTION>
                                Three Months Ended                           Nine Months Ended
                            --------------------------                   -------------------------
                                   September 30,           Percentage          September 30,           Percentage
                            --------------------------                   -------------------------
                                2001          2000           Change          2001         2000           Change
                            ------------  ------------   -------------   ------------ ------------   --------------
<S>                             <C>           <C>             <C>            <C>         <C>              <C>
Interest Income                 $ 35,000      $ 31,436        11.3%          $103,744    $  86,838        19.5%
Portfolio Interest Expense       (7,489)       (7,318)         2.3%          (23,500)     (18,344)        28.1%
                            ------------  ------------                   ------------ ------------
Net Interest Income             $ 27,511      $ 24,118        14.1%           $80,244    $  68,494        17.2%
                            ============  ============                   ============ ============


Average Effective Yield            26.5%         26.1%                         26.5%         26.4%
                            ============  ============                   ============ ============
Average Borrowing Cost              8.0%         10.7%                          8.1%         10.5%
                            ============  ============                   ============ =============
</TABLE>

     Interest  Income  consists  primarily  of  interest  on finance  receivable
principal balances retained on our balance sheet.  Retained principal  balances,
net grew to $537.9  million  at  September  30,  2001  from  $512.8  million  at
September 30, 2000. The growth in retained  principal  balances is primarily due
to the change in the way we structure our  securitizations to the collateralized
borrowing  method  during the  fourth  quarter  of 1998.  Since  that time,  all
securitized loans are retained on our balance sheet and the income is recognized
over the life of the loan.

     Portfolio  interest expense increased to $7.5 million and $23.5 million for
the three and nine-month periods ending September 30, 2001, respectively, versus
$7.3  million  and $18.3  million,  respectively,  for the same  periods  of the
previous year.  The increase is due to the increase in Portfolio  Notes Payable,
which consist of our Class A obligations related to our securitization  program,
along with our revolving warehouse  facility.  Lower borrowing costs help offset
the growth in the portfolio.  This increase in interest expense is offset by the
additional  interest  income  earned  from the  growth  in  finance  receivables
retained on our balance sheet.

Income before Operating Expenses

     Income before Operating  Expenses  decreased 39.9% to $26.4 million for the
three-month  period  ended  September  30,  2001 and  decreased  17.8% to $110.5
million for the nine-month  period ended September 30, 2001 as compared to $43.9
million and $134.4 million for the three and nine-month  periods ended September
30, 2000, respectively.  The decrease resulted from a decrease in Used Car Sales
and an increase in the amount  charged to current  operations for the Provision,
and an increase in interest  expense  resulting from additional  portfolio notes
payable, partially offset by an increase in interest income due to the growth in
the finance receivables portfolio.

<TABLE>
Operating Expenses
<CAPTION>
                               Three Months Ended                            Nine Months Ended
                                 September 30,           Percentage            September 30,           Percentage
                          --------------------------                   --------------------------
                              2001          2000           Change          2001          2000            Change
                          ------------  ------------   --------------  ------------  ------------     -------------
<S>                          <C>           <C>             <C>            <C>            <C>               <C>
Operating Expenses           $  35,230     $  36,995       (4.8%)         $ 108,588      $107,725          0.8%
                          ============  ============                   ============  ============
Per Car Sold                 $   2,959     $   2,495        18.6%         $  2,830       $  2,394         18.2%
                          ============  ============                   ============  ============
As % of Total Revenue            24.3%         23.4%                          24.1%         23.0%
                          ============  ============                   ============  ============
</TABLE>

     Operating  expenses,  which  consist of  selling,  marketing,  general  and
administrative  and   depreciation/amortization   expenses,  decreased  slightly
quarter over quarter, and increased slightly for the nine months ended September
30, 2001 versus 2000 but remained  relatively  constant as a percentage of total
revenues.  Included in these expenses for the nine-month  period ended September
30, 2001, is a pre-tax charge of approximately $600,000,  taken during the first
quarter of 2001,  for the  closing  of the  collection  and loan  administration
centers in Florida and Texas.  During the first  quarter of 2001, we initiated a
plan to close our collections and loan administration  operations in Clearwater,
Florida;  Plano, Texas; and Dallas, Texas and



                                       14
<PAGE>

move them to our dealerships or to our Gilbert,  Arizona collection facility. As
a result  of  these  closings,  we took an after  tax  charge  of  approximately
$368,000 to cover payroll,  severance and certain property related expenses.  We
have taken a charge of  approximately  $230,000 related to the cost of abandoned
assets in Plano,  Texas.  For the Clearwater  Facility we estimate an additional
restructuring  charge in the fourth quarter related to costs of abandoned assets
with a carrying value of approximately  $500,000.  The impact resulting from the
shut down of these  operations,  including  the  impact of  future  charges,  is
estimated to be break even over the remainder of 2001 and to decrease  operating
expenses by $1.5 million annually beginning in 2002.

     In August of 2001 the lease on the Company's corporate headquarters expired
and the Company  relocated to another  location in Phoenix.  Third  quarter 2001
operating  expenses  include  approximately   $500,000  in  non-recurring  costs
associated  with the  corporate  relocation.  Beginning in the third  quarter of
2001, the Company also began the process of  implementing  numerous cost savings
initiatives  to  reduce  operating  expenses  including  the  relocation  of its
corporate headquarters.  Further, in early October of 2001 the Company continued
this process by implementing a reduction in force of primarily  corporate staff.
Beginning in 2002,  this  reduction in staff,  the  relocation  of its corporate
headquarters  and other cost saving  initiatives are expected to decrease annual
operating expenses by approximately $6.0 million.

     Also  included  in  Operating  Expenses  in the third  quarter is  $350,000
related to legal and other expenses associated with the offer from Mr. Ernest C.
Garcia II, the Company's Chairman of the Board and largest  shareholder,  to the
Board of Directors to purchase all of the  outstanding  stock of the Company not
owned by him.

Other Interest Expense

     Interest  expense arising from our other,  non-portfolio  debt totaled $2.7
million and $8.6 million for the three and  nine-month  periods ended  September
30, 2001, versus $2.4 million and $7.2 million for the comparable periods of the
prior year. The increase is primarily  attributable to interest  expense arising
from our  senior  secured  loan  facility,  which was  renewed  during the first
quarter of 2001.

Income Taxes

     Income tax benefit  totaled ($4.7) million and ($2.8) million for the three
and nine month  periods  ended  September  30, 2001,  respectively,  versus $1.9
million and $8.0  million in income  taxes,  respectively,  for same  equivalent
periods in 2000. Our effective tax rate was 41% for all periods presented.

Earnings (Loss) before Extraordinary Item

     Earnings (Loss) before Extraordinary Item totaled ($6.8) million and ($4.0)
million  for the  three  and  nine  month  periods  ended  September  30,  2001,
respectively,  versus $2.7 million and $11.5 million, respectively, for the same
periods of the previous year. The decrease  resulted from a decrease in Used Car
Sales and an  increase  in the  amount  charged to  current  operations  for the
Provision,  and an  increase  in  interest  expense  resulting  from  additional
portfolio notes payable,  partially offset by an increase in interest income due
to the growth in the finance receivables portfolio.

Gain on Early Extinguishment of Debt

     During the nine months ended September 30, 2001, we repurchased in the open
market and retired  approximately $3.2 million, net of unamortized  discount, of
our exchange offer debt due October 2003, for  approximately  $2.6 million.  The
after tax impact of the purchase was a gain from  extinguishment of debt of $0.3
million.

Net Earnings (Loss)

     Net Earnings (Loss) totaled ($6.8) million and ($3.6) million for the three
and nine months ended  September 30, 2001,  respectively,  as compared with $2.7
million and $11.5  million for the same periods of the prior year.  The decrease
resulted from a decrease in Used Car Sales and an increase in the amount charged
to current  operations  for the Provision,  and an increase in interest  expense
resulting  from  additional  portfolio  notes  payable,  partially  offset by an
increase  in  interest  income  due to the  growth  in the  finance  receivables
portfolio.




                                       15
<PAGE>

Business Segment Information

     We report our operations based on three operating segments.  These segments
are reported as Retail, Portfolio and Corporate Operations.  These segments were
previously  reported as Company Dealership,  Company Dealership  Receivables and
Corporate  and Other,  respectively.  See Note 6 to the  Condensed  Consolidated
Financial Statements.

     Operating Expenses for our business  segments,  along with a description of
the included  activities,  for the three and nine-month  periods ended September
30, 2001 and 2000 are as follows:

     Retail  Operations.  Operating  expenses for our Retail segment  consist of
Company  marketing  efforts,  maintenance  and  development  of  dealership  and
inspection   center  sites,  and  direct   management   oversight  of  used  car
acquisition,  reconditioning and sales activities. A summary of retail operating
expenses follows:

<TABLE>
<CAPTION>

                                                           Three Months Ended                Nine Months Ended
                                                             September 30,                     September 30,
                                                     -------------------------------  --------------------------------
                                                          2001            2000            2001             2000
                                                     ---------------  --------------  --------------  ----------------
     Retail Operations:
<S>                                                  <C>              <C>             <C>             <C>
       Selling and Marketing                         $         6,084  $        7,187  $       19,945  $         22,748
       General and Administrative                             13,867          14,570          43,380            43,353
       Depreciation and Amortization                           1,419           1,201           4,108             3,405
                                                     ---------------  --------------  --------------  ----------------
            Retail Expense                           $        21,370  $       22,958  $       67,433  $         69,506
                                                     ===============  ==============  ==============  ================
   Per Car Sold:
       Selling and Marketing                         $           511             485             520               506
       General and Administrative                              1,165             983           1,131               963
       Depreciation and Amortization                             119              81             107                76
                                                     ---------------  --------------  --------------  ----------------
          Total                                      $         1,795  $        1,549  $        1,758  $          1,545
                                                     ===============  ==============  ==============  ================
   As % of Used Cars Sold Revenue:
       Selling and Marketing                                    5.5%            5.7%            5.8%              6.0%
       General and Administrative                              12.6%           11.5%           12.5%             11.4%
       Depreciation and Amortization                            1.3%            1.0%            1.2%              0.9%
                                                     ---------------  --------------  --------------  ----------------
          Total                                                19.4%           18.2%           19.5%             18.3%
                                                     ===============  ==============  ==============  ================
</TABLE>

     Selling and Marketing  expenses on a per car sold basis have  increased due
to a decrease  in the number of cars sold  without a  proportionate  decrease in
expenses,  for both the three and nine months ended  September 30, 2001,  versus
the same period of the previous year. However,  selling and marketing costs as a
percentage of Sales of Used Cars have remained relatively constant primarily due
to an increase of $716 and $562 in the average sales price per car for the three
and nine months ended September 30 , 2001, respectively.

     General and Administrative  expenses increased both on a per car sold basis
as well as on a percentage of related revenue basis for the three and nine-month
periods ended  September 30, 2001,  principally due to a reduction in the amount
of  cars  sold  and  the  resulting   high   proportion  of  fixed  general  and
administrative costs.







                                       16
<PAGE>
     Portfolio Operations.  Operating expenses for our Portfolio segment consist
of loan servicing and collection efforts,  securitization  activities, and other
operations  pertaining directly to the administration and collection of the loan
portfolio.
<TABLE>
<CAPTION>
                                                                Three Months Ended                     Nine Months Ended
                                                                  September 30,                          September 30,
                                                          -----------------------------------   ---------------------------------
                                                                2001              2000                2001              2000
                                                          ----------------  -----------------   ----------------  ---------------
     Portfolio Expense:
<S>                                                       <C>               <C>                 <C>               <C>
       General and Administrative                         $          7,286  $           7,411   $         22,653  $        18,904
       Depreciation and Amortization                                   236                278                732              858
                                                          ----------------  -----------------   ----------------  ---------------
          Portfolio Expense                               $          7,522  $           7,689   $         23,385  $        19,762
                                                          ================  =================   ================  ===============
   Average Expense per Month per Loan Serviced            $          28.99  $           28.73   $          29.60  $         25.38
                                                          ================  =================   ================  ===============
   Annualized Expense as % of  End of Period
       Managed Principal Balances                                     5.6%               5.8%               5.8%             5.0%
                                                          ================  =================   ================  ===============
</TABLE>
     Portfolio  expenses slightly decreased for the three months ended September
30,  2001,  versus  the same  period of 2000.  For the  nine-month  period,  the
increase in both Portfolio  expenses and the Average  Expense per Month per Loan
serviced is partly  attributed  to $600,000 of cost  incurred in relation to the
closing of the collections and loan administration  centers in Florida and Texas
during the first quarter of 2001.

     Corporate Operations.  Operating expenses for our Corporate segment consist
of costs to provide managerial  oversight,  provide financings and reporting for
the  Company,  develop  and  implement  policies  and  procedures,  and  provide
expertise to the Company in areas such as finance,  legal,  human  resources and
information technology.
<TABLE>
<CAPTION>
                                                              Three Months Ended                     Nine Months Ended
                                                                  September 30,                          September 30,
                                                          -----------------------------------   -----------------------------------
                                                                2001               2000              2001                2000
                                                          ----------------   ----------------   ----------------  -----------------
     Corporate Expense:
<S>                                                       <C>                <C>                <C>               <C>
       General and Administrative                         $          5,654   $          5,542   $         15,429  $          15,996
       Depreciation and Amortization                                   684                806              2,341              2,461
                                                         -----------------   ----------------   ----------------  -----------------
           Corporate Expense                              $          6,338   $          6,348   $         17,770  $          18,457
                                                         -----------------   ----------------   ----------------  -----------------
   Per Car Sold                                           $            532   $            428   $            463  $             410
                                                         =================   ================   ================  =================
   As % of Total Revenues                                             4.4%               4.0%               3.9%               3.9%
                                                         =================   ================   ================  ==================
</TABLE>
     Operating  expenses related to our Corporate  segment as a percent of total
revenue  remained  relatively  consistent  for the three and  nine-months  ended
September 30, 2001, versus the same period of 2000.  However,  on a per car sold
basis corporate  expenses  increased $104 and $53 per car for the three and nine
months ended September 30, 2001,  respectively,  as compared to the same periods
of the previous  year.  The increase on a per car sold basis is due to a decline
in used cars sold for both the three and nine months  ended  September  30, 2001
without a  proportionate  reduction  in  expenses.  We are  implementing  a cost
savings plan in an effort to reduce overall operating expenses.

Financial Position

     The following table reflects the growth in principal  balances  retained on
our balance sheet measured in terms of the principal  balances and the number of
loans outstanding.

<TABLE>
<CAPTION>
                                                                        Managed Loans Outstanding
                                           ------------------------------------------------------------------------------------
                                                    Principal Balances                           Number of Loans
                                           -------------------------------------    -------------------------------------------
                                             September 30,       December 31,           September 30,          December 31,
                                                 2001                2000                   2001                   2000
                                           ------------------   ----------------    ----------------------   ------------------
<S>                                        <C>                  <C>                 <C>                      <C>
Principal - Managed                        $          537,946   $       519,005     $               85,961   $           84,864
Less:  Principal - Securitized and Sold                    -              4,059                          -                2,266
                                           ------------------   ----------------    ----------------------   ------------------
Principal - Retained on Balance Sheet      $          537,946   $       514,946     $               85,961   $           82,598
                                           ==================   ================    ======================   ==================
</TABLE>
                                       17
<PAGE>

     At September  30,  2001,  the entire loan  portfolio  is on balance  sheet.
Principal - Retained on Balance Sheet has increased 4.5% from December 31, 2000.
As we continue to focus on enhanced  underwriting  guidelines,  we do not expect
the portfolio  balance to grow as significantly as in past quarters.  The number
of loans originated were 11,844 for the quarter ended September 30, 2001, versus
14,748  during the same  quarter of the prior year.  For the nine  months  ended
September  30,  the number of loans  originated  totaled  38,178 in 2001  versus
44,760 in 2000.  Although the volume of loans  originated  is declining  and the
number of loans  outstanding  is  leveling,  we believe the quality of the loans
written is improving, with the ultimate goal of reducing loan losses.

     The following  table reflects  activity in the Allowance for Credit Losses,
as well as  information  regarding  charge off activity,  for the three and nine
months ended September 30, 2001 and 2000:

<TABLE>
<CAPTION>
                                                               Three Months Ended                     Nine Months Ended
                                                                  September 30,                          September 30,
Allowance Activity:                                            2001              2000             2001              2000
                                                         ----------------   ---------------- ----------------   ----------------
<S>                                                      <C>                <C>                <C>               <C>
Balance, Beginning of Period                             $        101,589   $         98,533   $         99,700  $        76,150
Provision for Credit Losses                                        48,755             36,092            119,985          102,877
Other Allowance Activity                                            (127)            (1,250)              (133)          (2,250)
Net Charge Offs                                                  (35,717)           (33,332)          (105,052)         (76,734)
                                                         ----------------   ----------------   ----------------  ---------------
Balance, End of Period                                   $        114,500   $        100,043   $        114,500  $       100,043
                                                         ================   ================   ================  ===============
Allowance as % Ending Principal Balances                            21.3%              19.5%              21.3%            19.5%
                                                         ================   ================   ================  ===============
Charge off Activity:
Principal Balances                                       $        (45,655)  $       (41,934)  $       (134,416)  $      (99,076)
Recoveries, Net                                                      9,938             8,602             29,364           22,342
                                                         -----------------  ----------------  -----------------  ---------------
Net Charge Offs                                          $         35,717)  $       (33,332)  $       (105,052)  $      (76,734)
                                                    ======================  ================   ================  ===============
</TABLE>

     The  Allowance  for  Credit  Losses  is  maintained  at  a  level  that  in
management's  judgment is adequate to provide for estimated  probable net credit
losses  inherent  in our  portfolio  for the next 12 months.  See - Static  Pool
Analysis  section and the Provision for Credit Losses  section of  "Management's
Discussion and Analysis of Financial Condition and Results of Operations. "

     Charge offs,  net of recoveries,  for the three months ended  September 30,
2001  and  2000  were  $35.7  million  and  $33.3  million,  respectively.  As a
percentage of average principal  balances,  net charge offs for the same periods
were 6.6% and 6.7%, respectively. For the nine-month periods ended September 30,
2001  and  2000,  net  charge  offs  were  $105.1  million  and  $76.7  million,
respectively.  Net charge offs as a percentage of average principal balances for
the same periods were 19.7% and 17.0%, respectively.

     During the second quarter of 2001, we placed 31-60 day collectors  into the
majority  of  the  dealerships.   Upon  initial  deployment  of  the  31-60  day
collectors,  we  experienced  some negative  performance  as the  collectors and
collection   managers   adapted  to   collecting   and  managing  the  mid-range
delinquencies  and a decentralized  environment.  Adjustments were  subsequently
made to  address  the  negative  performance  issues  and we expect  to  improve
collection performance as a result of the relocation of these collectors.

Static Pool Analysis

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



                                       18
<PAGE>

     Currently  reported  cumulative  losses  may  vary  from  those  previously
reported  due to ongoing  collection  efforts on charged off  accounts,  and the
difference  between final proceeds on the sale of repossessed  collateral versus
our  estimates of the sale  proceeds.  Management,  however,  believes that such
variation will not be material.

     The following  table sets forth as of October 31, 2001,  the cumulative net
charge offs as a percentage of original loan cumulative  (pool) balances,  based
on the quarter of  origination  and segmented by the number of monthly  payments
completed  by customers  before  charge off. The table also shows the percent of
principal  reduction  for each pool since  inception  and  cumulative  total net
losses incurred (TLI).

<TABLE>
<CAPTION>

          Pools' Cumulative Net Losses as Percentage of Pools' Original
                           Aggregate Principal Balance
                                ($ in thousands)

                                  Monthly Payments Completed by Customer Before Charge Off
                                  ---------------------------------------------------------
                      Orig.      0       3       6        12       18       24      TLI    Reduced
                    -------     ---     ---     ---      ---      ---      ---     ----    -------
<S>                 <C>        <C>    <C>     <C>      <C>      <C>      <C>      <C>       <C>
   1993             $12,984    8.8%   21.4%   27.6%    32.8%    34.8%    35.3%    36.8%     100.0%
   1994             $23,589    5.3%   14.6%   19.6%    25.2%    27.5%    28.2%    28.8%     100.0%
   1995             $36,569    1.9%    8.1%   13.1%    19.0%    22.1%    23.4%    24.1%     100.0%
   1996             $48,996    1.5%    8.1%   13.9%    22.1%    26.2%    27.9%    28.9%     100.0%
   1997
   1st Quarter      $16,279    2.1%   10.7%   18.2%    24.8%    29.8%    32.0%    33.5%     100.0%
   2nd Quarter      $25,875    1.5%    9.9%   15.8%    22.7%    27.3%    29.4%    30.6%     100.0%
   3rd Quarter      $32,147    1.4%    8.3%   13.2%    22.4%    26.9%    29.1%    30.6%     100.0%
   4th Quarter      $42,529    1.4%    6.8%   12.6%    21.8%    26.0%    28.7%    29.9%     100.0%
   1998
   1st Quarter      $69,708    0.9%    6.9%   13.4%    20.9%    26.3%    28.7%    29.9%     100.0%
   2nd Quarter      $66,908    1.1%    8.1%   14.2%    21.7%    27.2%    29.1%    30.2%      99.8%
   3rd Quarter      $71,027    1.0%    7.9%   13.2%    22.9%    27.7%    30.2%    30.9%      99.7%
   4th Quarter      $69,583    0.9%    6.6%   13.1%    24.2%    28.9%    31.3%    32.1%      98.9%
   1999
   1st Quarter     $103,068    0.8%    7.4%   15.0%    23.5%    29.3%    31.5%    32.3%      96.9%
   2nd Quarter      $95,768    1.1%    9.9%   16.7%    25.3%    31.3%    33.7%    34.1%      93.0%
   3rd Quarter     $102,585    1.0%    8.3%   14.1%    25.2%    30.8%      x      33.2%      88.4%
   4th Quarter      $80,641    0.7%    5.9%   12.6%    23.6%    29.0%      --     30.2%      81.8%
   2000
   1st Quarter     $128,123    0.3%    6.5%   14.6%    24.1%      x        --     29.1%      74.6%
   2nd Quarter     $118,778    0.6%    8.6%   15.9%    25.9%      --       --     28.4%      66.3%
   3rd Quarter     $124,367    0.7%    7.7%   14.3%      x        --       --     23.8%      55.5%
   4th Quarter     $100,823    0.6%    6.6%   13.6%      --       --       --     18.0%      43.4%
   2001
   1st Quarter     $126,015    0.4%    6.4%      x       --       --       --     11.4%      31.9%
   2nd Quarter     $103,615    5.7%     x       --       --       --       --      4.5%      18.4%
   3rd Quarter     $109,037     x      --       --       --       --       --      0.4%       3.9%


</TABLE>


                                       19


<PAGE>

     The following table sets forth the principal balances delinquency status as
a percentage of total outstanding loan principal balances.

<TABLE>
<CAPTION>

                                                      September 30,      September 30,       December 31,
Days Delinquent:                                           2001                2000               2000
                                                    ----------------   ----------------  -----------------
<S>                                                           <C>                 <C>                <C>
Current                                                       67.4%               72.4%              66.1%
1-30 Days                                                     24.0%               19.3%              26.1%
31-60 Days                                                     5.3%                4.9%               4.7%
61-90 Days                                                     3.3%                3.4%               3.1%
                                                    ----------------   -----------------  -----------------
Total Portfolio                                              100.0%              100.0%             100.0%
                                                    ================   =================  =================
</TABLE>

     In accordance  with our charge off policy,  there are no accounts more than
90 days delinquent as of September 30, 2001.

     Delinquencies  rose  during  the third  quarter  of 2001  versus the second
quarter of this year, primarily due to seasonality.  In addition, the Company is
also seeing an increase  in  delinquencies  versus the prior year as a result of
the economic  environment.  The Company believes the transition of the 31-60 day
collectors into the dealerships has had a positive impact on collections.

Securitizations

     Under the current legal structure of our  securitization  program,  we sell
loans to our bankruptcy  remote  subsidiaries  that then securitize the loans by
transferring  them to separate  trusts that issue  several  classes of notes and
certificates  collateralized by the loans. The securitization  subsidiaries then
sell  Class A bonds or  certificates  (Class  A  obligations  or Notes  Payable)
representing  approximately 71% of the total finance  receivable balance for the
most recent securitizations to investors and subordinate classes are retained by
us. We continue to service the securitized loans.

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

     Reserve Account Requirements.  Under our current securitization  structure,
we make an initial cash deposit into a reserve account,  generally equivalent to
2.25%-6.0% of the initial underlying Finance Receivables  principal balance, and
pledge this cash to the reserve account agent. The trustee then makes additional
deposits  to  the  reserve   account  out  of  collections  on  the  securitized
receivables as necessary to fund the reserve account to a specified  percentage,
ranging from 8.0% to 11.0%,  of the underlying  Finance  Receivables'  principal
balance. The trustee makes distributions to us when:
<TABLE>
<CAPTION>

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

Liquidity and Capital Resources

    We require capital for:

     o  increases in our loan portfolio,                      o  the  seasonal purchase of inventories, and
     o  working capital and general corporate purposes,       o  the purchase or lease of property and equipment.
     o  equity or debt repurchases,

    We fund our capital requirements primarily through:

     o  operating cash flow,                                  o  our revolving  warehouse  and inventory  credit lines, and
     o  securitization transactions,                          o  supplemental borrowings.

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


                                       20
<PAGE>
Cash Flow

     Net cash provided by operating activities decreased $35.7 million to $135.4
million in the nine months ended  September 30, 2001.  The decrease is primarily
due to an increase in other  assets,  a decrease  in net  earnings  (loss) and a
decrease in other liabilities at September 30, 2001.

     Net cash used in investing  activities  decreased  $101.1 million to $135.1
million  during the nine months ended  September  30, 2001 as compared to $236.2
million  used during the same period of 2000.  The  decrease is due to increased
collections  on finance  receivables  and a decline in the  increase  of finance
receivables.

     Financing  activities used $1.9 million for the nine months ended September
30, 2001, versus generating $39.6 million during the nine months ended September
30 , 2000.  The change is  primarily  due to a decrease  in  Additions  to Notes
Payable Portfolio,  an increase in Additional  Deposits into Investments Held in
Trust,  an  increase  in  Collections  from  Investments  Held in Trust,  and an
increase in Additions to Other Notes Payable.

Financing Resources

     Revolving  Facility.  In April 2001, the Company  replaced their  warehouse
receivables  facility and in August 2001, the Company  replaced their  inventory
facility. Both lines of credit were previously with GE Capital.

     Our new revolving  warehouse  facility is with Greenwich  Capital Financial
Products,  Inc.  and allows for maximum  borrowings  of $75  million  during the
period May 1 through  November 30 increasing  to $100 million  during the period
December 1 through April 30. The term of the facility is 364 days with a renewal
option,  upon mutual consent,  for an additional  364-day period.  The borrowing
base consists of up to 65% of the principal balance of eligible loans originated
from the sale of used cars. The lender maintains an option to adjust the advance
rate to reflect  changes in market  conditions  or  portfolio  performance.  The
interest rate on the facility is LIBOR plus 2.80%.  The facility is secured with
substantially  all Company assets. At September 30, 2001, the Company was not in
compliance  with the  interest  coverage  ratio  covenant of this  facility  and
received a waiver from the lender.  The Company was in compliance with all other
required covenants.

     The new  revolving  inventory  facility is for $36 million,  an $11 million
increase from the prior facility,  and expires in June of 2003. Advance rates on
inventory  purchased range from 80% to 100% of the purchase price.  The interest
rate on the  facility is PRIME plus  6.00%.  The  facility  is secured  with the
Company's  automobile  inventory.  At September 30, 2001, the Company was not in
compliance  with the  interest  coverage  ratio  covenant of this  facility  and
received a waiver from the lender.  The Company was in compliance with all other
required covenants.

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

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

     Supplemental  Borrowings.  In January 2001, the Company  entered into a $35
million  senior  secured loan  facility as a renewal for our $38 million  senior
loan facility  originated in May 1999. The new facility has a term of 25 months.
Per the agreement,  the Company must make principal payments of $1.0 million per
month during months 4 through 22.  Thereafter  through  maturity,  the agreement
requires minimum payments of the greater of $3.0 million per month or 50% of the
cash  flows  from  classes  of  notes  issued  through  securitization  that are
subordinate to the Class A bonds.  Interest is payable monthly at LIBOR plus 600
basis points. The balance on this note was $29.0 million at September 30, 2001.

     As a condition  to the $35 million  senior  secured loan  agreement,  Verde
Investments, Inc., an affiliate of Mr. Garcia, was required to invest $7 million
in us through a subordinated loan. The funds were placed in escrow as additional
collateral  for the $35  million  senior  secured  loan.  The  funds  were to be
released in July 2001 if,  among other  conditions,  the Company had at least $7
million in pre-tax  income  through June of 2001 and, at that time,  Mr.  Garcia
would have  guaranteed  33.3% of the $35 million  facility.  The Company did not
meet  this  pre-tax  income  requirement  for the  first  six  months  of  2001.
Therefore,  per the loan  agreement,  Mr.  Garcia  is now  entitled  to  receive
warrants  from the  Company  for 1.5  million  shares of stock,  vesting  over a
one-year  period,  at an exercise price of $4.50 subject to certain  conditions.
Under the terms of the senior secured loan agreement,  any necessary shareholder
approval is a condition of the issuance of the warrants.  NASDAQ has advised the

                                       21
<PAGE>
Company  that  they  believe  that  shareholder  approval  is  required.  We are
requesting approval of the warrants at our December 2001 annual meeting. Also as
consideration  for the loan,  the Company  released all options to purchase real
estate that were then owned by Verde and leased to the Company.  We also granted
Verde the option to purchase,  at book value,  any or all  properties  currently
owned by the  Company,  or  acquired  by the  Company  prior to the  earlier  of
December  31,  2001,  or the date the loan is repaid.  Verde agreed to lease the
properties back to the Company,  on terms similar to our current  leases,  if it
exercises its option to purchase any of the  properties.  The loan is secured by
residual  interests  in  the  Company's   securitization   transactions  but  is
subordinate  to the senior secured loan  facility.  The loan requires  quarterly
interest  payments  at LIBOR  plus 600 basis  points  and is subject to pro rata
reductions  if certain  conditions  are met.  An  independent  committee  of the
Company's board reviewed and negotiated the terms of this  subordinated loan and
the Company also received an opinion from an investment banker, which deemed the
loan fair from a financial point of view both to the Company's  stockholders and
the  Company.  The balance of the note with Verde was $6.0  million at September
30, 2001.

Capital Expenditures and Commitments

     In November 2000, Verde Investments,  Inc.  ("Verde"),  an affiliate of Mr.
Garcia,   purchased  a  certain  property   located  in  Phoenix,   Arizona  and
simultaneously  leased the  property  to us  pursuant  to among  other terms the
following:  20 year term which expires  December 31, 2020;  rent payable monthly
with 5% annual rent  adjustments;  triple net lease;  four five-year  options to
renew;  and an option to purchase the property  upon prior notice and at Verde's
cost.  Subsequently,  we  surrendered  this  option  as part  of the $7  million
subordinated loan with Verde.

     In  May  2001,  Verde  purchased  one  of  the  Company  properties  at its
approximate book value of $1,650,000.  Verde has leased the property back to the
Company under a 20-year lease, which expires May 2021. The lease is a triple net
lease  with  an  increase  approximately  2% in  year  two  and  an  annual  CPI
adjustments thereafter.

Accounting Matters

     In August  2001,  the  Financial  Accounting  Standards  Board  issued FASB
Statement  No. 144,  Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets (Statement 144), which supersedes both FASB Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of (Statement  121) and the accounting  and reporting  provisions of APB Opinion
No. 30, Reporting the Results of  Operations--Reporting  the Effects of Disposal
of  a  Segment  of a  Business,  and  Extraordinary,  Unusual  and  Infrequently
Occurring Events and Transactions (Opinion 30), for the disposal of a segment of
a business (as previously  defined in that  Opinion).  Statement 144 retains the
fundamental provisions in Statement 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale, while also resolving significant  implementation issues associated with
Statement 121. For example,  Statement 144 provides guidance on how a long-lived
asset  that is used as part of a  group  should  be  evaluated  for  impairment,
establishes  criteria  for  when a  long-lived  asset  is  held  for  sale,  and
prescribes the accounting for a long-lived  asset that will be disposed of other
than by sale. Statement 144 retains the basic provisions of Opinion 30 on how to
present  discontinued  operations  in the income  statement  but  broadens  that
presentation  to include a component  of an entity  (rather  than a segment of a
business).  Unlike  Statement 121, an impairment  assessment under Statement 144
will never result in a write-down of goodwill. Rather, goodwill is evaluated for
impairment under Statement No. 142, Goodwill and Other Intangible Assets.

     The  Company  is  required  to adopt  Statement  144 no later than the year
beginning  after  December 15, 2001,  and plans to adopt its  provisions for the
quarter  ending  March 31,  2002.  Management  does not expect the  adoption  of
Statement 144 for  long-lived  assets held for use to have a material  impact on
the Company's  financial  statements  because the  impairment  assessment  under
Statement 144 is largely  unchanged  from  Statement  121. The provisions of the
Statement for assets held for sale or other  disposal  generally are required to
be applied  prospectively  after the adoption date to newly  initiated  disposal
activities.  Therefore,  management  cannot determine the potential effects that
adoption of Statement 144 will have on the Company's financial statements.

     In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations,  which  requires  that the fair value of a  liability  for an asset
retirement  obligation  be  recognized  in the period in which it is incurred if
reasonable  estimate of fair value can be made. The associated  asset retirement
costs would be  capitalized  as part of the  carrying  amount of the  long-lived
asset and depreciated  over the life of the asset.  The liability is accreted at
the end of each period through charges to operating  expense.  If the obligation
is settled for other than the carrying amount of the liability, the Company will
recognize  a gain or loss on  settlement.  The  provisions  of SFAS No.  143 are
effective for fiscal years  beginning  after June 15, 2002.  The Company has not
yet determined the impact, if any, of adoption of SFAS No. 143.

     In June 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as  all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141  also  specifies
criteria  intangible  assets acquired in a purchase method business  combination
must meet to be recognized and reported apart from goodwill.  Statement 142 will
                                       22
<PAGE>
require that  goodwill and  intangible  assets with  indefinite  useful lives no
longer be amortized,  but instead  tested for  impairment  at least  annually in
accordance with the provisions of Statement 142. Statement 142 will also require
that  intangible  assets with  definite  useful  lives be  amortized  over their
respective  estimated  useful  lives to their  estimated  residual  values,  and
reviewed for  impairment in  accordance  with SFAS No. 121,  Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

     The  Company  is  required  to  adopt  the   provisions  of  Statement  141
immediately  and  Statement  142  effective  January 1, 2002.  Furthermore,  any
goodwill and any intangible asset  determined to have an indefinite  useful life
that are acquired in a purchase  business  combination  completed after June 30,
2001 will not be amortized,  but will continue to be evaluated for impairment in
accordance  with  the  appropriate   pre-Statement  142  accounting  literature.
Goodwill  and  intangible  assets  acquired in business  combinations  completed
before  July 1, 2001 will  continue  to be  amortized  prior to the  adoption of
Statement 142.

     Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing  intangible  assets and goodwill  that were  acquired in a
prior purchase business combination, and make any necessary reclassifications in
order to conform with the new criteria in Statement  141 for  recognition  apart
from  goodwill.  Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible  assets acquired
in purchase business  combinations,  and make any necessary  amortization period
adjustments by the end of the first interim period after adoption.  In addition,
to the extent an intangible  asset is identified as having an indefinite  useful
life, the Company will be required to test the  intangible  asset for impairment
in  accordance  with the  provisions  of Statement  142 within the first interim
period.  Any  impairment  loss will be measured  as of the date of adoption  and
recognized as the cumulative  effect of a change in accounting  principle in the
first interim period.

     As of January 1, 2002, the Company expects to have unamortized  goodwill of
approximately $11.6 million and no unamortized  identifiable  intangible assets.
The goodwill will be subject to the transition  provisions of Statements 141 and
142.  Amortization  expense related to goodwill was approximately  $1.0 million,
$0.2 million and $0.7  million for the year ended  December 31, 2000 and for the
three and nine months ended  September 30 , 2001,  respectively.  Because of the
extensive  effort needed to comply with adopting  Statements  141 and 142, it is
not practicable to reasonably  estimate the impact of adopting these  Statements
on the  Company's  financial  statements  at the date of this report,  including
whether any transitional  impairment losses will be required to be recognized as
a result of the cumulative effect of this change in accounting principle.

     In  September  2000,  the  Financial   Accounting  Standards  Board  issued
Statement of Financial  Accounting  Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and  Extinguishments of Liabilities" (SFAS No.
140).  SFAS No.  140  replaces  SFAS  No.  125 and  revises  the  standards  for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral. This statement is effective for transfers and servicing of financial
assets and  extinguishments of liabilities  occurring after March 31, 2001. This
statement is effective for  recognition and  reclassification  of collateral and
for  disclosures  relating to  securitization  transactions  and  collateral for
fiscal years ending  after  December 15, 2000.  The adoption of SFAS No. 140 did
not have a material impact on us.

     In June 2000, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No. 138,  "Accounting  for Certain  Derivative
Instruments and Certain Hedging  Activities" (SFAS No. 138). SFAS No. 138 amends
a limited number of issues causing implementation difficulties for entities that
apply SFAS No. 133. SFAS No. 138 is effective for fiscal years  beginning  after
June 15, 2000.  Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative  Instruments and Hedging  Activities" (SFAS No. 133) required all
derivatives  to be recorded on the balance  sheet at fair value and  establishes
new accounting  rules for hedging  instruments.  The adoption of SFAS No. 138 or
No. 133 did not have a material effect on us.

We Make Forward Looking Statements

     This report includes statements that constitute  forward-looking statements
within the  meaning of the safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995. We claim the protection of the  safe-harbor  for
our   forward-looking   statements.   Forward-looking   statements   are   often
characterized  by  the  words  "may,"  "anticipates,"  "believes,"  "estimates,"
"projects,"  "expects"  or similar  expressions  and do not  reflect  historical
facts.  Forward-looking  statements in this report relate,  among other matters,
to: adverse economic conditions;  anticipated  financial results, such as sales,
other revenues and loan portfolios,  improvements in  underwriting,  adequacy of
the  allowance  for credit  losses,  and  improvements  in  recoveries  and loan
performance,  including delinquencies and charge offs; our ability to retain our
inventory  and  warehouse  lines  of  credit;  roll-out  of  collectors  to  our
dealerships; the success of cost savings initiatives;  improvements in inventory
and inventory mix; favorable  interest rate environment;  and e-commerce related
growth  and  loan  performance.   Forward  looking   statements  include  risks,
uncertainties and other factors which may cause our actual results,  performance
or  achievements  to be materially  different from those expressed or implied by
such forward  looking  statements, some of which we cannot predict or quantify.

                                       23
<PAGE>
Factors that could  affect our results and cause or  contribute  to  differences
from these  forward-looking  statements  include,  but are not  limited  to: any
decline  in  consumer  acceptance  of our  car  sales  strategies  or  marketing
campaigns;  any  inability to finance our  operations in light of a tight credit
market for the sub-prime industry and our current financial  circumstances;  any
deterioration in the used car finance  industry or increased  competition in the
used car sales and finance  industry;  any  inability to monitor and improve our
underwriting and collection processes;  any changes in estimates and assumptions
in, and the ongoing adequacy of, our allowance for credit losses;  any inability
to continue to reduce operating expenses as a percentage of sales;  increases in
interest rates; adverse economic conditions;  any material litigation against us
or material,  unexpected developments in existing litigation; any new or revised
accounting,  tax or legal  guidance  that  adversely  affect  used car  sales or
financing;  and  developments  with  respect  to Mr.  Garcia's  offer to take us
private.  Future  events and actual  results  could differ  materially  from the
forward-looking statements. When considering each forward-looking statement, you
should keep in mind the risk  factors  and  cautionary  statements  found in the
sections entitled  "Management's  Discussion and Analysis of Financial Condition
and Results of  Operations  -- Risk  Factors," in our most recent report on Form
10-K, in Exhibit 99 attached to this Quarterly Report on Form 10-Q and elsewhere
in our Securities and Exchange Commission  filings.  In addition,  the foregoing
factors may affect  generally our business,  results of operations and financial
position.  There  may also be other  factors  that we are  currently  unable  to
identify  or   quantify,   but  may  arise  or  become   known  in  the  future.
Forward-looking statements speak only as of the dated the statement was made. We
are not obligated to publicly update or revise any forward  looking  statements,
whether as a result of new information, future events, or for any other reason.

                                     ITEM 3.
                                   Market Risk

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

     Our  financial   instruments   consist  primarily  of  fixed  rate  finance
receivables,  residual  interests  in pools of fixed rate  finance  receivables,
short-term variable rate revolving Notes Receivable, and variable and fixed rate
Notes  Payable.  Our finance  receivables  are  classified as subprime loans and
generally  bear  interest  at the lower of 29.9% or the  maximum  interest  rate
allowed in states that impose  interest rate limits.  At September 30, 2001, the
scheduled  maturities on our finance  receivables  ranged from one to 48 months,
with a weighted  average  maturity of 23.8 months.  The interest rates we charge
our customers on finance receivables has not changed as a result of fluctuations
in market interest rates,  although we may increase the interest rates we charge
in the future if market interest rates  increase.  A large component of our debt
at September 30, 2001 is the Collateralized  Notes Payable (Class A obligations)
issued under our securitization program. Issuing debt through our securitization
program  allows us to mitigate our interest rate risk by reducing the balance of
the variable  revolving  line of credit and replacing it with a lower fixed rate
note  payable.  We are subject to interest rate risk on fixed rate Notes Payable
to the extent that future  interest  rates are lower than the interest  rates on
our existing Notes Payable.

    We believe that our market risk information has not changed materially from
December 31, 2000.

PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings.

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

     There has also been  litigation  filed in connection with or related to the
intent  and/or  offer  of our  chairman,  Mr.  Garcia,  to  purchase  all of our
outstanding  common  stock not owned by him. On March 20,  2001,  a  shareholder
derivative  complaint  was  filed,   purportedly  on  behalf  of  Ugly  Duckling
Corporation,  in the Court of  Chancery  for the State of Delaware in New Castle
County,  captioned Berger v. Garcia, et al., No. 18746NC.  The complaint alleges
that our current  directors  breached  fiduciary duties owed to us in connection
with  certain  transactions  between  us and Mr.  Garcia  and  various  entities
controlled by Mr.  Garcia.  The complaint was amended on April 17, 2001 to add a
                                       24


<PAGE>

second cause of action,  on behalf of all persons who own our common stock,  and
their successors in interest,  which alleges that our current directors breached
fiduciary  duties in connection  with the proposed  acquisition by Mr. Garcia of
all of the outstanding  shares of Ugly Duckling  common stock.  Ugly Duckling is
named as a nominal  defendant in the action.  The original cause of action seeks
to void all  transactions  deemed to have been  approved in breach of  fiduciary
duty and recovery by Ugly Duckling of alleged  compensatory damages sustained as
a result of the transactions. The second cause of action seeks to enjoin us from
proceeding with the proposed  acquisition by Mr. Garcia, or, in the alternative,
awarding compensatory damages to the class.

     Following  Mr.  Garcia's  offer in early April 2001,  five  additional  and
separate purported  shareholder class action complaints were filed between April
17 and April 25, 2001 in the Court of Chancery  for the State of Delaware in New
Castle County.  They are captioned  Turberg v. Ugly Duckling  Corp., et al., No.
18828NC,  Brecher v. Ugly Duckling Corp.,  et al., No. 18829NC,  Suprina v. Ugly
Duckling  Corporation,  et al., No.  18830NC,  Benton v. Ugly Duckling Corp., et
al., No. 18838NC, and Don Hankey Living Trust v. Ugly Duckling  Corporation,  et
al., No. 18843NC. Each complaint alleges that Ugly Duckling,  and its directors,
breached  fiduciary  duties in connection  with the proposed  acquisition by Mr.
Garcia of all of the outstanding  shares of the Ugly Duckling common stock.  The
complaints seek to enjoin the proposed  acquisition by Mr. Garcia and to recover
compensatory  damages caused by the proposed  acquisition and the alleged breach
of fiduciary duties.

     These cases were  consolidated  in June 2001. In September  2001 Mr. Garcia
withdrew his offer.  If plaintiffs  continue to pursue their claims we intend to
vigorously  defend  against the  plaintiff's  allegations  and believe  that the
actions are without merit.

Item 2.  Changes in Securities and Use of Proceeds.

     (a)      None
     (b)      None
     (c)      None
     (d)      Not Applicable

Item 3.  Defaults Upon Senior Securities.

     We recently  obtained waiver letters for financial ratio covenant  breaches
under our revolving credit facility and our senior secured loan facility.

Item 4.  Submission of Matters to a Vote of Security Holders.

     None

Item 5.  Other Information.

     None

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

     (a)  Exhibits

     Exhibit  10.1  -  Loan  and  Security  Agreement  dated  as of  August  24,
     2001between the Registrant and Automotive Finance Corporation

     Exhibit 10.2 - Covenant  Waiver  Letter dated  November 1, 2001 between the
     Registrant and Automotive Finance Corporation

     Exhibit 10.3 - Covenant  Waiver  Letter dated  November 9, 2001 between the
     Registrant and Greenwich Capital Financial Products, Incorporated

     Exhibit 10.4 - Covenant  Waiver  Letter dated  November 9, 2001 between the
     Registrant and Sun America Life Insurance Company

     Exhibit  99 -  Statement  Regarding  Forward  Looking  Statements  and Risk
     Factors




                                       25

<PAGE>

     (b)  Reports on Form 8-K.

     During the third  quarter of 2001,  the Company filed three reports on Form
8-K. The first report on Form 8-K, dated  September 14, 2001 and filed September
14, 2001, reported Ugly Duckling's closing of an Inventory Line of Credit, filed
as an exhibit to the Form 8-K,  was a press  release  dated  September  6, 2001,
entitled "Ugly Duckling  Announces Closing of an Inventory Line of Credit".  The
second report on Form 8-K dated September 25, 2001 and filed September 25, 2001,
reported  the  withdrawal  of an offer made by Mr.  Ernest C.  Garcia  II,  Ugly
Duckling's Chairman and largest stockholder,  to purchase all of the outstanding
shares of common stock of Ugly  Duckling not already  owned by Mr.  Garcia,  and
filed as an exhibit to the Form 8-K was a press release dated September 24, 2001
entitled "Ugly  Duckling  Reports  Withdrawal of Chairman's  April 2001 Offer to
Purchase  Outstanding Common Stock." The third report on Form 8-K, dated October
25, 2001 and filed October 25, 2001, reported Ugly Duckling's third quarter 2001
earnings,  and filed as an  exhibit  to the Form 8-K was a press  release  dated
October 25, 2001 entitled  "Ugly  Duckling  Reports Third Quarter and Nine Month
Results."




























                                       26
<PAGE>




SIGNATURE

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

         UGLY DUCKLING CORPORATION
         /s/ STEVEN T. DARAK
         -------------------------------------------
         STEVEN T. DARAK
         Senior Vice President and
         Chief Financial Officer
         (Principal Financial and Accounting Officer)

Date:  November 14, 2001




















                                       27

<PAGE>
<TABLE>
<CAPTION>

EXHIBIT INDEX

     Exhibit
     Number                                     Description
     -------                                    -----------
<S>  <C>       <C>
     10.1      Loan and Security Agreement dated as of August 24, 2001 between the
               Registrant and Automotive Finance Corporation

     10.2      Covenant Waiver Letter dated November 1, 2001 between the Registrant and
               Automotive Finance Corporation

     10.3      Covenant Waiver Letter dated November 9, 2001 between the Registrant and
               Greenwich Capital Financial Products, Incorporated

     10.4      Covenant Waiver Letter dated November 9, 2001 between the Registrant and
               Sun America Life Insurance Company

       99      Statement Regarding Forward Looking Statements and Risk Factors

</TABLE>