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


                       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, 1999

                        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.)

          2525 E. Camelback Road, Suite 500,
                   Phoenix, Arizona                  85016
           (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 4, 1999, there were  approximately  14,880,000  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, 1998.
================================================================================

<PAGE>



                            UGLY DUCKLING CORPORATION

                                    FORM 10-Q

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                                         Page
                          Part I - FINANCIAL STATEMENTS
<S>                                                                                                                      <C>
  Item 1.        FINANCIAL STATEMENTS
                 Condensed Consolidated Balance Sheets -- September 30, 1999 and December 31, 1998......................   1
                 Condensed Consolidated Statements of Operations -- Three and Nine Months Ended September 30, 1999
                     and September 30, 1998.............................................................................   2
                 Condensed Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1999 and
                     September 30, 1998.................................................................................   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............................................................................................  31

                      Part II. -- OTHER INFORMATION
  Item 1.        LEGAL PROCEEDINGS......................................................................................  33
  Item 2.        CHANGES IN SECURITIES..................................................................................  33
  Item 3.        DEFAULTS UPON SENIOR SECURITIES........................................................................  33
  Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................................  33
  Item 5.        OTHER INFORMATION .....................................................................................  33
  Item 6.        EXHIBITS AND REPORTS ON FORM 8-K.......................................................................  33
                 SIGNATURES.............................................................................................  35
  Exhibit 10.1    Amendment No. 5 to the Amended and Restated Motor Vehicle and Installment Contract Loan and
                     Security Agreement between General Electric Capital Corporation and Registrant dated August
                     16, 1999
  Exhibit 10.1(a) Amendment No. 6 to the Amended and Restated Motor Vehicle and Installment Contract Loan and
                     Security Agreement between General Electric Capital Corporation and Registrant dated August
                     27, 1999
  Exhibit 10.2    Third Amendment to Credit and Security Agreement between Registrant and First Merchants, dated as of
                     August 2, 1999
  Exhibit 10.3    Amendment to Loan Agreement between Registrant and each of the Kayne Anderson related Lenders named
                     therein, dated September 30, 1999
  Exhibit 11      Statement regarding computation of per share earnings (see note 5 of Notes to
                     Condensed Consolidated Financial Statements)
  Exhibit 27      Financial Data Schedule
  Exhibit 99      Statement Regarding Forward Looking Statements and Risk Factors
</TABLE>



<PAGE>
                                     Page 1



                                     ITEM 1.

                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>



                                                                         September 30,         December 31,
                                                                              1999                 1998
                                                                        -----------------    ------------------
<S>                                                                     <C>                  <C>
                                ASSETS
Cash and Cash Equivalents.............................................    $       4,165        $       2,751
Finance Receivables, Net..............................................          356,370              163,209
Notes Receivable, Net.................................................           21,347               28,257
Inventory.............................................................           46,322               44,167
Property and Equipment, Net...........................................           34,881               32,970
Intangible Assets, Net................................................           15,327               15,530
Other Assets..........................................................           23,279               20,575
Net Assets of Discontinued Operations.................................           20,939               38,516
                                                                        -----------------    ------------------
                                                                          $     522,630        $     345,975
                                                                        =================    ==================


                 LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
    Accounts Payable..................................................    $       3,795        $       2,479
    Accrued Expenses and Other Liabilities............................           38,710               19,694
    Notes Payable.....................................................          280,571              117,294
    Subordinated Notes Payable........................................           37,077               43,741
                                                                        -----------------    ------------------
Total Liabilities.....................................................          360,153              183,208
                                                                        -----------------    ------------------
Stockholders' Equity:
    Common Stock......................................................               19                   19
    Additional Paid in Capital........................................          173,257              173,809
    Retained Earnings.................................................            9,522                3,449
    Treasury Stock....................................................          (20,321)             (14,510)
                                                                        -----------------    ------------------
Total Stockholders' Equity............................................          162,477              162,767
                                                                        -----------------    ------------------
                                                                          $     522,630        $     345,975
                                                                        =================    ==================
</TABLE>



     See accompanying notes to Condensed Consolidated Financial Statements.


<PAGE>
                                     Page 2

                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

               Three and Nine Months Ended September 30, 1999 and
                  1998 (In thousands, except earnings per share
                                    amounts)


<TABLE>
<CAPTION>
                                                                 Three Months Ended               Nine Months Ended
                                                                   September 30,                    September 30,

                                                            -----------------------------    ----------------------------
                                                               1999            1998              1999           1998
                                                            ------------   --------------    -------------  -------------
<S>                                                           <C>            <C>               <C>           <C>
Sales of Used Cars.........................................   $ 103,315      $    73,580       $  307,633    $   216,075
Less:
    Cost of Used Cars Sold.................................      57,773           42,763          173,429        125,085
    Provision for Credit Losses............................      29,315           16,298           84,510         46,648
                                                            ------------   --------------    -------------  -------------
                                                                 16,227           14,519           49,694         44,342
                                                            ------------   --------------    -------------  -------------
Other Income:
    Interest Income........................................      25,044            7,187           59,311         19,415
    Gain on Sale of Finance Receivables....................          --            3,820              --          12,093
    Servicing and Other Income.............................       6,963           12,127           24,259         25,726
                                                            ------------   --------------    -------------  -------------
                                                                 32,007           23,134           83,570         57,234
                                                            ------------   --------------    -------------  -------------
Income before Operating Expenses...........................      48,234           37,653          133,264        101,576
Operating Expenses:
    Selling and Marketing..................................       6,160            5,316           18,655         15,754
    General and Administrative.............................      26,112           26,781           81,524         63,690
    Depreciation and Amortization..........................       2,458            1,445            6,917          3,970
                                                            ------------   --------------    -------------  -------------
                                                                 34,730           33,542          107,096         83,414
                                                            ------------   --------------    -------------  -------------
Operating Income...........................................      13,504            4,111           26,168         18,162
Interest Expense...........................................       6,422            1,482           15,895          4,355
                                                            ------------   --------------    -------------  -------------

Earnings before Income Taxes...............................       7,082            2,629           10,273         13,807
Income Taxes...............................................       2,900            1,102            4,200          5,609
                                                            ------------   --------------    -------------  -------------
Income from Continuing Operations..........................       4,182            1,527            6,073          8,198
Discontinued Operations:
Loss from Operations of Discontinued Operations, net of
    income tax benefit of $492.............................           --              --               --           (768)
Loss on Disposal of Discontinued Operations, net of
    income tax benefit of $2,372 and $5,396................           --          (3,628)              --         (8,455)
                                                            ============   ==============    =============  =============
Net Earnings (Loss).........................................   $   4,182      $    (2,101)      $    6,073    $    (1,025)
                                                            ============   ==============    =============  =============
Earnings per Common Share from Continuing
    Operations:
    Basic..................................................   $    0.28      $      0.08       $     0.40    $      0.44
                                                            ============   ==============    =============  =============
    Diluted................................................   $    0.28      $      0.08       $     0.39    $      0.44
                                                            ============   ==============    =============  =============
Net Earnings (Loss) per Common Share:
    Basic..................................................   $    0.28      $     (0.11)      $     0.40    $     (0.06)
                                                            ============   ==============    =============  =============
    Diluted................................................   $    0.28      $     (0.11)      $     0.39    $     (0.05)
                                                            ============   ==============    =============  =============
Shares Used in Computation:
    Basic..................................................      14,903           18,560           15,161         18,600
                                                            ============   ==============    =============  =============
    Diluted................................................      15,167           18,800           15,384         18,800
                                                            ============   ==============    =============  =============
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements.

<PAGE>
                                     Page 3

                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Nine Months Ended September 30, 1999 and 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                    1999            1998
                                                                                --------------  --------------
<S>                                                                             <C>             <C>
Cash Flows from Operating Activities:
Net Earnings................................................................      $   6,073      $  (1,025)
Adjustments to Reconcile Net Earnings to Net Cash Provided
  by Operating Activities:
  Provision for Credit Losses...............................................         84,510         46,648
  Gain on Sale of Finance Receivables.......................................             --        (12,093)
  Depreciation and Amortization ............................................          6,917          3,970
  Loss from Discontinued Operations.........................................             --          9,223
  Purchase of Finance Receivables Held for Sale.............................             --       (246,431)
  Increase in Deferred Income Taxes.........................................         (3,769)        (1,260)
  Proceeds from Sale of Finance Receivables.................................             --        159,498
  Collections of Finance Receivables........................................             --         41,527
  Increase in Inventory.....................................................         (1,280)        (3,833)
  Increase in Other Assets..................................................         (1,862)        (6,293)
  Increase in Accounts Payable, Accrued Expenses and Other Liabilities......         20,595         11,005
  Increase in Income Taxes Payable..........................................          2,926          1,521
                                                                                --------------  --------------
Net Cash Provided by Operating Activities...................................        114,110          2,457
                                                                                --------------  --------------
Cash Flows from Investing Activities:
  Purchase of Finance Receivables Held for Investment.......................       (377,547)            --
  Collections of Finance Receivables Held for Investment....................        121,551             --
  Increase in Investments Held in Trust.....................................        (10,914)        (9,719)
  Advances under Notes Receivable...........................................         (6,577)       (38,788)
  Repayments of Notes Receivable............................................         13,487         39,062
  Proceeds from Disposal of Property and Equipment..........................             --         27,413
  Purchase of Property and Equipment........................................         (8,165)       (20,567)
  Payment for Acquisition of Assets.........................................        (12,095)            --
                                                                                --------------  --------------
Net Cash Used in Investing Activities.......................................       (280,260)        (2,599)
                                                                                --------------  --------------
Cash Flows from Financing Activities:
  Additions to Notes Payable................................................        270,027         30,000
  Repayment of Notes Payable................................................       (106,750)       (46,222)
  Net Issuance (Repayment) of Subordinated Notes Payable....................         (6,664)        18,000
  Proceeds from Issuance of Common Stock....................................             60            303
  Acquisition of Treasury Stock.............................................         (5,811)          (535)
  Repurchase of Outstanding Warrants........................................           (612)            --
  Other, Net................................................................           (263)          (222)
                                                                                --------------  --------------
Net Cash Provided by Financing Activities...................................        149,987          1,324
                                                                                --------------  --------------
Cash Provided by (Used in) Discontinued Operations..........................         17,577         (3,313)
                                                                                --------------  --------------
Net Increase (Decrease) in Cash and Cash Equivalents........................          1,414         (2,131)
Cash and Cash Equivalents at Beginning of Period............................          2,751          3,537
                                                                                --------------  --------------
Cash and Cash Equivalents at End of Period..................................      $   4,165      $   1,406
                                                                                ==============  ==============
Supplemental Statement of Cash Flows Information:
Interest Paid...............................................................      $  16,110      $   7,697
                                                                                ==============  ==============
Income Taxes Paid...........................................................      $   5,609      $   1,558
                                                                                ==============  ==============
</TABLE>


     See accompanying notes to Condensed Consolidated Financial Statements.


<PAGE>
                                     Page 4


                            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 generally  accepted  accounting  principles 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 generally accepted  accounting  principles
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, 1998
was derived from our audited  consolidated  financial statements as of that date
but does not include all the  information  and  footnotes  required by generally
accepted  accounting  principles.  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, 1998.

Note 2.  Summary of Finance Receivables

Following is a summary of our Finance Receivables, Net, as of September 30, 1999
and December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                     September 30, 1999                         December 31, 1998
                                          -----------------------------------------  -----------------------------------------
                                                            Non                                          Non
                                           Dealership    Dealership                   Dealership     Dealership
                                           Operations    Operations       Total       Operations     Operations      Total
                                          ------------- -------------  ------------  --------------  ------------  -----------
<S>                                         <C>          <C>             <C>           <C>            <C>          <C>
Gross Installment Sales Contracts........   $  464,775                                 $ 131,510
Unearned Finance Charges.................     (132,793)                                 (37,574)
                                          -------------                              --------------
Installment Sales Contract Principal
   Balances..............................      331,982       53,066        385,048        93,936          51,282      145,218
Add: Accrued Interest....................        3,689          650          4,339           877             473        1,350
    Loan Origination Costs...............        5,053           --          5,053         2,237              --        2,237
                                          ------------- -------------  ------------  --------------  ------------  -----------
Principal Balances, Net..................      340,724       53,716        394,440        97,050          51,755      148,805
Residuals in Finance Receivables Sold....       19,576        2,625         22,201        33,331           2,625       35,956
Investments Held in Trust................       42,137           --         42,137        20,564              --       20,564
                                          ------------- -------------  ------------  --------------  ------------  -----------
                                               402,437       56,341        458,778       150,945          54,380      205,325
Allowance for Credit Losses..............      (80,698)      (3,888)       (84,586)      (24,777)         (2,024)     (26,801)
Discount on Acquired Loans...............           --      (17,822)       (17,822)           --         (15,315)     (15,315)
                                          ------------- -------------  ------------  --------------  ------------  -----------
Finance Receivables, Net.................   $  321,739   $   34,631      $ 356,370     $ 126,168       $  37,041   $  163,209
                                          ============= =============  ============  ==============  ============  ===========

Classification of Principal Balances:
Finance Receivables Held for Investment..   $   86,169   $   53,066      $ 139,235     $  26,852       $  51,282   $   78,134
Finance Receivables Held as Collateral
for Securitization Notes Payable.........      245,813           --        245,813        67,084              --       67,084
                                          ============= =============  ============  ==============  ============  ===========
Installment Sales Contract Principal
Balances.................................   $  331,982   $   53,066      $ 385,048     $  93,936       $  51,282   $  145,218
                                          ============= =============  ============  ==============  ============  ===========
</TABLE>




<PAGE>
                                     Page 5

    As of September  30, 1999 and December  31, 1998,  our  Residuals in Finance
Receivables Sold from dealership  operations were comprised of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                  September 30,       December 31,
                                                                                       1999               1998
                                                                                 -----------------  ------------------
<S>                                                                              <C>                 <C>
Retained interest in subordinated securities (B Certificates).................    $        25,017     $       51,243
Net interest spreads, less present value discount.............................              9,207             25,838
Reduction for estimated credit losses.........................................            (14,648)           (43,750)
                                                                                 -----------------  ------------------
Residuals in finance receivables sold.........................................    $        19,576     $       33,331
                                                                                 =================  ==================
Securitized principal balances outstanding....................................    $        95,457     $      198,747
                                                                                 =================  ==================
Estimated credit losses as a % of securitized principal balances outstanding.              15.3%               22.0%
                                                                                 =================  ==================
</TABLE>

         The following table reflects a summary of activity for our Residuals in
Finance  Receivables  Sold from  dealership  operations  for the  periods  ended
September 30, 1999 and 1998, respectively (in thousands):

<TABLE>
<CAPTION>
                                                                   Three Months Ended          Nine Months Ended
                                                                     September 30,               September 30,
                                                               --------------------------- ---------------------------
                                                                  1999           1998          1999           1998
                                                               ------------   ------------ ------------- -------------
<S>                                                             <C>            <C>          <C>           <C>
Balance, Beginning of Period..................................  $   22,559     $   28,417   $   33,331    $   13,277
Additions.....................................................          --         11,182           --        35,435
Amortization..................................................      (2,983)        (4,440)     (13,755)      (13,553)
                                                               ------------   ------------ ------------- -------------
Balance, End of Period........................................  $   19,576     $   35,159   $   19,576    $   35,159
                                                               ============   ============ ============= =============
</TABLE>

Note 3.  Notes Receivable

    Our  Cygnet  dealer  program  has  various  notes  receivable  from used car
dealers.  Under Cygnet's asset based loan program, our commitments for revolving
notes receivable totaled $9.5 million at September 30, 1999.

    In July 1997, First Merchants Acceptance Corporation (First Merchants) filed
for bankruptcy.  Immediately  subsequent to the bankruptcy filing, we executed a
loan agreement to provide First  Merchants  with debtor in possession  financing
(DIP  facility).   Additionally,  in  August  1999,  we  increased  our  funding
obligation to First  Merchants by $2.0 million  bringing the maximum  commitment
under the DIP facility to $13.5 million at September 30, 1999.  The  outstanding
balance on the DIP facility totaled $12.5 million and $12.2 million at September
30, 1999 and December 31, 1998, respectively.

    Following  is a  summary  of Notes  Receivable  at  September  30,  1999 and
December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                               September 30,      December 31,
                                                                                   1999               1998
                                                                             ------------------  -----------------
<S>                                                                          <C>                <C>
Notes Receivable under the asset based loan program, net of
    allowance for doubtful accounts of $103, and $500, respectively......      $       7,080      $       8,311
First Merchants Debtor in Possession Note Receivable.....................             12,492             12,228
First Merchants Bank Group Participation.................................                721              6,856
Other Notes Receivable...................................................              1,054                862
                                                                             ------------------  -----------------
Notes Receivable, Net....................................................      $      21,347      $      28,257
                                                                             ==================  =================
</TABLE>




<PAGE>
                                     Page 6

Note 4.  Notes Payable

    The  following  is a summary of Notes  Payable  at  September  30,  1999 and
December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                                September 30,    December 31,
                                                                                    1999             1998
                                                                             ------------------ ---------------
<S>                                                                           <C>                <C>
Revolving Facility with GE Capital........................................    $        60,031    $      51,765
Securitization Notes Payable..............................................            184,905           50,607
Note Payable Collateralized by Securitization Subsidiaries' Common Stock..             36,000           12,234
Mortgage Loan with Finance Company........................................                 --            3,386
Others....................................................................                726              967
                                                                             ------------------ ---------------
Subtotal..................................................................            281,662          118,959
Less:  Unamortized Loan Fees..............................................              1,091            1,665
                                                                             ------------------ ---------------
Notes Payable.............................................................    $       280,571    $     117,294
                                                                             ================== ===============
</TABLE>

Note 5.  Common Stock Equivalents

    Net  Earnings per common  share  amounts are based on the  weighted  average
number of common shares and common stock equivalents outstanding for the periods
ended  September  30, 1999,  and 1998 as follows (in  thousands,  except for per
share amounts):

<TABLE>
<CAPTION>
                                                                           Three Months Ended            Nine Months Ended
                                                                              September 30,                September 30,
                                                                        --------------------------   --------------------------
                                                                           1999          1998           1999          1998
                                                                        -------------------------------------------------------
<S>                                                                      <C>            <C>            <C>          <C>
Income from Continuing Operations......................................  $    4,182     $   1,527      $   6,073    $   8,198
                                                                        ============  ============   ============  ============
Net Earnings (Loss)....................................................  $    4,182     $  (2,101)     $   6,073    $  (1,025)
                                                                        ============  ============   ============  ============
Basic EPS-Weighted Average Shares Outstanding..........................      14,903        18,560         15,161       18,600
                                                                        ============  ============   ============  ============
Basic Earnings (Loss) Per Share from:
    Continuing Operations..............................................  $     0.28     $     0.08     $    0.40    $     0.44
                                                                        ============  ============   ============  ============
    Net Earnings (Loss)................................................  $     0.28     $    (0.11)    $    0.40    $    (0.06)
                                                                        ------------  ------------   ------------  ------------

Basic EPS-Weighted Average Shares Outstanding..........................      14,903        18,560         15,161       18,600
Effect of Diluted Securities:
    Warrants ..........................................................          11            29             --           25
    Stock Options......................................................         253           211            223          175
                                                                        ------------  ------------   ------------  ------------
Dilutive EPS-Weighted Average Shares Outstanding.......................      15,167        18,800         15,384       18,800
                                                                        ============  ============   ============  ============
Diluted Earnings (Loss) Per Share from:
    Continuing Operations..............................................  $     0.28     $    0.08      $    0.39    $     0.44
                                                                        ============  ============   ============  ============
    Net Earnings (Loss)................................................  $     0.28     $   (0.11)     $    0.39    $    (0.05)
                                                                        ============  ============   ============  ============
Warrants Not Included in Diluted EPS Since Antidilutive................       1,158         1,439          1,120        1,439
                                                                        ============  ============   ============  ============
Stock Options Not Included in Diluted EPS since Antidilutive...........         979         1,562          1,054          716
                                                                        ============  ============   ============  ============
</TABLE>

Note 6.  Business Segments

    We have two divisions:  dealership operations and non-dealership operations.
Within  our  divisions,  we have six  distinct  business  segments.  Within  the
dealership  operations  division,  the  segments  consist  of  retail  car sales
operations  (company  dealerships),   the  income  generated  from  the  finance
receivables  generated at the Ugly Duckling  dealerships and corporate and other
operations.  Under the non-dealership  operations division, the segments consist
of the Cygnet dealer program, bulk purchasing and loan servicing,  and corporate
and other operations.

<PAGE>

                                     Page 7

    A summary of operating  activity by business  segment for the periods  ended
September 30, 1999 and 1998 follows (in thousands):

<TABLE>
<CAPTION>
                                                Dealership Operations                 Non Dealership Operations
                                        --------------------------------------  --------------------------------------
                                                       Company                                 Cygnet
                                          Company    Dealership    Corporate      Cygnet        Loan       Corporate
                                        Dealerships  Receivables   and Other      Dealer      Servicing    and Other       Total
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
<S>                                      <C>          <C>          <C>           <C>          <C>          <C>           <C>
Three months ended September 30, 1999:
Sales of Used Cars...................    $ 103,315    $       --   $      --     $     --     $       --   $       --    $  103,315
Less:  Cost of Used Cars Sold........       57,773            --          --           --             --           --        57,773
    Provision for Credit Losses......       21,527         6,033          --        1,755             --           --        29,315
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
                                            24,015        (6,033)         --       (1,755)            --           --        16,227

Interest Income......................           --        19,597         178        3,923          1,344            2        25,044
Servicing and Other Income...........           72         1,793          56           --          5,042           --         6,963
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
Income before Operating Expenses.....       24,087        15,357         234        2,168          6,386            2        48,234
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------

Operating Expenses:
    Selling and Marketing............        6,144            --          --           16             --           --         6,160
    General and Administrative.......       11,111         4,794       4,390        1,055          4,063          699        26,112
    Depreciation and Amortization....          919           279         565          112            373          210         2,458
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
                                            18,174         5,073       4,955        1,183          4,436          909        34,730
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
Operating Income (Loss)..............    $   5,913    $   10,284   $  (4,721)    $    985     $    1,950   $     (907)   $   13,504
                                        ============ ============ ============= ============ ============ ============  ============

Three months ended September 30, 1998:
Sales of Used Cars...................    $  73,580    $       --   $      --     $     --     $       --   $       --    $   73,580
Less:  Cost of Used Cars Sold........       42,763            --          --           --             --           --        42,763
    Provision for Credit Losses......       15,709            37          --          552             --           --        16,298
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
                                            15,108           (37)         --         (552)            --           --        14,519

Interest Income......................           --         4,537          54        2,299            297           --         7,187
Gain on Sale of Loans................           --         3,820          --           --             --           --         3,820
Servicing and Other Income...........           70         3,972          44           --          8,041           --        12,127
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
Income before Operating Expenses.....       15,178        12,292          98        1,747          8,338           --        37,653
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------

Operating Expenses:
    Selling and Marketing............        5,242            --          --           59              8            7         5,316
    General and Administrative.......        8,133         4,380       4,334          575          6,585        2,774        26,781
    Depreciation and Amortization....          628           323         256           24            183           31         1,445
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
                                            14,003         4,703       4,590          658          6,776        2,812        33,542
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
Operating Income (Loss)..............    $   1,175    $    7,589   $  (4,492)    $  1,089     $    1,562   $   (2,812)   $    4,111
                                        ============ ============ ============= ============ ============ ============  ============
</TABLE>




<PAGE>
                                     Page 8


<TABLE>
<CAPTION>
                                                Dealership Operations                 Non Dealership Operations
                                        --------------------------------------  --------------------------------------
                                                       Company                                 Cygnet
                                          Company    Dealership    Corporate      Cygnet        Loan       Corporate
                                        Dealerships  Receivables   and Other      Dealer      Servicing    and Other       Total
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
<S>                                     <C>           <C>          <C>           <C>          <C>          <C>           <C>
Nine months ended September 30, 1999:
Sales of Used Cars...................    $  307,633   $       --   $       --    $     --     $       --   $       --    $  307,633
Less:  Cost of Used Cars Sold........       173,429           --           --          --             --           --       173,429
    Provision for Credit Losses......        63,551       17,562           --       3,397             --           --        84,510
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
                                             70,653      (17,562)          --      (3,397)            --           --        49,694

Interest Income......................            --       45,556          348      11,432          1,971            4        59,311
Servicing and Other Income...........            84        6,972          234          --         16,969           --        24,259
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
Income before Operating Expenses.....        70,737       34,966          582       8,035         18,940            4       133,264
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------

Operating Expenses:
    Selling and Marketing............        18,577           --           --          75              3           --        18,655
    General and Administrative.......        33,120       13,944       14,348       3,024         14,872        2,216        81,524
    Depreciation and Amortization....         2,572          842        1,623         297          1,064          519         6,917
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
                                             54,269       14,786       15,971       3,396         15,939        2,735       107,096
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
Operating Income (Loss)..............    $   16,468   $   20,180   $  (15,389)   $  4,639     $    3,001   $   (2,731)   $   26,168
                                        ============ ============ ============  ============ ============ ============  ============

Nine months ended September 30, 1998:
Sales of Used Cars...................    $  216,075   $       --   $       --    $     --     $       --   $       --    $  216,075
Less:  Cost of Used Cars Sold........       125,085           --           --          --             --           --       125,085
    Provision for Credit Losses......        45,006           47           --       1,595             --           --        46,648
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
                                             45,984          (47)          --      (1,595)            --           --        44,342

Interest Income......................            --       11,860          171       5,909          1,475           --        19,415
Gain on Sale of Loans................            --       12,093           --          --             --           --        12,093
Servicing and Other Income...........           270       11,825          143           1         13,487           --        25,726
                                        ------------ ------------ ------------- ------------ ------------ ------------  ------------
Income before Operating Expenses.....        46,254       35,731          314       4,315         14,962           --       101,576
                                        ------------ ------------ ------------  ------------ ------------  -----------  ------------

Operating Expenses:
    Selling and Marketing............        15,545           --           --         178             20           11        15,754
    General and Administrative.......        23,559       13,215       10,412       1,651         10,785        4,068        63,690
    Depreciation and Amortization....         1,856          972          706          69            336           31         3,970
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
                                             40,960       14,187       11,118       1,898         11,141        4,110        83,414
                                        ------------ ------------ ------------  ------------ ------------ ------------  ------------
Operating Income (Loss)..............    $    5,294   $   21,544   $  (10,804)   $  2,417     $    3,821   $   (4,110)   $   18,162
                                        ============ ============ ============  ============ ============ ============  ============
</TABLE>

Note 7.  Discontinued Operations

    In February  1998,  we announced  our  intention to close our branch  office
network,  through which we purchased  retail  installment  contracts  from third
party  dealers,  and exit this line of business.  We completed the branch office
closure as of March 31, 1998. As a result of the branch office network  closure,
we  reclassified  the results of operations of the branch office  network in the
accompanying  condensed  consolidated balance sheets and condensed  consolidated
statements of operations to discontinued operations.

<PAGE>
                                     Page 9

    The components of Net Assets of Discontinued  Operations as of September 30,
1999 and December 31, 1998 follow (in thousands):

<TABLE>
<CAPTION>
                                                    September 30,     December 31,
                                                         1999             1998
                                                   ----------------  ---------------
<S>                                                <C>               <C>
Finance Receivables, Net...........................   $    17,042     $      30,649
Residuals in Finance Receivables Sold..............         2,956             7,875
Investments Held in Trust..........................         2,135             3,665
Other Assets, Net of Accounts Payable and
    Accrued Liabilities............................           331             2,351
Disposal Liability.................................        (1,525)           (6,024)
                                                   ================  ===============
Net Assets of Discontinued Operations..............   $    20,939     $      38,516
                                                   ================  ===============
</TABLE>

Note 8.  Use of Estimates

    The preparation of our 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 9.  Certain Bankruptcy Remote Entities

    Ugly Duckling  Receivables  Corporation (UDRC) and Ugly Duckling Receivables
Corporation   II  (UDRC  II)   (collectively   referred  to  as   Securitization
Subsidiaries),   are  our  wholly-owned   special  purpose   "bankruptcy  remote
entities." Their assets, including assets classified as Discontinued Operations,
include  Residuals in Finance  Receivables  Sold and Investments  Held In Trust.
Total  assets for UDRC and UDRC II are  approximately  $2.6  million  and $258.6
million,  respectively,  at  September  30,  1999.  These  amounts  would not be
available to satisfy claims of our creditors on a consolidated basis.

Note 10.  Reclassifications

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



<PAGE>
                                    Page 10


                                                      ITEM 2.

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

    Our Quarterly  Report on Form 10-Q contains forward looking  statements.  We
may make additional written or oral forward looking statements from time to time
in filings  with the  Securities  and Exchange  Commission  or  otherwise.  Such
forward looking statements are within the meaning of that term in Section 27A of
the  Securities  Act of 1933,  as amended,  and  Section  21E of the  Securities
Exchange Act of 1934,  as amended.  Such  statements  may  include,  but are not
limited to,  projections of revenues,  income,  or loss,  capital  expenditures,
plans for future operations,  financing needs or plans, Year 2000 readiness, and
plans relating to our products or services,  as well as assumptions  relating to
the  foregoing.   The  words  "believe,"   "expect,"   "intend,"   "anticipate,"
"estimate,"   "project,"  and  similar  expressions   identify  forward  looking
statements,  which  speak only as of the date the  statement  was made.  Forward
looking statements are inherently  subject to risks and  uncertainties,  some of
which cannot be predicted or quantified.  Future events and actual results could
differ  materially from those set forth in,  contemplated  by, or underlying the
forward  looking  statements.  We undertake no obligation to publicly  update or
revise any forward looking  statements,  whether as a result of new information,
future events, or otherwise.  Statements in this Quarterly Report, including the
Notes to the  Condensed  Consolidated  Financial  Statements  and  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations,"
describe  factors,  among  others,  that  could  contribute  to  or  cause  such
differences.  Additional  risk factors that could cause actual results to differ
materially from those expressed in such forward looking statements are set forth
in Exhibit 99 which is attached  hereto and  incorporated by reference into this
Quarterly Report on Form 10-Q.

Introduction

    Dealership  Operations.  We operate the largest  chain of buy here-pay  here
used car dealerships in the United States. We sell and finance our used vehicles
to customers within the sub-prime segment of the used car market.  Our customers
typically have limited credit histories, low incomes or past credit problems. At
September 30, 1999, we operated 67 dealerships located in Los Angeles,  Atlanta,
Tampa,  Orlando,  San Antonio,  Phoenix,  Las Vegas,  Albuquerque,  Tucson,  and
Dallas.  In the third  quarter of 1999,  we  acquired  four  dealerships  in the
Orlando market and a loan portfolio of  approximately  $15.0 million from DCT of
Ocala  Corporation.  We also opened one  dealership  in Las Vegas,  and three in
California.  In the  fourth  quarter of 1999,  we  completed  negotiations  with
Virginia  Auto  Mart  to  acquire  five  dealerships  and a  loan  portfolio  of
approximately $8.0 million.

    Non-Dealership  Operations.  In addition  to our  dealership  and  financing
operations,  we also o provide  financing to other  independent used car dealers
through our Cygnet dealer  program,  o service and collect  large  portfolios of
finance receivables owned by others, and o manage selected financial assets that
we acquire from financially distressed third parties.

    We  have  entered  into  several  large  servicing  and/or  bulk  purchasing
transactions  involving  third party  dealer  contract  portfolios.  Under these
transactions,  we have acquired loan  portfolios or  participation  interests in
loan  portfolios  that we also  service.  During the second  quarter of 1999, we
closed our loan servicing facility in Nashville, Tennessee, and consolidated our
non-dealership  loan  servicing  operations  into our two remaining  facilities,
which are located in Aurora, Colorado and Plano, Texas.

    We have reduced our bulk purchase and third party loan servicing operations.
We have recently  transferred  our rights to service the loan portfolios of Auto
Marketing  Network (AMN) to Loan Servicing  Enterprise in exchange for $140,000.
The AMN portfolio totaled $85.5 million as of September 30, 1999. We also intend
to close our Aurora,  Colorado  collection  facility in the near future and move
remaining portfolios to our Plano, Texas collection facility.

    In 1998, we classified the Cygnet dealer program and bulk purchase and third
party loan  servicing  operations as  discontinued  operations  and attempted to
split off these operations through a rights offering to our stockholders. Due to
a lack of stockholder  interest,  however, we cancelled the rights offering.  We
recorded a charge of $2.0 million ($1.2 million, net of income taxes) during the
third quarter of 1998 to write off costs  associated  with the cancelled  rights
offering.  In the first  quarter of 1999,  we  reclassified  the  Cygnet  dealer
program  and  bulk  purchase  and  loan  servicing  operations  into  continuing
operations for all periods presented in this quarterly report.

    Discontinued  Operations.  From 1994 through the first  quarter of 1998, we
maintained a national  branch office  network that acquired and serviced  retail
installment   contracts  from  numerous  independent  third  party  dealers.  We

<PAGE>
                                    Page 11


discontinued  these  operations in 1998.

    Below is a summary of our businesses by division and their related segments:

    [Organizational Chart of Business Segments]

    The chart above shows Ugly Duckling with two operating divisions. Dealership
operations  is the first  division.  Dealership  operations  has three  distinct
segments.  Retail sales is its first segment.  This is the segment that operates
our chain of Ugly Duckling Car Sales  dealerships.  Portfolio and loan servicing
is the second segment of dealership operations.  This segment holds and services
the  loan  portfolios  originated  or  acquired  by our  dealership  operations.
Finally,  dealership  operations  has an  administration  segment that  provides
corporate administration to the division. Our non-dealership operations division
also contains three segments. The first non-dealership operations segment is the
bulk  purchasing/loan  servicing  segment.  In this  segment,  we  acquire  loan
portfolios  in bulk from third  parties and  provide  loan  servicing  for third
parties.  The second segment of  non-dealership  operations is the Cygnet dealer
program under which we provide various credit facilities to independent used car
dealers.  Finally,  the  non-dealership  operations also have an  administration
segment that provides corporate administration to the non-dealership operations.
Last,  the chart shows our  discontinued  operations,  which contains our branch
office network that we closed in February 1998 and the loans we acquired through
that network.

    In the following  discussion and analysis,  we explain the general financial
condition and the results of  operations of Ugly Duckling and its  subsidiaries.
In  particular,  we analyze and explain the changes in the results of operations
of our various  business  segments for the quarter and nine month  periods ended
September  30,  1999  compared  to the  quarter  and nine  month  periods  ended
September 30, 1998.

Results of Operations for the Three Months Ended September 30, 1999 and 1998

    Income items in our Statement of Operations consist of:
    o  Sales of  Used Cars, less  Cost of  Used  Cars  Sold, less  Provision for
         Credit Losses
    o  Interest Income
    o  Gain on Sale of Loans
    o  Servicing and Other Income

Sales of Used Cars and Cost of Used Cars Sold

      Three Months Ended:                            September 30,
                                                 (Dollars in Thousands)
                                               ---------------------------
                                                  1999            1998
                                               ------------    -----------
      Used Cars Sold (Units)..................      12,219          9,128
                                               ============    ===========

      Sales of Used Cars......................   $ 103,315      $  73,580
      Cost of Used Cars Sold..................      57,773         42,763
                                               ------------    -----------
      Gross Margin............................   $  45,542      $  30,817
                                               ============    ===========

      Gross Margin %..........................       44.1%          41.9%
                                               ============    ===========

      Per Unit Sold:
      Sales of Used Cars......................   $   8,455      $   8,061
      Cost of Used Cars Sold..................       4,728          4,685
                                               ------------    -----------
      Gross Margin............................   $   3,727      $   3,376
                                               ============    ===========


<PAGE>

                                    Page 12

    The number of cars we sold  (units)  increased by 33.9% for the three months
ended  September  30, 1999 over the same period in 1998.  The  increase in units
sold is  primarily  the result of an  increase in the number of  dealerships  in
operation  and an  increase in same store  sales.  Same store unit sales for the
three months ended  September  30, 1999  increased  11.0%  compared to the three
month period ended September 30, 1998. The increase in our same store unit sales
was primarily a result of the  maturation of stores  purchased or opened in late
1997,  changes  in  marketing  and  promotions,  and more  efficient  management
resulting from separating our  non-dealership  operations.  We anticipate future
revenue growth will come from  increasing the number of our  dealerships and not
from higher sales volumes at existing dealerships.

    Our Used Car Sales  revenues  increased  by 40.4% for the three months ended
September 30, 1999 over the same period ended September 30, 1998. The growth for
this period reflects  increases in the number of dealerships,  increases in same
store sales,  and an increase in the average unit sales price.  The Cost of Used
Cars Sold increased by 35.1% for the three months ended  September 30, 1999 over
the same period ended  September 30, 1998. The increase in The Cost of Used Cars
Sold is attributed to the increase in the number of dealerships in operation and
an increase in same store  sales.  The gross  margin on used car sales (Sales of
Used Cars less Cost of Used Cars Sold  excluding  Provision  for Credit  Losses)
increased by 47.8% for the three months ended  September  30, 1999 over the same
period ended  September  30,  1998.  The gross margin per car sold for the three
months  ended  September  30, 1999  increased  10.4% over the three months ended
September  30, 1998  primarily as a result of a management  decision to increase
the gross margin on each unit sold.

    Our average sales price per car increased by 4.9% for the three months ended
September 30, 1999 over the three months ended  September 30, 1998. The increase
in the average sales price per car is a result of a small increase in the direct
cost of the cars we sell and a management  decision to increase the gross margin
on each unit sold.

Provision for Credit Losses

    We record provisions for credit losses in our dealership  operations and our
non-dealership operations.

    Dealership  Operations.  Following is a summary of the  Provision for Credit
Losses from our dealership operations:

  Three Months Ended:                                       September 30,
                                                      --------------------------
                                                         1999          1998
                                                      ------------  ------------
  Provision for Credit Losses (in thousands)........   $   27,560    $   15,746
                                                      ============  ============
  Provision per contract originated.................   $    2,271    $    1,738
                                                      ============  ============
  Provision as % of Principal balances originated...        26.9%         22.2%
                                                      ============  ============

    The Provision for Credit Losses in our  dealership  operations  increased by
75.0% in the three months ended  September  30, 1999 over the three months ended
September 30, 1998.  The Provision for Credit Losses per unit  originated at our
dealerships  increased by $533 or 30.7% in the three months ended  September 30,
1999 over the three months  ended  September  30,  1998.  When we changed how we
structure securitizations for accounting purposes in the fourth quarter of 1998,
we also changed the timing of providing for credit losses.  For periods prior to
the fourth quarter of 1998, we generally  provided a Provision for Credit Losses
of approximately 21% of the loan principal balance at the time of origination to
record the loan at the lower of cost or market. However, as a consequence of our
revised securitization  structure, we will now be retaining securitized loans on
our balance sheet for accounting  purposes and recognizing  income over the life
of the contracts.  We record a provision for credit losses of approximately  27%
of the principal balance at the time of origination.

    Non-Dealership   Operations.   The   provision  for  credit  losses  in  our
non-dealership  operations  increased  by  226.1% to $1.8  million  in the three
months  ended  September  30,  1999  from  $552,000  in the three  months  ended
September 30, 1998. The increase was primarily due to the  significant  increase
in loans under the Cygnet dealer program.

    See also "Allowance for Credit Losses" below.

Interest Income

    We generate  Interest  Income from both our  dealership  operations  and our
non-dealership operations.

<PAGE>

                                    Page 13


    Dealership  Operations.  Interest Income  consists  primarily of interest on
finance  receivables  from our  dealership  sales and income from  Residuals  in
Finance  Receivables  Sold  from  our  securitization   transactions  that  were
structured as sale transactions for accounting  purposes  (Securitized  Contract
Sales).  Interest  Income  increased  by 330.4% to $19.8  million  for the three
months  ended  September  30, 1999 from $4.6  million for the three months ended
September  30,  1998.  The  increase  was  primarily  due to the increase in the
average finance receivables retained on our balance sheet. Because prior to 1999
we  structured  most of our  securitizations  to  recognize  income as sales for
accounting purposes,  there were fewer receivables retained on our balance sheet
and Interest Income was lower in these periods. See  "Securitizations-Dealership
Operations" below for additional  discussion of our securitization  transactions
and our on balance sheet portfolio.

    A primary  element  of our sales  strategy  is to provide  financing  to our
customers,  almost all of whom are  sub-prime  borrowers.  As  summarized in the
following  table,  we continue  to  increase  the  percentage  of sales  revenue
financed, and the number of units sold and financed.

   Three Months ended:                                     September 30,
                                                        ---------------------
                                                          1999        1998
                                                        ---------   ---------
    Percentage of sales revenue financed..............     99.3%       96.5%
                                                        =========   =========
    Percentage of sales units financed................     99.3%       99.2%
                                                        =========   =========

    The average effective yield on finance  receivables from our dealerships was
approximately  25.9% for the three months ended September 30, 1999 and 25.8% for
the three months  ended  September  30, 1998.  Our policy is to charge 29.9% per
year on our dealership contracts.  However, in those states that impose interest
rate limits,  such as Texas and  Florida,  we charge the maximum  interest  rate
permitted.

    Non-Dealership  Operations.  In our non-dealership  operations,  we generate
interest income primarily from our Cygnet dealer program and from a loan we made
to First Merchants as part of its bankruptcy  proceedings.  Interest Income from
the First  Merchants  transaction  increased  by 25.4% to $370,000 for the three
months  ended  September  30,  1999 from  $295,000  for the three  months  ended
September  30, 1998.  The increase in interest  income from the First  Merchants
transaction  is primarily  the result of a higher  average  balance on the First
Merchants debtor in possession loan (DIP loan) for the three months period ended
September 30, 1999 compared to the three months period ended September 30, 1998.
We expect interest income from the DIP loan to decline as permanent payments are
made on the principal of the loan. We anticipate receiving a permanent principal
paydown of approximately  $3.5 million on November 15, 1999, and expect that all
but the most  recent $2 million  increase in the DIP loan may be paid in full by
the end of the first quarter 2000.

    Interest from the Cygnet dealer  program  increased by 69.6% to $3.9 million
for the three  months ended  September  30, 1999 from $2.3 million for the three
months ended  September 30, 1998. The increase in interest  income in the Cygnet
dealer  program  reflects  a  significant   increase  in  the  amount  of  loans
outstanding  during the three months ended  September  30, 1999  compared to the
three months ended September 30, 1998.

    Arbitrage  Income.  During  September of 1999, we  recognized  approximately
$974,000 of arbitrage  interest  income from our investment in First  Merchants.
The arbitrage  interest  represents our retained  portion of interest  income on
contracts that we purchased from First  Merchants and sold to a third party.  We
retained a residual interest in these contracts.  We had deferred  recording our
share of this  interest  income  until  the third  quarter  of this year when we
resolved certain contingencies surrounding our investment in First Merchants. We
expect that, going forward,  we will record interest income on a quarterly basis
for the life of the residual  interest,  currently  expected to be approximately
six months. Due to the rapid run-off of this residual  interest,  the amounts we
record  will be  substantially  lower in future  periods  with  interest  income
estimated  to be  approximately  $200,000  for the  fourth  quarter  of 1999 and
$100,000 in the first quarter of 2000.  Actual amounts realized will depend on a
variety of factors,  including the balance of the outstanding  portfolio and the
collections thereon.

Gain on Sale of Loans

    Dealership  Operations.  The  gain on sale of  finance  receivables  we have
recorded prior to the fourth quarter of 1998 was generated from  securitizations
that were structured as sale transactions. During the fourth quarter of 1998, we
began structuring our  securitization  transactions as financings for accounting
purposes (securitized  borrowings) instead of sales transactions and, therefore,
we  have  not  recognized  gains  on  the  sale  of  loans  from  securitization
transactions  subsequent  to the  change.  We  recorded  Gains  on Sale of Loans
related  to  Securitized  Contract  Sales of zero  for the  three  months  ended
September 30, 1999 and $3.8 million during the three months ended  September 30,
<PAGE>
                                    Page 14


1998.  See  "Securitizations-Dealership  Operations"  below for a summary of the
structure of our securitizations.

Servicing and Other Income

    We generate  Servicing and Other Income from both our dealership  operations
and our  non-dealership  operations.  A summary of  Servicing  and Other  Income
follows for the three months ended September 30, 1999 and 1998 (in thousands):

                               Dealership      Non-Dealership
                               Operations       Operations         Total
                              --------------   --------------  --------------
   September 30, 1999........  $      1,921      $     5,042    $      6,963
                              ==============   ==============  ==============
   September 30, 1998........  $      4,086      $     8,041    $     12,127
                              ==============   ==============  ==============

    Dealership Operations. Servicing and Other Income decreased by 53.0% to $1.9
million in the three  months  ended  September  30,  1999  compared  to the $4.1
million  recognized in the three months ended September 30, 1998. We service the
securitized  contracts  that were  included in the  Securitized  Contract  Sales
transactions  for monthly  fees  ranging  from .25% to .33% of the  beginning of
month principal balances (3.0% to 4.0% per year). We do not, however,  recognize
service fee income on the contracts included in our Securitized Borrowings.  The
significant  decrease in  Servicing  and Other  Income is  primarily  due to the
decrease in the principal  balance of (1)  contracts  being  serviced  under the
previous securitization  structure and (2) a portfolio we service on behalf of a
third  party.  We  anticipate  that our future  Servicing  and Other Income will
continue to decline as the principal balance of the contracts serviced under the
Securitized Contract Sales agreements and the third party portfolio continues to
decrease.

    Non-Dealership Operations. Our Servicing and Other Income decreased 37.3% to
$5.0 million in the three months ended  September  30, 1999 compared to the $8.0
million  recognized in the three months ended  September 30, 1998. Our servicing
fee is  generally a  percentage  of the  serviced  portfolio  principal  balance
(generally  3.25%  to 4.0%  per  year)  with a  minimum  fee per  loan  serviced
(generally $14 to $17 per month). The decrease in our Servicing and Other income
is due to a continued  decrease in both the  average  principal  balance and the
number of loans under service by our bulk purchasing/loan-servicing  segment. We
have not entered into any loan  servicing  agreements  thus far in 1999 and have
reduced our bulk purchase and loan servicing operations, including the scheduled
closure of our Aurora,  Colorado  servicing facility in December 1999. We do not
have a current estimate for the cost of closing our  Aurora, Colorado  servicing
facility.  As our  operations  in this area wind  down,  we expect  the  average
principal  balance and number of loans under  service in our bulk  purchase  and
third party loan servicing operations, and consequently our servicing fee income
from  this  segment,   to  continue  to  decrease,   subject  to  the  incentive
compensation  discussed  below.  However,  we do not expect our costs associated
with  the  servicing  of  these  portfolios  to  decrease  as  quickly  as these
portfolios are declining.

    Under our  agreements  with  First  Merchants,  we are  entitled  to certain
incentive  compensations  in excess of our normal  servicing  fees once  certain
creditors of First  Merchants  have been paid in full. As of September 30, 1999,
we had not recorded any fee income from these incentive  provisions.  We believe
that the underlying portfolios expected to produce the excess servicing fees now
have a performance history from which reasonable estimates of future performance
can be made.  Based on this,  beginning in the fourth quarter of 1999, we expect
to begin recording  excess  servicing fees and estimate that the total incentive
compensation from this servicing  agreement will range from $6.0 million to $8.0
million. Additionally, these estimated excess servicing fees are projected to be
approximately  $1.6 million in the fourth quarter of 1999.  With the portfolio's
expected decline in size, we expect these  excess-servicing fees to decline on a
pro-rata basis.  Under current  estimates,  we believe that approximately 50% of
these excess-servicing fees will be realized by December 31,2000.

    We also anticipate that we will receive a distribution of approximately $4.0
million in the near future from  collections on charged of  receivables  held by
First Merchants.

    In addition,  our  non-dealership  operations  have entered into a servicing
agreement  with  another  company  that  filed  and  subsequently  emerged  from
bankruptcy.  Under this servicing  agreement,  we are also entitled to incentive
compensation in excess of our normal  servicing fee after certain  creditors are
paid in full. However,  based on this portfolio's  historic  performance,  as of
September  30, 1999, we do not expect to  receive any excess  servicing  fees on
this portfolio.

<PAGE>
                                    Page 15


Income before Operating Expenses

    As a result of our continued  expansion,  Income before  Operating  Expenses
grew by 27.9% to $48.2  million for the three  months ended  September  30, 1999
from $37.7  million for the three months  ended  September  30, 1998.  Growth of
Sales of Used Cars and  Interest  Income  were the primary  contributors  to the
increase.

Operating Expenses

    Operating Expenses consist of:
    o  Selling and Marketing Expenses,
    o  General and Administrative Expenses, and
    o  Depreciation and Amortization.

    A summary of  operating  expenses  for our  business  segments for the three
months ended September 30, 1999 and 1998 follows (in thousands):

<TABLE>
<CAPTION>
                                            Dealership Operations                  Non-Dealership Operations
                                   ---------------------------------------   ---------------------------------------
                                                  Company                                   Cygnet
                                     Company     Dealership    Corporate       Cygnet        Loan        Corporate
                                   Dealerships  Receivables    and Other       Dealer      Servicing     and Other        Total
                                   -----------  ------------- ------------   ------------ ------------- ------------   ------------
<S>                                 <C>           <C>          <C>            <C>           <C>          <C>             <C>
1999:
Selling and Marketing.............  $    6,144    $     --     $       --     $       16    $     --     $       --      $   6,160
General and Administrative........      11,111       4,794          4,390          1,055       4,063            699         26,112
Depreciation and Amortization.....         919         279            565            112         373            210          2,458
                                   -----------  ------------- ------------   ------------ ------------- ------------   ------------
                                    $   18,174    $  5,073     $    4,955     $    1,183    $  4,436     $      909      $  34,730
                                   ===========  ============= ============   ============ ============= ============   ============
1998:
Selling and Marketing.............  $    5,242    $     --     $       --     $       59    $      8     $        7      $   5,316
General and Administrative........       8,133       4,380          4,334            575       6,585          2,774         26,781
Depreciation and Amortization.....         628         323            256             24         183             31          1,445
                                   -----------  ------------- ------------   ------------ ------------- ------------   ------------
                                    $   14,003    $  4,703     $    4,590     $      658    $  6,776     $    2,812      $  33,542
                                   ===========  ============= ============   ============ ============= ============   ============
</TABLE>


    A  summary  of  Selling  and  Marketing,   General  and  Administrative  and
Depreciation and Amortization  Expenses for the three months ended September 30,
1999 and 1998 as a percentage of Sales of Used Cars and Selling and Per Car Sold
from our company dealership segment follows:

Three Months Ended:                                         September 30,
                                                        ----------------------
                                                          1999        1998
                                                        ----------  ----------
As Percent of Sales:
Selling and Marketing Expense ..........................    6.0%        7.1%
General and Administrative Expense......................   10.8%       11.1%
Depreciation and Amortization...........................    1.0%        1.0%

Per Car Sold:
Selling and Marketing Expense...........................  $  503      $ 574
General and Administrative Expense......................  $  909      $ 891
Depreciation and Amortization...........................  $   75      $  69

    Selling and  Marketing  Expenses.  For the three months ended  September 30,
1999 and 1998,  Selling and  Marketing  Expenses  consisted  almost  entirely of
advertising costs and commissions relating to our dealership  operations.  Total
Selling and Marketing  Expenses increased by 15.9% to $6.2 million for the three
months  ended  September  30, 1999 from $5.3  million for the three months ended
September  30,  1998.  The  decrease  in Selling  and  Marketing  Expenses  as a
percentage  of Sales of Used Cars and on a per unit basis is primarily due to an
increase in the number of cars sold and an increase in the number of dealerships
in operation for the three months ended September 30, 1999 compared to the three
months ended September 30, 1998.

<PAGE>
                                    Page 16


    General and  Administrative  Expenses.  For the three months ended September
30, 1999, total General and Administrative  Expenses  decreased by 2.6% to $26.1
million from $26.8 million for the three months ended  September  30, 1998.  The
decrease  in General  and  Administrative  Expenses  was  primarily  a result of
consolidating our non-dealership operations. General and Administrative Expenses
for  our  Dealership  Operations  increased  20.5%  due to the  addition  of new
dealerships  and the expansion of  infrastructure  to  administer  the increased
number of used car dealerships in operation.

     Depreciation and  Amortization.  Depreciation and Amortization  consists of
depreciation  and amortization on our property and equipment and amortization of
goodwill and trademarks.  Depreciation  and  amortization  increased by 70.1% to
$2.5 million for the three months ended September 30, 1999 from $1.4 million for
the three months ended  September  30, 1998.  The increase in 1999 was primarily
due to  depreciation  on an increased  dealership  base,  depreciation  from our
non-dealership  operations,  and an  increase in  software  amortization  of our
investment in our integrated car sales and loan servicing system.

Interest Expense

    Interest  expense  increased  by 326.7% to $6.4 million for the three months
ended  September 30, 1999 from $1.5 million for the three months ended September
30,  1998.  The  increase  in the third  quarter  of 1999 was  primarily  due to
increased borrowings under our Securitization  Notes Payable,  Notes Payable and
Subordinated Notes Payable. The increased borrowings were used primarily to fund
the increases in Finance Receivables.

Income Taxes

    Income taxes  totaled $2.9 million for the three months ended  September 30,
1999,  and $1.1  million for the three  months ended  September  30,  1998.  Our
effective  tax rate was 41.0% for the three months ended  September 30, 1999 and
41.9% for the three months ended September 30, 1998.

Results of Operations for the Nine Months Ended September 30, 1999 and 1998

Sales of Used Cars and Cost of Used Cars Sold

Nine Months Ended:                                     September 30,
                                                   (Dollars in Thousands)
                                               -------------------------------
                                                   1999             1998
                                               -------------    --------------

Used Cars Sold (Units)........................       36,389            27,198
                                               =============    ==============

Sales of Used Cars............................   $  307,633       $   216,075
Cost of Used Cars Sold........................      173,429           125,085
                                               -------------    --------------
Gross Margin..................................   $  134,204       $    90,990
                                               =============    ==============

Gross Margin %................................        43.6%             42.1%
                                               =============    ==============

Per Unit Sold:
Sales of Used Cars............................   $    8,454       $     7,945
Cost of Used Cars Sold........................        4,766             4,599
                                               -------------    --------------
Gross Margin..................................   $    3,688       $     3,346
                                               =============    ==============

    The number of cars we sold  (units)  increased  by 33.8% for the nine months
ended September 30, 1999 over the same period in 1998. As previously  mentioned,
the  increase in the number of cars sold is primarily a result of an increase in
the number of dealerships in operation and an increase in same store sales. Same
store unit sales for the nine months ended  September  30, 1999  increased  6.8%
compared to the nine month period ended  September 30, 1998. The increase in our
same  store  unit  sales  was  primarily  a result of the  maturation  of stores
purchased or opened in late 1997, changes in marketing and promotions,  and more
efficient management resulting from separating our non-dealership operations. We
anticipate  future  revenue  growth will come from  increasing the number of our
dealerships and not from higher sales volumes at existing dealerships.


<PAGE>
                                    Page 17


    Our Used Car Sales  revenues  increased  by 42.4% for the nine months  ended
September 30, 1999 over the same period ended September 30, 1998. The growth for
this period reflects increases in the number of dealerships in operation and the
average unit sales price.  The Cost of Used Cars Sold increased by 38.6% for the
nine months ended  September  30, 1999 over the same period ended  September 30,
1998.  The  increase  in the Cost of Used Cars Sold is  primarily a result of an
increase in the number of dealerships in operation and an increase in same store
sales.  The gross margin on used car sales (Sales of Used Cars less Cost of Used
Cars Sold excluding Provision for Credit Losses) increased by 47.5% for the nine
months ended  September 30, 1999 over the same period ended  September 30, 1998.
The gross  margin per car sold for the nine  months  ended  September  30,  1999
increased  10.2% over the nine months ended  September 30, 1998,  primarily as a
result of a management decision to increase the gross margin on each car sold.

    Our average  sales price per car increased by 6.4% for the nine months ended
September 30, 1999 over the nine months ended  September 30, 1998.  The increase
in the average sales price per car is a result of an increase in the direct cost
of the  cars  we  sell  and an  increase  in the  provision  for  credit  losses
recognized  at the time of  origination.  On a per unit basis,  the Cost of Used
Cars Sold  increased by 3.6% for the nine months ended  September  30, 1999 over
the nine months ended  September 30, 1998 due to a small  increase in the direct
cost of the cars we sell.

Provision for Credit Losses

    We record provisions for credit losses in our dealership  operations and our
non-dealership operations.

    Dealership  Operations.  Following is a summary of the  Provision for Credit
Losses from our dealership operations:

<TABLE>
<CAPTION>
Nine Months Ended:                                               September 30,
                                                           ---------------------------
                                                              1999           1998
                                                           ------------   ------------
<S>                                                        <C>            <C>
Provision for Credit Losses (in thousands)...............   $   81,113      $  45,053
                                                           ============   ============
Provision per contract originated........................   $    2,240      $   1,674
                                                           ============   ============
Provision as percent of principal balances originated....        26.9%           21.7%
                                                           ============   ============
</TABLE>

    The Provision for Credit Losses in our  dealership  operations  increased by
80.0% in the nine months  ended  September  30, 1999 over the nine months  ended
September 30, 1998.  The Provision for Credit Losses per unit  originated at our
dealerships  increased by $566 or 33.8% in the nine months ended  September  30,
1999 over the nine months ended  September 30, 1998. The increase is primarily a
result  of the  change  in  how  we  structure  securitizations  for  accounting
purposes.

    Non-Dealership   Operations.   The   provision  for  credit  losses  in  our
non-dealership operations increased by 112.5% to $3.4 million in the nine months
ended  September  30, 1999 from $1.6 million in the nine months ended  September
30, 1998.  The increase was primarily due to the  significant  increase in loans
under the Cygnet dealer program.

    See also "Allowance for Credit Losses" below.

Interest Income

    We generate  Interest  Income from both our  dealership  operations  and our
non-dealership operations.

    Dealership  Operations.  Interest Income  consists  primarily of interest on
finance  receivables  from our  dealership  sales and income from  Residuals  in
Finance  Receivables Sold from our Securitized  Contract Sales.  Interest Income
increased  by 282.5% to $45.9  million for the nine months ended  September  30,
1999 from $12.0  million for the nine  months  ended  September  30,  1998.  The
increase was  primarily due to the increase in the average  finance  receivables
retained on our balance sheet. Because we structured most of our securitizations
to recognize  income as sales for accounting  purposes prior to 1999, there were
fewer receivables retained on our balance sheet and Interest Income was lower in
these periods. See "Securitizations-Dealership  Operations" below for additional
discussion  of  our  securitization   transactions  and  our  on  balance  sheet
portfolio.

    A primary  element  of our sales  strategy  is to provide  financing  to our
customers,  almost all of whom are  sub-prime  borrowers.  As  summarized in the
following  table,  we continue  to  increase  the  percentage  of sales  revenue
financed, and the number of units sold and financed.
<PAGE>
                                    Page 18


Nine Months Ended:                                     September 30,
                                            ------------------------------------
                                                 1999                 1998
                                            ---------------      ---------------
 Percentage of sales revenue financed.....      98.0%                96.1%
                                            ===============      ===============
 Percentage of sales units financed.......      99.5%                99.0%
                                            ===============      ===============

         The average effective yield on finance receivables from our dealerships
was  approximately  26.2% for the nine months ended September 30, 1999 and 25.2%
for the nine months ended September 30, 1998.

    Non-Dealership   Operations.   Interest  Income  from  the  First  Merchants
transaction  decreased  by 33.5% to  approximately  $997,000 for the nine months
ended  September 30, 1999 from $1.5 million for the nine months ended  September
30, 1998.  This decrease is primarily the result of a lower average loan balance
on our Note  Receivable from First Merchants for the nine months ended September
30,1999  compared to the nine months ended September 30, 1998.  During September
of 1999, we also recognized  approximately $974,000 of arbitrage interest income
from our  investment in FMAC.  See "Results of  Operations  for the Three Months
Ended September 30, 1999 and 1998 -- Interest Income" above for a description of
this  arbitrage  interest  income and our  expectations  with  respect to future
interest income from the DIP loan.

    Interest  Income from the Cygnet dealer program  increased by 93.2% to $11.4
million for the nine months ended  September  30, 1999 from $5.9 million for the
nine months ended  September  30, 1998.  The increase in interest  income in the
Cygnet dealer  program  reflects an increase in the amount of loans  outstanding
during the nine months  ended  September  30,  1999  compared to the nine months
ended September 30, 1998.

Gain on Sale of Loans

    Dealership  Operations.  Because of the change in the way we  structure  our
securitization  transactions  for  accounting  purposes in the fourth quarter of
1998,  we no longer  recognize  gains on the sale of loans  from  securitization
transactions. We recorded Gains on Sale of Loans related to Securitized Contract
Sales of zero for the nine months  ended  September  30, 1999 and $12.1  million
during the nine months ended September 30, 1998. See "Securitizations-Dealership
Operations" below for a summary of the structure of our securitizations.

Servicing and Other Income

    We generate  Servicing and Other Income from both our dealership  operations
and our  non-dealership  operations.  A summary of  Servicing  and Other  Income
follows for the nine months ended September 30, 1999 and 1998 (in thousands):

                            Dealership     Non-Dealership
                            Operations       Operations         Total
                           ------------- ------------------ -------------
September 30, 1999........  $     7,290     $     16,969      $  24,259
                           ============= ================== =============
September 30, 1998........  $    12,238     $     13,488      $  25,726
                           ============= ================== =============

    Dealership Operations. Servicing and Other Income decreased by 40.4% to $7.3
million in the nine  months  ended  September  30,  1999  compared  to the $12.2
million  recognized  in the nine months ended  September 30, 1998. As previously
noted, we anticipate that our future  Servicing and Other Income will decline as
the principal balance of the contracts  serviced under the Securitized  Contract
Sales agreements and the third party portfolio will continue to decrease.

    Non-Dealership Operations. Our Servicing and Other Income increased 25.8% to
$17.0 million in the nine months ended  September 30, 1999 compared to the $13.5
million  recognized in the nine months ended  September 30, 1998.  Our Servicing
and Other Income increased because our  non-dealership  operations did not begin
servicing loans until April 1998. As previously  noted, we have not entered into
any loan  servicing  agreements  in 1999 and expect  that,  except  for  certain
incentive  fee income,  our servicing fee income will continue to decline as the
principal balances of the portfolios that we are currently  servicing  decrease.
See "Results of  Operations  for the Three Months Ended  September  30, 1999 and
1998 -- Servicing and Other Income" above for a description of our  expectations
with respect to certain incentive fee income.


<PAGE>
                                    Page 19


Income before Operating Expenses

    As a result of our continued  expansion,  Income before  Operating  Expenses
grew by 31.2% to $133.3  million for the nine months  ended  September  30, 1999
from $101.6  million for the nine months ended  September  30,  1998.  Growth of
Sales of Used Cars,  Interest  Income,  and  Servicing and Other Income were the
primary contributors to the increase.

    A summary of  operating  expenses  for our  business  segments for the  nine
months ended September 30, 1999 and 1998 follows (in thousands):

<TABLE>
<CAPTION>
                                            Dealership Operations                Non-Dealership Operations
                                    -------------------------------------   -------------------------------------
                                                  Company                                 Cygnet
                                      Company    Dealership   Corporate       Cygnet       Loan        Corporate
                                    Dealerships  Receivables  and Other       Dealer     Servicing     And Other       Total
                                    -----------  -----------  -----------   -----------  -----------  -----------  ------------

<S>                                 <C>          <C>          <C>           <C>           <C>          <C>         <C>
1999:
    Selling and Marketing........     $ 18,577    $      --    $      --     $      75     $      3     $    --     $   18,655
    General and Administrative...       33,120       13,944       14,348         3,024       14,872        2,216        81,524
    Depreciation and Amortization        2,572          842        1,623           297        1,064          519         6,917
                                    -----------  -----------  -----------   -----------  -----------  -----------  ------------
                                      $ 54,269    $  14,786    $  15,971     $   3,396     $ 15,939     $  2,735    $  107,096
                                    ===========  ===========  ===========   ===========  ===========  ===========  ============
1998:
    Selling and Marketing........     $ 15,545    $      --    $      --     $     178     $     20     $     11    $   15,754
    General and Administrative...       23,559       13,215       10,412         1,651       10,785        4,068        63,690
    Depreciation and Amortization        1,856          972          706            69          336           31         3,970
                                    -----------  -----------  -----------   -----------  -----------  -----------  ------------
                                      $ 40,960    $  14,187    $  11,118     $   1,898     $ 11,141     $  4,110    $   83,414
                                    ===========  ===========  ===========   ===========  ===========  ===========  ============
</TABLE>

    A  summary  of  Selling  and  Marketing,   General  and  Administrative  and
Depreciation and  Amortization  Expenses for the nine months ended September 30,
1999 and 1998 as a percentage of Sales of Used Cars and Selling and Per Car Sold
from our company dealership segment follows:

Nine Months Ended:                                          September 30,
                                                        ----------------------
                                                          1999        1998
                                                        ----------  ----------
As Percent of Sales:
Selling and Marketing Expense.........................     6.0%        7.2%
General and Administrative Expense....................    10.8%       10.9%
Depreciation and Amortization.........................     1.0%        1.0%

Per Car Sold:
Selling and Marketing Expense.........................    $ 511       $ 572
General and Administrative Expense....................    $ 910       $ 866
Depreciation and Amortization.........................    $  71        $ 68

    Selling and Marketing Expenses. For the nine months ended September 30, 1999
and 1998,  total Selling and Marketing  Expenses  consisted  almost  entirely of
advertising costs and commissions relating to our dealership  operations.  Total
Selling and Marketing  Expenses increased by 18.4% to $18.7 million for the nine
months  ended  September  30, 1999 from $15.8  million for the nine months ended
September  30,  1998.  The  decrease  in  Selling  and  Marketing  Expense  as a
percentage  of Sales of Used Cars and on a per unit basis is primarily due to an
increase in the number of cars sold and an increase in the number of dealerships
in operation  for the nine months ended  September 30, 1999 compared to the nine
months ended September 30, 1998.

    General and Administrative Expenses. For the nine months ended September 30,
1999, total General  and  Administrative  Expenses  increased  by 27.9% to $81.5
million from $63.7  million for the nine months ended  September  30, 1998.  The
increase in General and  Administrative  Expenses  was  primarily a result of an
increase in the number of  dealerships  in  operation,  the addition of our bulk
purchasing  and loan  servicing  operations in the second  quarter of 1998,  the
expansion of  infrastructure  to  administer  the  increased  number of used car
dealerships in operation, and the growth of the Cygnet dealer program.

<PAGE>
                                    Page 20


     Depreciation and  Amortization.  Depreciation and Amortization  consists of
depreciation  and amortization on our property and equipment and amortization of
goodwill and trademarks.  Depreciation  and  amortization  increased by 72.5% to
$6.9 million for the nine months ended  September 30, 1999 from $4.0 million for
the nine months ended September 30, 1998. The increase in 1999 was primarily due
to  depreciation  on  an  increased  dealership  base,   depreciation  from  our
non-dealership  operations,  and an  increase in  software  amortization  of our
investment in our integrated car sales and loan servicing system.

Interest Expense

    Interest  expense  increased by 261.4% to $15.9  million for the nine months
ended  September 30, 1999 from $4.4 million for the nine months ended  September
30,  1998.  The  increase  for the nine  months  ended  September  30,  1999 was
primarily due to increased  borrowings under our  Securitization  Notes Payable,
Notes Payable and Subordinated Notes Payable. The increased borrowings were used
primarily to fund the increases in Finance Receivables. See "Financial Position"
below.

Income Taxes

    Income taxes  totaled $4.2 million for the nine months ended  September  30,
1999,  and $5.6  million for the nine  months  ended  September  30,  1998.  Our
effective  tax rate was 40.9% for the nine months ended  September  30, 1999 and
40.6% for the nine months ended September 30, 1998.

Discontinued Operations

    We  recorded  a  pre-tax   charge  to   discontinued   operations   totaling
approximately  $9.1 million  (approximately  $5.6 million,  net of income taxes)
during the first  quarter of 1998  related to the  closure of our branch  office
network.  In addition,  we recorded a $6.0 million  charge  (approximately  $3.6
million,  net of income taxes) during the third quarter of 1998 due primarily to
higher than  anticipated  loan  losses and  servicing  expenses.  The charges we
recorded to  Discontinued  Operations  represent the total estimated net loss we
expect to realize from the branch office network closure. As a result, there was
no  income  or loss  from  Discontinued  Operations  for the nine  months  ended
September 30, 1999.

Financial Position

     Total  assets  increased by 51.1% to $522.6  million at September  30, 1999
from $346.0  million at December 31, 1998.  The increase was due primarily to an
increase in Finance Receivables of $193.2 million to $356.4 million at September
30, 1999 from $163.2 million at December 31, 1998.  Our  dealership  operations'
Finance Receivables increased  approximately $195.6 million due primarily to the
change  in our  securitization  structure,  and our  non-dealership  operations'
Finance Receivables  decreased  approximately $2.4 million primarily as a result
of the runoff of the bulk purchasing/loan servicing portfolio.

    We financed the increases in assets primarily through additional borrowings,
represented  by increases in Notes  Payable.  Notes Payable  increased by $163.3
million to $280.6  million at September 30, 1999 from $117.3 million at December
31, 1998.  The increase in our Notes Payable is  attributable  to an increase of
$8.3 million in our revolving line of credit, which totaled  approximately $60.0
million at September  30, 1999,  compared to $51.8 million at December 31, 1998.
Our  Securitization  Notes  Payable  increased by $134.3  million as a result of
securitization transactions we closed in April and August 1999. Our Note Payable
Collateralized by the Common Stock of our Securitization  Subsidiaries increased
by $23.8 million as a result of a loan obtained from an unrelated third party in
May 1999.  We also  repaid  $3.4  million in  mortgage  loans from an  unrelated
finance company.

    Growth  in  Finance  Receivables.  As a result of our  continued  expansion,
contract  receivables  managed by our  dealership  operations  have continued to
increase.  The following table reflects the growth in period end balances of our
dealership  operations  measured in terms of the principal amount and the number
of contracts outstanding.


<PAGE>
                                    Page 21


<TABLE>
<CAPTION>
                                                      Total Contracts Outstanding - Dealership Operations
                                                           (In thousands, except number of contracts)
                                                    September 30, 1999                    December 31, 1998
                                             ----------------------------------   ----------------------------------
                                                Principal         Number of          Principal        Number of
                                                  Amount          Contracts           Amount          Contracts
                                             -----------------  ---------------   ----------------  ----------------
<S>                                          <C>                 <C>              <C>                <C>
Managed Portfolio...........................   $    427,439          68,420        $     292,683         49,601
Less:  Portfolios Securitized and Sold......         95,457          22,546              198,747         37,186
                                             ----------------   ---------------   ----------------  ----------------
Total Retained Principal....................   $    331,982          45,874        $      93,936         12,415
                                             =================  ===============   ================  ================
</TABLE>

    In addition to the loan  portfolio  summarized  above,  we also service loan
portfolios  totaling  approximately  $56.6 million  ($19.3  million for Kars and
$37.3  million from branch  office  originations)  as of September  30, 1999 and
$121.2  million  ($47.9  million for Kars and $73.3  million from branch  office
originations) as of December 31, 1998.

                Total Contracts Originated/Purchased - Dealership
              Operations (In thousands, except number of contracts
                             and average principal)
<TABLE>
<CAPTION>
                                                         Three Months Ended         Nine Months Ended
                                                            September 30,             September 30,
                                                       ------------------------  --------------------------
                                                          1999          1998         1999          1998
                                                       ------------  ----------  ------------ -------------
<S>                                                     <C>          <C>         <C>           <C>
Principal Amount....................................... $ 102,599    $  71,027   $   301,430   $   207,643
Number of Contracts....................................    12,137        9,058        36,211        26,915
Average Principal...................................... $   8,453    $   7,841   $     8,324   $     7,715
</TABLE>

    Finance   Receivable   principal  balances  generated  or  acquired  by  our
dealership  operations  during the three months period ended  September 30, 1999
increased  by 44.5% to $102.6  million  from $71.0  million for the three months
ended September 30, 1998. For the nine months ended September 30, 1999,  Finance
Receivables  increased by 45.2% to $301.4  million  from $207.6  million for the
nine months ended September 30, 1998. The increase in average principal financed
is due to the increase in our average sales price per car sold.

     Our  non-dealership  operations  began  servicing  loans on behalf of First
Merchants in April 1998,  and began  servicing  additional  loan  portfolios  on
behalf of other third  parties  throughout  1998.  At September  30,  1999,  our
non-dealership bulk purchasing/loan  servicing operations were servicing a total
of approximately  $273.9 million in finance  receivables  (approximately  47,000
contracts)  compared  to $587.3  million in finance  receivables  (approximately
80,000 contracts) at December 31, 1998.

    Cygnet  dealer's net  investment in finance  receivables  purchased from two
third  party   dealers   totaled   approximately   $9.0   million   representing
approximately 21.2% of Cygnet dealer's net finance  receivables  portfolio as of
September  30,  1999.  We did not have any other third party  dealer  loans that
exceeded 10% of our Cygnet dealer finance  receivable  portfolio as of September
30, 1999.

Allowance for Credit Losses

    We have  established  an Allowance  for Credit Losses  (Allowance)  to cover
anticipated  credit  losses on the  contracts  currently  in our  portfolio.  We
established  the  Allowance by recording an expense  through the  Provision  for
Credit Losses.

    For  Finance  Receivables  generated  at our  dealerships,  our policy is to
charge off a contract the earlier of:

    o when we believe it is  uncollectible,  or o when it is delinquent for more
    than 90 days.

    The following  table  reflects  activity in the Allowance for our dealership
operations,  as well as information  regarding charge off activity for the three
and nine months ended September 30, 1999 and 1998, in thousands.


<PAGE>
                                    Page 22

<TABLE>
<CAPTION>
                                                             Three Months Ended               Nine Months Ended
                                                               September 30,                    September 30,
                                                       -------------------------------  -------------------------------
                                                            1999            1998            1999             1998
                                                       ---------------  --------------  --------------  ---------------
<S>                                                      <C>             <C>              <C>            <C>
Allowance Activity:
Balance, Beginning of Period.........................    $    66,905     $      5,950     $    24,777    $     10,356
Provision for Credit Losses..........................         27,560           15,746          81,113          45,053
Allowance on Acquired Loans..........................          3,835               --           3,835              --
Reduction Attributable to Loans Sold.................             --          (14,068)             --         (44,785)
Net Charge Offs......................................        (17,602)          (2,056)        (29,027)         (5,052)
                                                       ---------------  --------------  --------------  ---------------
Balance, End of Period...............................    $    80,698     $      5,572     $    80,698    $      5,572
                                                       ===============  ==============  ==============  ===============
Allowance as a Percent of Period End Balances........           24.3%           18.5%           24.3%            18.5%
                                                       ===============  ==============  ==============  ===============
Charge off Activity:
Principal Balances...................................    $   (22,030)    $     (2,665)    $   (36,610)   $     (7,001)
Recoveries, Net......................................          4,428              609           7,583           1,949
                                                       ---------------  --------------  --------------  ---------------
Net Charge Offs......................................    $   (17,602)    $     (2,056)    $   (29,027)  $      (5,052)
                                                       ===============  ==============  ==============  ===============
Net Charge Offs as a Percent of Average Principal
   Outstanding.......................................            6.0%            4.2%           13.4%             8.6%
                                                       ===============  ==============  ==============  ===============
Average Principal Balance Outstanding................    $   292,452     $     48,872     $   216,447    $     58,503
                                                       ===============  ==============  ==============  ===============
</TABLE>

    The  Allowance  on contracts  from  dealership  operations  was 24.3% of the
outstanding principal balances as of September 30, 1999 and 26.4% of outstanding
principal  balances as of December  31,  1998.  We changed the  structure of our
securitization  transactions  for  accounting  purposes in the fourth quarter of
1998, which resulted in us retaining the securitized  loans from  securitization
transactions  closed  subsequent  to the third quarter of 1998. We increased the
provision for credit losses to  approximately  27% of the principal  balance for
loans  originated  beginning in the fourth  quarter of 1998 as we intend to hold
the balance sheet portfolio for investment and not for sale.

    A Summary of the  Allowance  on  contracts  from  non-dealership  operations
follows:

<TABLE>
<CAPTION>
                                                                           Non-Dealership Operations
                                                        -----------------------------------------------------------------
                                                                 September 30,                    December 31,
                                                        --------------------------------  -------------------------------
                                                             1999            1998             1998             1997
                                                        ---------------  ---------------  ---------------  --------------
As Percent of Period End Balances:
<S>                                                     <C>               <C>             <C>              <C>
     Allowance........................................            7.3%             3.5%             3.9%            3.8%
     Non-refundable discount and security deposits....           33.6%            28.6%            29.9%           26.0%
                                                        ===============  ===============  ===============  ==============
     Total Allowance, discount and security deposits..           40.9%            32.1%            33.8%           29.8%
                                                        ===============  ===============  ===============  ==============
</TABLE>

    Even though a contract is charged off, we continue to attempt to collect the
contract.  Recoveries  as a percentage  of principal  balances  charged off from
dealership  operations  averaged 20.1% for the three months ended  September 30,
1999  compared to 22.9% for the three months  ended  September  30,  1998.  Such
recoveries for the nine month periods ended September 30, 1999 and 1998 averaged
20.7% and 27.8%, respectively.  Recoveries as a percentage of principal balances
charged off from  non-dealership  operations averaged 33.4% for the three months
ended  September 30, 1999 compared to 35.7% for the three months ended September
30, 1998.  Such  recoveries for the nine month periods ended  September 30, 1999
and 1998 averaged 33.0% and 30.7%, respectively.

    For Finance  Receivables  acquired  by our  non-dealership  operations  with
recourse  to  the  seller,  our  general  policy  is to  exercise  the  recourse
provisions in our agreements  under the Cygnet dealer program when a contract is
delinquent for 45 days. For contracts not purchased with recourse, our policy is
similar to that for our dealership operations.

Static Pool Analysis

    We use a "static pool" analysis to monitor performance for contracts 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


<PAGE>
                                    Page 23


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
contract  cumulative  balances,  based on the quarter the loans were originated.
The table is further  stratified by the number of payments made by our customers
prior to charge off.  For periods  denoted by "x",  the pools have not  seasoned
sufficiently to allow us to compute  cumulative  losses.  For periods denoted by
"-",  the pools have not yet  reached the  indicated  cumulative  age.  While we
monitor  static pools on a monthly  basis,  for  presentation  purposes,  we are
presenting the information in the table below on a quarterly basis.

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

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

    The following  table sets forth as of October 31, 1999,  the  cumulative net
charge offs as a percentage of original  contract  cumulative  (pool)  balances,
based on the  quarter  of  origination  and  segmented  by the number of monthly
payments  completed  by  customers  before  charge off. The table also shows the
percent of principal  reduction  for each pool since  inception  and  cumulative
total net losses incurred (TLI).

          POOL'S CUMULATIVE NET LOSSES AS PERCENTAGE OF POOL'S ORIGINAL
                           AGGREGATE PRINCIPAL BALANCE
<TABLE>
<CAPTION>

                             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>
1994:
1st Quarter     $     6,305   3.4%     10.0%    13.4%    17.9%    20.3%    20.9%    21.0%      100.0%
2nd Quarter     $     5,664   2.8%     10.4%    14.1%    19.6%    21.5%    22.0%    22.1%      100.0%
3rd Quarter     $     6,130   2.8%      8.1%    12.0%    16.3%    18.2%    19.1%    19.2%      100.0%
4th Quarter     $     5,490   2.4%      7.6%    11.2%    16.4%    19.3%    20.2%    20.3%      100.0%
1995:
1st Quarter     $     8,191   1.6%      9.1%    14.7%    20.4%    22.7%    23.6%    23.8%      100.0%
2nd Quarter     $     9,846   2.0%      8.5%    13.3%    18.1%    20.7%    22.1%    22.5%      100.0%
3rd Quarter     $    10,106   2.5%      7.9%    12.2%    18.8%    22.1%    23.5%    24.1%       99.9%
4th Quarter     $     8,426   1.5%      6.6%    11.7%    18.1%    22.4%    24.0%    24.5%       99.8%
1996:
1st Quarter     $    13,635   1.6%      8.0%    13.7%    20.6%    24.7%    26.0%    27.0%       99.6%
2nd Quarter     $    13,462   2.2%      9.2%    13.4%    21.9%    25.8%    27.5%    28.8%       98.6%
3rd Quarter     $    11,082   1.6%      6.8%    12.4%    21.2%    25.3%    27.5%    28.5%       97.1%
4th Quarter     $    10,817   0.6%      8.4%    15.8%    24.7%    29.0%    30.8%    31.8%       95.4%
1997:
1st Quarter     $    16,279   2.1%     10.5%    17.7%    24.3%    29.3%    31.6%    32.5%       92.6%
2nd Quarter     $    25,875   1.5%      9.9%    15.8%    22.7%    27.4%    29.6%    29.9%       87.0%
3rd Quarter     $    32,147   1.4%      8.4%    13.2%    22.4%    26.9%        x    28.9%       82.0%
4th Quarter     $    42,529   1.4%      6.8%    12.5%    21.8%    26.2%        x    27.3%       77.2%
1998:
1st Quarter     $    69,708   0.9%      6.9%    13.4%    20.9%        x       --    25.6%       70.9%
2nd Quarter     $    66,908   1.1%      8.0%    14.2%    22.0%        x       --    24.3%       61.4%
3rd Quarter     $    71,027   1.0%      8.0%    13.4%        x       --       --    21.9%       52.7%
4th Quarter     $    69,583   0.9%      6.7%    13.4%        x       --       --    18.4%       40.3%

1999:
1st Quarter     $   102,733   0.8%      7.7%        x       --       --       --    12.6%       27.4%
2nd Quarter     $    96,098   1.2%         x       --       --       --       --     7.0%       12.0%
3rd Quarter     $   102,599      x        --       --       --       --       --     0.6%        1.2%
</TABLE>

<PAGE>
                                    Page 24


    The  following  table  sets  forth  the  principal  balances  31 to 60  days
delinquent,  and 61 to 90 days  delinquent as a percentage of total  outstanding
contract principal balances from dealership operations.

                                     Retained   Securitized    Managed
                                   ----------   -----------  ------------
            September 30, 1999:
            31 to 60 days..........    6.0%         9.4%          6.8%
            61 to 90 days..........    3.1%         4.7%          3.5%
            December 31, 1998:
            31 to 60 days..........    2.3%         5.2%          4.6%
            61 to 90 days..........    0.5%         2.2%          1.9%

    In accordance with our charge off policy, there are no accounts more than 90
days delinquent as of September 30, 1999 and December 31, 1998.

    Delinquencies  increased  primarily  because of  turnover at our  collection
centers and a new  repossession  practice  implemented  in the second quarter of
1999.  Because of our  initiatives  and the return of staffing to prior  levels,
delinquencies  after  September  30,  1999 have been  improved by over 1% and we
expect  that  trend  to  continue.  However,  there  can  be no  assurance  that
delinquencies will continue to decline.

Securitizations--Dealership Operations

    Structure  of  Securitizations.  In the fourth  quarter of 1998 we announced
that we were changing the way we structure  transactions for accounting purposes
under our securitization program.  Through September 30, 1998, we had structured
these  transactions  as sales  for  accounting  purposes  (Securitized  Contract
Sales).  However,  beginning in the fourth quarter of 1998, we began structuring
securitizations for accounting purposes to retain the contract,  and the related
Securitization  Note Payable on our balance  sheet and recognize the income over
the life of the contracts (Securitized  Borrowings).  We continue to service the
securitized contracts.

    Residuals in Finance  Receivables  Sold.  The  residuals  are a component of
Finance   Receivables  and  represent  our  retained  interest  in  the  Finance
Receivables  included in our Securitized  Contract Sales. We utilize a number of
assumptions  to  determine  the  initial  value  of  the  Residuals  in  Finance
Receivables  Sold.  The  Residuals in Finance  Receivables  Sold  represent  the
present  value of the expected  net cash flows of the trusts  formed to hold the
securitized  receivables  using the out of the trust method.  The net cash flows
out of the  trusts are the  collections  on the loans in the trusts in excess of
the principal and interest payments due on the senior certificates issued by the
trusts and certain other trust  expenses.  The  assumptions  used to compute the
Residuals in Finance Receivables Sold include, but are not limited to:

    o  charge off rates,
    o  repossession recovery rates,
    o  portfolio delinquency,
    o  prepayment rates, and
    o  trust expenses.

    The  Residuals  in  Finance   Receivables   Sold  are  adjusted  monthly  to
approximate  the present  value of the expected  remaining net cash flows out of
the trusts.  If actual  cash flows on a  securitization  are below our  original
estimates, and those differences appear to be other than temporary in nature, we
are  required  to revalue  Residuals  in Finance  Receivables  Sold and record a
charge  to  earnings  based  upon  the  reduction.  The  cumulative  net loss at
origination  assumption  inherent in the securitization  transactions we entered
into in 1996 and 1997 is approximately  27.5%. For the  securitizations  that we
completed during the nine month period ended September 30, 1998, net losses were
estimated  using total  expected  cumulative  net losses at loan  origination of
approximately  29.0%.  The remaining net charge offs in our Residuals in Finance
Receivables  Sold  as a  percentage  of  the  remaining  principal  balances  of
securitized contracts was approximately 15.3% as of September 30, 1999, compared
to 22.0% as of December 31, 1998.  Because we now structure  our  securitization
transactions to retain the Finance Receivables securitized, we will no longer be
adding to our  Residuals in Finance  Receivables  Sold.  Further,  the remaining
Residuals  in  Finance  Receivables  Sold that were  originated  under our prior
method  will  continue  to decline as the  underlying  loan  portfolios  mature.
Consequently,  the  remaining  net  charge  offs  in our  Residuals  in  Finance
Receivables  Sold  as a  percentage  of  the  remaining  principal  balances  of
securitized  contracts  will continue to decline as the related loan  portfolios
mature.  The  balance of the  Residuals  in Finance  Receivables  sold was $19.6

<PAGE>
                                    Page 25


million at September  30, 1999 and $33.3  million as of December  31,  1998.  We
classify the residuals as "held-to-maturity"  securities in accordance with SFAS
No. 115.

    Spread  Account  Requirements.  We  maintain  a  spread  account  under  our
securitization agreements. The spread account is a reserve account that would be
used to repay the senior  certificates  on notes  issued by the trusts  (Class A
securities) in the event collections on a particular pool of finance receivables
was  insufficient to make the required  payments.  At the time a  securitization
transaction is entered into, our securitization subsidiary makes an initial cash
deposit into the spread account, generally equivalent to 4% to 6% of the initial
underlying Finance Receivables  principal balance,  and pledges this cash to the
spread account. The trustee then makes additional deposits to the spread account
out of collections on the  securitized  receivables as necessary to maintain the
spread  account at a specified  percentage,  ranging from 6.0% to 10.5%,  of the
underlying Finance  Receivables'  principal  balance.  The trustee will not make
distributions to the  securitization  subsidiaries on the subordinate  interests
unless:

   o   the spread account has the required balance,
   o   the  required  periodic  payments to the  Class A  security  holders  are
         current, and
   o   the trustee, servicer and other administrative costs are current.

    Under our existing  securitizations,  we are  required to  maintain  certain
cash  balances in the spread  accounts.  Generally,  our  securitization  trusts
operate independently.  These balances vary by trust and may change based on the
level of delinquencies  and charge offs of the loans in the respective trust. At
September 30, 1999, primarily due to an increase in delinquencies,  the targeted
spread  account  balance for one trust was increased and the actual  balance was
$2.4 million under the increased specified levels. After September 30, 1999, the
targeted  spread  account  balance for four other trusts were also increased and
actual balances in the spread accounts for these trusts  cumulatively were $13.6
million under the increased  specified  levels.  While these increased  targeted
spread account requirements continue, collections on receivables in these trusts
in excess of amounts  required  to pay the senior  certificates,  our  servicing
fees,  and certain other  amounts will be used to satisfy the  increased  spread
account  amount  and  will  not be  distributed  to us.  Because  of the  normal
reduction  of  the  portfolios  in  these  trusts,   and  our  expectation  that
delinquency levels will decrease, we expect the targeted spread account balances
for these  trusts to return to their prior  levels  within the first  quarter of
2000, and at that time any accumulated excess cash will be released.

    Based on its  historical  performance and its current  delinquency levels, a
termination  event is expected to occur on one trust in  December  1999.  When a
termination  event  occurs,  the  party  controlling  the trust has the right to
remove us as servicer  although we do not currently expect that this will occur.
Further, as this trust has paid down to less that 10% of its original balance it
is subject to a "clean-up" call, meaning, we can buy the remaining interest.  We
expect to repurchase  the  remaining  interest  (contracts)  in the trust in the
fourth  quarter of 1999 or in the first  quarter of 2000.  While this trust will
pay a scheduled  distribution on November 15, 1999, should the termination event
occur or it not be immediately repurchased, we will not receive any further cash
distributions  related to our residual  interests in this trust until repurchase
does occur.

    We also maintain spread accounts for the  securitization  transactions  that
were  consummated  by our  discontinued  operations.  For the same reason  noted
above,  we have been required to increase the spread account balance by $200,000
on one trust and since then a termination  event has occurred on this trust.  We
expect to repurchase this trust by the end of the first quarter of 2000. Another
trust is currently  subject to termination  but is expected to be repurchased on
November 15, 1999. We will not receive any further cash distributions from these
trusts until repurchase.

    All our trusts are  administered  independently  and only certain trusts are
affected by these events. For those affected, it is estimated that the amount of
cash distributions postponed to future periods will approximate $2 to $3 million
per month over the next three to five  months.  We  believe  that the  increased
payments  expected from the First Merchants  transaction as described above will
exceed the estimated amount of cash payments that will be postponed.  Therefore,
we do not believe that the delay in receiving these cash  distributions  and our
purchase of certain trusts will have a material  adverse effect on our financial
status.

    However,  while our delinquency levels are currently improving and we expect
to purchase certain trusts,  there can be no assurance that  delinquencies  will
continue to  improve,  that spread  account  balances  will be able to return to
prior levels,  that cash  distributions  will begin from these  trusts,  or that
financial  conditions  will  not  change  and  make the  absence  of these  cash
distribution's material to us.

    Certain financial information regarding securitizations.  During August 1999
we  closed  a  Securitized   Borrowing   transaction  in  which  we  securitized

<PAGE>
                                    Page 26


approximately $123.3 million of contracts and issued approximately $87.5 million
of Class A  securities.  In the second  quarter of 1999 we closed a  Securitized
Borrowing  transaction  in which we  securitized  $119.7  million of  contracts,
issuing $87.4 million in Class A securities.  During the first three quarters of
1998, we  securitized  $222.8  million in contracts,  issuing  $161.1 million in
Class A  securities,  and $61.7 million in residual  interests.  We recorded the
carrying  value of the related  Residuals in Finance  Receivables  Sold at $36.5
million for the first three quarters of 1998. Due to the change in the structure
of our securitization  transactions,  we did not record any Residuals in Finance
Receivables for the  securitization  transaction we closed in April or August of
1999.

Liquidity and Capital Resources

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

    o  increases in our contract portfolio,
    o  expansion of our dealership network,
    o  our commitments under the First Merchants transaction,
    o  expansion of the Cygnet  dealer  program,
    o  common  stock  repurchases,
    o  the purchase of inventories,
    o  the purchase of property and equipment, and
    o  working capital and general corporate purposes.

    We fund our capital requirements primarily through:

    o  operating cash flow,
    o our  revolving  facility with General  Electric  Capital  Corporation  (GE
       Capital),
    o  securitization transactions,
    o  supplemental borrowings, and
    o  occasionally, equity offerings.

    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.  See
"Securitizations  --  Dealership  Operations"  for  a  discussion  of  potential
liquidity  concerns  arising  because of an  increase  in  delinquencies  in our
securitization transactions.

Operating Cash Flow

    Net Cash Provided by Operating Activities increased by $111.7 million in the
nine months  ended  September  30, 1999 to $114.1  million  compared to the nine
months ended  September  30, 1998 of $2.5  million.  The change in inventory and
accounts payable and accrued  expenses  contributed to the increase in operating
cash flow for the  quarter.  The changes in the Net Cash  Provided by  Operating
activities and Net Cash Used in Investing  Activities is largely due to a change
in classification  of portfolio  activity related to the change in the structure
of our securitization transactions.  Under our old structure contracts were held
for sale and,  consequently,  Finance  Receivable  purchases  and related  sales
proceeds were  considered  operating  activities.  Under our revised  structure,
contracts are held for investment  and such  purchases are considered  investing
activities.

    Net Cash Used in Investing  Activities increased by $277.7 million to $280.3
million in the nine months ended  September 30, 1999 compared to $2.6 million of
Net Cash Provided by Investing Activities in the nine months ended September 30,
1998.  The increase in Cash Used in  Investing  Activities  is primarily  due to
increases in purchases of Finance  Receivables,  net  decreases in Cash advanced
under our Notes  Receivable,  which  were  offset by  increased  collections  of
Finance Receivables and Notes Receivable.

    Net Cash  Provided by Financing  Activities  increased by $148.7  million to
$150.0  million in the nine months  ended  September  30, 1999  compared to $1.3
million  of Net Cash  Used in  Financing  Activities  in the nine  months  ended
September 30, 1998.  The increase is due to increases in Notes  Payable,  net of
increases in repayments of Notes Payable and the acquisition of Treasury Stock.

<PAGE>
                                    Page 27


Financing Resources

    Revolving  Facility.   The maximum  commitment  under our  revolving  credit
facility with GE Capital is $125.0 million. Under the revolving facility, we may
borrow:

   o  up to 65.0% of the principal balance of eligible contracts originated from
        the sale of used cars,
   o  up to 86.0% of the  principal  balance of  eligible  contracts  previously
        originated by our branch office network,
   o  the  lesser of $20 million or 58% of the direct vehicle costs for eligible
        vehicle inventory, and
   o  the lesser of $15 million or 50% of eligible contracts or loans originated
        under the Cygnet dealer program.

    However,  an amount up to $3.0 million of the borrowing  capacity  under the
revolving  facility  is not  available  at any time while our  guarantee  to the
purchaser  of  contracts  acquired  from First  Merchants  is  outstanding.  The
revolving  facility  expires in  September  2000 and  contains a provision  that
requires us to pay GE Capital a termination  fee of $200,000 if we terminate the
revolving  facility  prior to the  expiration  date. We secure the facility with
substantially all of our assets.

    As of  September  30,  1999,  our  borrowing  capacity  under the  revolving
facility was $89.8 million, the aggregate principal amount outstanding under the
revolving facility was approximately $60.0 million,  and the amount available to
be borrowed under the facility was $29.8 million.  The revolving  facility bears
interest at the 30-day LIBOR plus 3.15%,  payable  daily (total rate of 8.44% as
of September 30, 1999).

    The revolving  facility contains  covenants that, among other things,  limit
our ability to do the following without GE Capital's consent:

    o  incur additional indebtedness,
    o  make any change in our capital structure,
    o  declare or pay  dividends, except in  accordance with all applicable laws
         and not in excess of fifteen  percent (15%) of each year's net earnings
         available for distribution, and
    o  make certain investments and capital expenditures.

    The revolving  facility also provides that an event of default will occur if
Mr.  Ernest C. Garcia II owns less than 15.0% of our voting  stock.  Mr.  Garcia
owned approximately 32.1% of our common stock at September 30, 1999.

    We were also required to be Year 2000  compliant no later than June 30, 1999
(see discussion below under the Year 2000 Readiness Disclosure), and we are also
required  to maintain  specified  financial  ratios,  including a debt to equity
ratio of 2.2 to 1 and a net worth of at least $150 million.

    Securitizations.  Our  securitization  program  is a  primary  source of our
working  capital.   Since  September  30,  1997,  we  have  closed  all  of  our
securitizations  with private investors through Greenwich Capital Markets,  Inc.
(Greenwich  Capital).  In March  1999,  we  executed a  commitment  letter  with
Greenwich Capital to act as our exclusive agent in placing up to $300 million of
surety wrapped securities under our securitization program.

    Securitizations generate cash flow for us from:

   o  the sale of Class A securities,
   o  ongoing servicing fees, and
   o  excess  cash  flow   distributions  from  collections  on  the  contracts
       securitized  after:
       o  payments on the Class A securities sold to third party investors,
       o  payment of fees, expenses, and insurance premiums, and
       o required deposits to the spread account.

    In August 1999, we closed a  securitization  transaction  through  Greenwich
Capital. Under this transaction,  we securitized approximately $123.3 million of
contracts and issued  approximately  $87.5 million of Class A securities with an
annual interest rate of 6.45%.

<PAGE>
                                    Page 28


    In April 1999,  we closed a  securitization  transaction  through  Greenwich
Capital. Under this transaction,  we securitized approximately $119.7 million of
contracts and issued  approximately  $87.4 million of Class A securities with an
annual interest rate of 5.7%.

    Securitization  also allows us to fix our cost of funds for a given contract
portfolio.  Failure to  regularly  engage in  securitization  transactions  will
adversely  affect us. See  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations--Securitizations--Dealership operations" for
a more complete description of our securitization program.

Supplemental Borrowings

    Verde Debt.  Prior to our public offering in September 1996, we historically
borrowed  substantial  amounts from Verde  Investments,  Inc. (Verde),  which is
owned by our  Chairman,  Ernest C.  Garcia II. The  Subordinated  Notes  Payable
balances outstanding to Verde totaled $8.0 and $10.0 million as of September 30,
1999 and as of December 31, 1998.  Under the terms of this note, we are required
to make  monthly  payments of interest  and annual  payments of principal in the
amount of $2.0 million.  These  borrowings  accrue interest at an annual rate of
10.0%.  Except for the debt incurred related to our exchange offer, this debt is
junior  to all of our  other  indebtedness  and  we  may  suspend  interest  and
principal  payments if we are in default on obligations to any other  creditors.
In July  1997,  our Board of  Directors  approved  the  prepayment  of the total
balance of the Verde subordinated debt after the earlier of the following:

    o  the completion of a debt offering,
    o  the  First  Merchants  transactions  have  been  completed  or  the  cash
         requirements for completion of the transaction are known, or
    o  we  either  have  cash in excess  of  our  current  needs or  have  funds
         available under our financing sources in excess of our current needs.

    No such prepayment has been made as of the date of filing of this Form 10-Q.
Any prepayment would require the consent of certain of our lenders.

    Exchange Offer. In the fourth quarter of 1998, we acquired approximately 2.7
million shares of our common stock in exchange for  approximately  $17.5 million
of subordinated debentures.  The debentures are unsecured and are subordinate to
all of our  existing  and  future  indebtedness.  We must  pay  interest  on the
debentures  twice a year at 12% per year.  We are required to pay the  principal
amount of the debentures on October 23, 2003.

    We issued the debentures at a premium of approximately $3.9 million over the
market  value of the shares of our  common  stock  that were  exchanged  for the
debentures.  Accordingly,  the debt was recorded at $13.6 million on our balance
sheet. The premium will be amortized over the life of the debentures and results
in an effective annual interest rate of  approximately  18.8%. We can redeem all
or part of the debentures at any time, subject to the subordination provision of
the debentures.  The balance of the subordinated debentures was $14.1 million at
September 30, 1999.

    Senior  Subordinated  Notes.  In February 1998, we borrowed a total of $15.0
million of subordinated debt from unrelated third parties for a three year term.
We pay interest on this debt quarterly at 12% per annum. This debt is:

    o  senior  to the  Verde   subordinated  note  (described   above)  and  the
         subordinated  debentures  issued in our exchange offer (also  described
         above), and
    o  subordinate to our other indebtedness.

    We issued  warrants  to the  lenders of this debt to  purchase up to 500,000
shares of our common stock at an exercise price of $10.00 per share, exercisable
at any time until the later of February 2001, or when the debt is paid in full.

    In July 1998, we borrowed a total of $5.0 million in subordinated  debt from
unrelated third parties for a three-year  term. In the first quarter of 1999, we
prepaid $3.0 million of the loans.  We repaid the remaining $2.0 million in June
1999.

    Additional Financing.  On November 12, 1998, we borrowed $15.0 million for a
term of 364 days from  Greenwich  Capital.  We pay  interest  on this loan at an
interest rate equal to LIBOR plus 400 basis points. We secured the loan with the
common  stock of our  securitization  subsidiaries.  In March 1999,  we borrowed

<PAGE>
                                    Page 29


$20.0 million for a term of 278 days from  Greenwich  Capital.  $1.5 million was
used to repay the remaining  balance of the $15 million  Greenwich Capital loan.
The new loan was secured by the common stock of our securitization subsidiaries.
The interest  rate is at LIBOR plus 500 basis points and we paid an  origination
fee of 100 basis points. We repaid this loan in the second quarter of 1999.

    On March 26, 1999, we borrowed  approximately  $28.9 million from  Greenwich
Capital under a repurchase facility with a 62% advance rate, bearing interest at
8.5%, and maturing May 31, 1999.  This  repurchase  facility was repaid in April
1999.

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

    On May 14, 1999, we borrowed  approximately  $38.0 million from an unrelated
party for a term of three years maturing on May 1, 2001 (Residual Loan).The note
calls for monthly  principal  payments of generally  not less than $500,000 plus
interest at a rate equal to LIBOR plus 550 basis points.  The loan is secured by
our Residuals in Finance Receivables Sold and certain Finance Receivables.

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

Capital Expenditures and Commitments

    During  the three  months  ended  September  30,  1999,  we opened  four new
dealerships and acquired four dealerships and one reconditioning center from DCT
of Ocala.  In the second quarter of 1999, we opened one new  dealership.  In the
fourth  quarter of 1999 we completed  negotiations  with  Virginia  Auto Mart to
obtain five dealerships and a loan portfolio of approximately  $8.0 million.  We
also have an additional three dealerships under development.  The direct cost of
opening a  dealership  is primarily a function of whether we lease a facility or
construct a facility. A leased facility costs approximately $650,000 to develop,
while a facility we construct costs approximately $1.7 million. In addition,  we
require  capital to finance the portfolio that we carry on our balance sheet for
each store.  It takes  approximately  $2.2  million in cash to support a typical
stabilized  store  portfolio  with our  existing  65% advance  rate under our GE
facility.  Additionally,  it takes approximately 30 months for a store portfolio
to reach a stabilized level.

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

    Matters Relating to First  Merchants.  On July 11, 1997, we  entered into an
agreement to provide  debtor in  possession  financing to First  Merchants  (DIP
Facility).  As of September 30, 1999, the maximum commitment on the DIP facility
was $11.5 million and the outstanding  balance on the DIP facility totaled $11.9
million.  When First  Merchants  defaulted on the DIP facility,  we negotiated a
settlement agreement with them that has increased our funding obligation by $2.0
million,  subject to  satisfaction  of certain  conditions,  and in exchange for
other  concessions.  These conditions were satisfied in August 1999 and the loan
is no longer in default.  The total amount  outstanding on the  additional  $2.0
million is approximately  $600,000.  We anticipate paydowns on the DIP financing
to begin in the near  future  and  expect  that  FMAC  will pay all but the most
recent $2.0 million increase by the end of the first quarter of 2000. We believe
that we will  begin to  record  certain  incentive  fee  income  from the  First
Merchants  transaction in the fourth quarter of 1999. We also anticipate that we
will receive a distribution of  approximately  $4.0 million on November 15, 1999
from  collections  on charged off  receivables  held by First  Merchants.  These
payments should be sufficient to offset the reduction in cash distributions from
our   securitization   transactions   over   the  next  3  to  5   months.   See
"Securitizations - Dealership Operations" above.

    In the past, we reported that we entered into agreements with certain of the
banks from which we  purchased  First  Merchants'  senior  bank debt to pay them
additional  consideration,  up to the amount of the  discount we received on the
purchase  of the bank debt,  if First  Merchants  makes cash  payments or issues
notes at market rates to its unsecured creditors and equity holders in excess of
10% of their allowed claims in First Merchants' bankruptcy  proceedings.  In the
third quarter of 1999, we repurchased the warrants that were  previously  issued
to this  group of  banks  and  these  contingent  claims  for  consideration  of
approximately $612,000.

    Common  Stock  Repurchase  Program.  During the first  quarter  of 1999,  we
repurchased  approximately  928,000  shares of our common stock for $5.2 million
under our first stock  repurchase  program.  We have  repurchased a total of one
million shares of our common stock under the program,  which is the total number

<PAGE>
                                    Page 30


of shares the Board of Directors  authorized under that program.  In April 1999,
our Board of  Directors  authorized,  subject to certain  conditions  and lender
approval, a second stock repurchase program that would allow us to repurchase up
to 2.5 million  additional  shares of our common  stock.  Purchases  may be made
depending on market conditions, share price, and other factors. During the third
quarter of 1999 we repurchased an additional 66,325 shares for $497,000.

Year 2000 Readiness Disclosure

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

    Our Year 2000 compliance program consists of:

   o  identification and assessment of critical computer programs,  hardware and
         and other business equipment and systems,
   o  remediation and testing,
   o  assessment of the Year 2000 readiness of our critical  suppliers,  vendors
         and business partners, and
   o  contingency planning.

    Identification and Assessment

    The first component of our Year 2000 compliance program is complete. We have
identified our critical  computer  programs,  hardware,  and other  equipment to
determine which systems are compliant, or must be replaced or remediated.

    Remediation and Testing

    Dealership  Operations.  We have finished  remediating  the program code and
underlying data,  testing the remediated code modifications and have implemented
these changes into  operation for our  integrated  car sales and loan  servicing
system (CLASS  System).  We placed the modified  program code into production in
April 1999 and have completed performing date testing on the modified code.

    Non-Dealership  Operations.  Our  non-dealership  loan servicing  operations
currently  utilize  several loan processing and  collections  programs  provided
through third party service bureaus.  Based upon certifications we have received
from the software vendors, and independent testing we have performed, we believe
that our loan processing and collections programs are Year 2000 compliant.

    Our Cygnet  dealer  program  utilizes  one of the same loan  processing  and
collections programs used by our loan servicing  operations.  The service bureau
that  provides the program has written a custom module for us and has stated the
custom module is Year 2000 compliant. In addition, we have performed independent
Year 2000 compliance  testing on the Cygnet dealer program's custom module,  and
believe it is Year 2000 compliant.

    The  remediation  and testing of the critical  business  systems used by our
dealership and non-dealership operations was completed during the second quarter
of 1999.

    Assessment of Business Partners

    We have also  identified  critical  suppliers,  vendors,  and other business
partners  and have taken steps to  determine  their Year 2000  readiness.  These
steps include interviews,  questionnaires, and other types of inquiries. Because
of the large number of business systems that our business partners use and their
varying levels of Year 2000 readiness, it is difficult to determine how any Year
2000 issues of our business  partners will affect us. We are not currently aware
of any  business  relationships  with third  parties that we believe will likely
result in a  significant  disruption  of our  businesses.  We  believe  that our
greatest risk is with our utility suppliers,  banking and financial  institution
partners,  and  suppliers  of  telecommunications  services,  all of  which  are
operating  within  the  United  States.  Potential  consequences  if we,  or our
business partners, are not Year 2000 compliant include:

<PAGE>
                                    Page 31


   o  failure to operate from a lack of power,
   o  shortage of cash flow,
   o  disruption or errors in loan  collection  and  processing  efforts,  and
   o  delays in receiving inventory, supplies, and services.

    If any of these events  occurred,  the results could have a material adverse
impact on us and our operations.

Contingency Plans

    We are also  developing  contingency  plans to mitigate the risks that could
occur in the event of a Year 2000  business  disruption.  Contingency  plans may
include:

   o  increasing inventory levels,
   o  securing additional financing,
   o  relocating operations to unaffected sites,
   o  vendor/supplier replacement,
   o  utilizing temporary manual or spreadsheet-based processes, or
   o  other prudent actions,

    We are  currently  working  on  updating  our  disaster  recovery  plan  and
formulating  our Year 2000  contingency  plans.  We will continue to develop our
contingency plans throughout the rest of the year and expect to complete them by
December 31, 1999.

Costs

    We currently  estimate that  remediation and testing of our business systems
will cost  between $2.4  million and $2.7  million.  Most of these costs will be
expensed  and funded by our  operating  line of  credit.  Costs  incurred  as of
September 30, 1999 approximate $2.4 million, including approximately $231,000 of
internal payroll costs,  substantially all of which have been charged to general
and  administrative  expense.  Costs  incurred  in the nine month  period  ended
September 30, 1999  approximate  $970,000.  We incurred  costs of  approximately
$265,000 in the  comparable  period in 1998.  We believe costs  associated  with
developing  and  implementing  contingency  measures will not be material to our
operating results.  The scheduled completion dates and costs associated with the
various  components  of our Year 2000  compliance  program  described  above are
estimates and are subject to change.

Accounting Matters

    In February 1998, the Financial Accounting  Standards Board issued Statement
of  Financial  Accounting  Standards  No.  132,  "Employer's  Disclosures  about
Pensions  and  Other  Postretirement  Benefits"  (SFAS  No.  132)  which  became
effective  for us January 1, 1999.  SFAS No. 132  establishes  standards for the
information that public enterprises report in annual financial  statements.  The
adoption of SFAS No. 132 did not have a material impact on us.

    In June 1998, the Financial  Accounting Standards Board  issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities" (SFAS No. 133) which becomes effective for us January 1,
2001. We believe the adoption of SFAS No. 133 will not have a material impact on
us.

                                     ITEM 3.

Market Risk

    We are exposed to market risk on our financial  instruments  from changes in
interest  rates.  We do not use  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

<PAGE>
                                    Page 32


allowed in states that impose  interest rate limits.  At September 30, 1999, the
scheduled maturities on our finance receivables range from one to 52 months with
a weighted  average  maturity of 31.3 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,  1999 is the  Collateralized  Notes  Payable  (senior  and junior
securities)  issued under our securitization  program.  Issuing debt through our
securitization  program allows us to mitigate our interest rate risk by reducing
the balance of the  variable  revolving  line of credit and  replacing it with a
lower fixed rate note  payable.  We are  subject to interest  rate risk on fixed
rate Notes Payable to the extent that future  interest rates are higher than the
interest rates on our existing Notes Payable.

    We believe that our market risk information has not changed  materially from
December 31, 1998.

<PAGE>
                                    Page 33


                           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, based on the
advice of counsel,  do not expect the final  outcome to have a material  adverse
effect on our financial position.

Item 2.  Changes in Securities and Use of Proceeds.

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

Item 3.  Defaults Upon Senior Securities.

    As a result of an increase in  delinquencies,  we recently obtained a waiver
to a technical covenant breach under our Residual Loan. In addition, we obtained
a waiver to a technical breach of a financial ratio covenant  resulting from the
change in structures of our securitizations transactions under another loan.

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

    None

Item 5.  Other Information.

    On July 26, 1999,  Gregory B. Sullivan,  President,  Chief Operating Officer
and a director of Ugly Duckling,  was appointed Chief  Executive  Officer by our
Board of Directors.  Mr.  Sullivan  replaced Ernest C. Garcia II, who remains as
Chairman  of the  Board  and  our  largest  stockholder  with  over  32% of Ugly
Duckling's stock.

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

    (a) Exhibits
        Exhibit 10.1 --  Amendment No. 5 to  the  Amended  and  Restated   Motor
           Vehicle and Installment  Contract Loan and Security Agreement between
           General Electric Capital Corporation and Registrant dated August 16,
           1999

        Exhibit  10.1(a) -- Amendment No. 6 to  the  Amended and  Restated Motor
           Vehicle and  Installment Contract Loan and Security Agreement between
           General Electric Capital Corporation and Registrant dated August 27,
           1999

        Exhibit 10.2 -- Third Amendment to Credit and Security Agreement between
           Registrant and First Merchants, dated as of August 2, 1999

        Exhibit 10.3 -- Amendment to Loan Agreement between  Registrant and each
           of the Kayne Anderson related Lenders named therein, dated September
           30, 1999

        Exhibit 11 -- Statement regarding computation of per share earnings (see
           note 5 of Notes to condensed consolidated Financial Statements)

        Exhibit 27 -- Financial Data Schedule

<PAGE>
                                    Page 34


        Exhibit 99 --Statement Regarding Forward Looking Statements and Risk
           Factors

    (b) Reports on Form 8-K.

    During the third  quarter of 1999,  the Company filed one report on Form 8-K
dated August 26, 1999 to report the acquisition of four  dealerships in Orlando,
Florida and a loan portfolio of approximately $15.0 million. In addition,  after
the third quarter of 1999,  the Company has filed one report on Form 8-K,  dated
November 8, 1999, to report the  acquisition  of five  dealerships  in Richmond,
Virginia and a loan portfolio of approximately $8.0 million.


<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 15, 1999



<PAGE>



                                                   EXHIBIT INDEX

 Exhibit
 Number                                      Description
10.1   Amendment No. 5 to the Amended and Restated Motor Vehicle and Installment
          Contract Loan and Security  Agreement between General Electric Capital
          Corporation and Registrant dated August 16, 1999
10.1(a)Amendment No. 6 to the Amended and Restated Motor Vehicle and Installment
          Contract Loan and Security  Agreement between General Electric Capital
          Corporation and Registrant dated August 27, 1999
10.2   Third Amendment to Credit and Security Agreement between  Registrant  and
          First Merchants, dated as of August 2, 1999
10.3   Amendment to Loan  Agreement  between  Registrant and  each of the  Kayne
          Anderson related Lenders named therein, dated September 30, 1999
11     Statement  regarding  computation of per  share  earnings  (see note 5 of
          Notes to Condensed Consolidated Financial Statements)
27     Financial Data Schedule
99     Statement Regarding Forward Looking Statements and Risk Factors