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


                       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: March 31, 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 offices)        (Zip Code)
                     

                                 (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 May 11,  1999,  there  were  approximately  14,938,600  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>

<TABLE>
<CAPTION>


                                             UGLY DUCKLING CORPORATION

                                                     FORM 10-Q

                                                 TABLE OF CONTENTS
<S>                                                                                                              <C>
                                                                                                                 Page
                              Part I. -- FINANCIAL STATEMENTS
Item 1.  FINANCIAL STATEMENTS           
  Condensed Consolidated Balance Sheets-- March 31, 1999 and December 31, 1998..........................          1
  Condensed Consolidated Statements of Operations-- Three Months Ended March 31, 1999 and March 31, 1998          2
  Condensed Consolidated Statements of Cash Flows-- Three Months Ended March 31, 1999 and March 31, 1998          3
  Notes to Condensed Consolidated Financial Statements..................................................          4
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........          9
                             Part II.-- OTHER INFORMATION                                                        28
Item 1.  LEGAL PROCEEDINGS..............................................................................            
Item 2.  CHANGES IN SECURITIES..........................................................................         28
Item 3.  DEFAULTS UPON SENIOR SECURITIES................................................................         28
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................         28
Item 5.  OTHER INFORMATION..............................................................................         28
Item 6.  EXHIBITS AND REPORTS ON FORM 8-K...............................................................         28
SIGNATURES..............................................................................................         30
Exhibit 10.1      Engagement Letter between Greenwich Capital Markets, Inc.
                  and Registrant dated March 16, 1999 for Greenwich to Act as Placement Agent
                  for not less than $300 Million of Securitized Loans
Exhibit 10.2      Commitment Letter between Greenwich Capital Markets, Inc.
                  and Registrant dated March 17, 1999 with Term Sheet for $100 Million
                  Revolving Credit Facility
Exhibit 10.3      $20 Million Loan agreement between Greenwich Capital
                  Financial Products, Inc. and Registrant dated March 18, 1999
Exhibit 10.3(a)   Stock Pledge Agreement among Greenwich Capital Financial
                  Products, Inc., Registrant, and certain related parties, dated March 18,1999
Exhibit 10.4      Amendment to the Amended and Restated Motor Vehicle
                  Installment  Contract  Loan and Security  Agreement  between
                  General  Electric  Capital  Corporation and Registrant dated
                  March 25, 1999 regarding Year 2000 date change
Exhibit 11        Statement regarding computation 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>


<TABLE>
<CAPTION>

                                            ITEM 1.

                          UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                             CONDENSED CONSOLIDATED BALANCE SHEETS
                                        (In thousands)

                                                        March 31,             December 31,
                                                           1999                   1998
                                                      -----------------      ---------------

                                                ASSETS
 <S>                                                       <C>                   <C>
 Cash and Cash Equivalents                                 $   4,387             $   2,751
 Finance Recievables, net                                    237,928               163,209
 Notes Receiveable, Net                                       21,670                28,257
 Inventory                                                    39,891                44,167
 Property and Equipment, net                                  34,299                32,970
 Intangible Assets, Net                                       15,256                15,530
 Other Assets                                                 22,880                20,575
 Net Assets of Discontinued Operations                        30,305                38,516
                                                           ----------            ----------
                                                           $ 406,616             $ 345,975
                                                           ==========            ==========

</TABLE>
<TABLE>
<CAPTION>



                     LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                        <C>                   <C>
 Liabilities:
 Accounts Payable                                          $   5,678             $   2,479
 Accrued Expenses and Other Liabilities                       30,329                19,694
 Notes Payable                                               171,904               117,294
 Subordinated Notes Payable                                   40,815                43,741
                                                           ---------             ---------
 Total Liabilities:                                          248,726               183,208
                                                           ---------             ---------
 Stockholders' Equity
 Common Stock                                                     19                    19
 Additional Paid in Capital                                  173,819               173,809
 Retained Earnings                                             3,869                 3,449
 Treasury Stock                                              (19,817)              (14,510)
                                                           ---------             ---------
 Total Stockholders' Equity                                  157,890               162,767
                                                           ---------             ---------
                                                           $ 406,616             $ 345,975
                                                           =========             =========
</TABLE>




          See accompanying notes to Condensed Consolidated Financial Statements.

                                     Page 1
<PAGE>


<TABLE>
<CAPTION>

                           UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                        Three Months Ended March 31, 1999 and 1998
                     (In thousands, except earnings per share amounts)

                                                                          1999          1998
                                                                        ----------   ----------
<S>                                                                     <C>           <C>
Sales of Used Cars                                                      $106,443      $ 72,973
Less:
Cost of Used Cars Sold                                                    60,097        39,731
Provision for Credit Losses                                               28,561        15,362
                                                                        --------      --------
                                                                          17,785        17,880
                                                                        --------      --------
Other Income:
Interest Income                                                           14,003         6,205
Gain on Sale of Finance Receivables                                            -         4,614
Servicing and Other Income                                                 9,672         3,912
                                                                        --------      --------
                                                                          23,675        14,731
                                                                        --------      --------
Income before Operating Expenses                                          41,460        32,611
Operating Expenses:
Selling and Marketing                                                      6,416         4,921
General and Administrative                                                28,553        18,786
Depreciation and Amortization                                              2,135         1,173
                                                                        --------      --------
                                                                          37,104        24,880
                                                                        --------      --------
Operating Income                                                           4,356         7,731
Interest Expense                                                           3,656         1,502
                                                                        --------      --------

Earnings before Income Taxes                                                 700         6,229
Income Taxes                                                                 280         2,500
                                                                        --------      --------
Income from Continuing Operations                                            420         3,729
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 $3,024                                                            -        (4,827)
                                                                        --------      --------
Net Earnings (Loss)                                                     $    420      $ (1,866)
                                                                        ========      ========
Earnings per Common Share from Continuing Operations:
Basic                                                                   $   0.03      $   0.20
                                                                        ========      ========
Diluted                                                                 $   0.03      $   0.20
                                                                        ========      ========
Net Earnings (Loss) per Common Share:
Basic                                                                   $   0.03      $ (0.10)
                                                                        ========      ========
Diluted                                                                 $   0.03      $ (0.10)
                                                                        ========      ========
Shares Used in Computation:
Basic                                                                     15,650        18,557
                                                                        ========      ========
Diluted                                                                   15,785        19,093
                                                                        ========      ========
</TABLE>

                                     Page 2
<PAGE>

<TABLE>
<CAPTION>

                                    UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    Three Months Ended March 31, 1999 and 1998
                                                  (In thousands)

                                                                          1999             1998
                                                                       -----------      -----------
<S>                                                                      <C>            <C> 
Cash Flows from Operating Activities:
Net Earnings (Loss)                                                      $    420        $  (1,866)
Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided
  by Operating Activities:
Loss from Discontinued Operations                                               -            5,595
Provision for Credit Losses                                                28,561           15,362
Purchase of Finance Receivables for Sale                                        -          (69,708)
Increase in Deferred Income Taxes                                          (5,188)          (2,205)
Depreciation and Amortization                                               2,135            1,173
Gain on Sale of Finance Receivables                                             -           (4,614)
Proceeds from Sale of Finance Receivables                                       -           62,556
Collections of Finance Receivables                                              -            5,935
Decrease in Inventory                                                       4,276            6,914
Decrease in Other Assets                                                      237            1,324
Increase in Accounts Payable, Accrued Expenses and Other                    9,911            2,139
Increase in Income Taxes Payable                                            6,689              793
                                                                         ---------       ----------
Net Cash Provided by Operating Activities                                  47,041           23,398
                                                                         ---------       ----------
Cash Flows Used in Investing Activities:
Increase in Finance Receivable                                           (137,358)          (8,735)
Collections of Finance Receivables                                         36,319            4,741
Increase in Investments Held in Trust                                      (2,116)          (3,543)
Advances under Notes Receivable                                            (3,109)         (11,131)
Repayments of Notes Receivable                                              9,571            4,926
Purchase of Property and Equipment                                         (3,190)          (6,640)
                                                                         ---------       ----------
Net Cash Used in Investing Activities                                     (99,883)         (20,382)
                                                                         ---------       ----------
Cash Flows from Financing Activities:
Additions to Notes Payable                                                 72,717           45,000
Repayment of Notes Payable                                                (21,538)         (31,867)
Proceeds from Issuance of Common Stock                                         32              202
Acquisition of Treasury Stock                                              (5,307)               -
Other, Net                                                                    363              223
                                                                         ---------       ----------
Net Cash Provided by Financing Activities                                  46,267           13,558
                                                                         ---------       ----------
Cash Provided by (Used in) Discontinued Operations                          8,211          (19,597)
                                                                         ---------       ----------
Net Increase (Decrease) in Cash and Cash Equivalents                        1,636           (3,023)
Cash and Cash Equivalents and Beginning of Period                           2,751            3,537
                                                                         ---------       ----------
Cash and Cash Equivalents and End of Period                              $  4,387        $     514
                                                                         =========       ==========
Supplemental Statement of Cash Flows Information:
Interest Paid                                                            $  5,934        $   2,222
                                                                         =========       ==========
Income Taxes Paid                                                        $      -        $     408
                                                                         =========       ==========
</TABLE>




     See accompanying notes to Condensed Consolidated Financial Statements.

                                     Page 3
<PAGE>



                            UGLY DUCKLING CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.  Basis of Presentation

    Our accompanying  unaudited condensed consolidated financial statements have
been prepared in accordance with 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 March 31, 1999 and
December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
                                                            March 31, 1999                          December 31, 1998
                                              ----------------------------------------  ----------------------------------------
                                                                Non                                       Non
                                               Dealership    Dealership                  Dealership    Dealership
                                               Operations    Operations      Total       Operations    Operations      Total
                                              ------------- ------------  ------------  ------------  ------------ -------------
<S>                                            <C>          <C>           <C>           <C>           <C>           <C>     
Installment Sales Contract Principal Balances  $   182,150  $    69,053   $   251,203   $    93,936   $    51,282   $   145,218
Add: Accrued Interest                                1,798          765         2,563           877           473         1,350
Loan Origination Costs                               3,583            -         3,583         2,237             -         2,237
                                               ------------ ------------  ------------  ------------  ------------  ------------
Principal Balances, net                            187,531       69,818       257,349        97,050        51,755       148,805
Residuals in Finance Receivables Sold               28,480        2,625        31,105        33,331         2,625        35,956
Investments Held in Trust                           22,680            -        22,680        20,564             -        20,564
                                               ------------ ------------  ------------  ------------  ------------  ------------
                                                   238,691       72,443       311,134       150,945        54,380       205,325
Allowance for Credit Losses                        (48,628)      (2,326)      (50,954)      (24,777)       (2,024)      (26,801)
Discount on Acquired Loans                               -      (22,252)      (22,252)            -       (15,315)      (15,315)
                                               ------------ ------------  ------------  ------------  ------------  ------------
Finance Receivables, net                       $   190,063  $    47,865   $   237,928   $   126,168   $    37,041   $   163,209
                                               ============ ============  ============  ============  ============  ============

Classification:
Finance Receivables Held for Investment        $   123,787  $    69,053   $   192,840   $    26,852   $    51,282   $    78,134
Finance Receivables Held as Collateral for
  Securitization Note Payable                       58,363            -        58,363        67,084             -        67,084
                                               ------------ ------------  ------------  ------------  ------------  ------------
                                               $   182,150  $    69,053   $   251,203   $    93,936   $    51,282   $  $145,218
                                               ============ ============  ============  ============  ============  ============
</TABLE>
                                     Page 4
<PAGE>



As of March 31, 1999 and December 31, 1998, our Residuals in Finance Receivables
Sold from dealership operations were comprised of the following (in thousands):
<TABLE>
<CAPTION>
                                                                 March 31,           December 31,
                                                                   1999                  1998
                                                              -------------         ------------
 <S>                                                            <C>                 <C>
 Retained interest in subordinated securities (B Certificates)  $   41,165          $    51,243
 Net interest spreads, less present value discount                  19,837               25,838
 Reduction for estimated credit losses                             (32,522)             (43,750)
                                                                -----------         ------------
 Residuals in finance receivables sold                          $   28,480          $    33,331
                                                                ===========         ============
 Securitized principal balances outstanding                     $  158,890          $   198,747
                                                                ===========         ============
 Estimated credit losses as a % of securitized principal
   balances outstanding                                               20.5%                22.0%
                                                                ===========         ============
</TABLE>

         The following table reflects a summary of activity for our Residuals in
Finance Receivables Sold from dealership  operations for the three month periods
ended March 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
                                                                 March 31,            March 31,
                                                                   1999                 1998
                                                               ------------         ------------
 <S>                                                           <C>                  <C>
 Balance, Beginning of Period                                  $    33,331          $    13,277
 Additions                                                               -               13,858
 Amortization                                                       (4,851)              (2,394)
                                                               ------------         ------------
 Balance, End of Period                                        $    28,480          $    24,741
                                                               ============         ============
</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 $10.2 million at March 31, 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).  The maximum  commitment under the DIP facility is $11.5 million
at March 31, 1999.  The  outstanding  balance on the DIP facility  totaled $11.1
million and $12.2 million at March 31, 1999 and December 31, 1998.

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

<TABLE>
<CAPTION>
                                                                           March 31,          December 31,
                                                                             1999                1998
                                                                         --------------      -------------
<S>                                                                      <C>                  <C>       
Notes Receivable under the asset based loan program, net of
  allowance for doubtful accounts of $167, and $500, respectively        $       7,230        $     8,311
First Merchants Debtor in Possession Note Receivable                            11,062             12,228
First Merchants Bank Group Participation                                         2,331              6,856
Other Notes Receivable                                                           1,047                862
                                                                         --------------       ------------
Notes Receivable, net                                                    $      21,670        $    28,257
                                                                         ==============       ============
</TABLE>
                                     Page 5
<PAGE>


Note 4.  Notes Payable

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

<TABLE>
<CAPTION>

                                                                                           March 31,         December 31,
                                                                                             1999                1998
                                                                                         -----------         ------------

<S>                                                                                      <C>                 <C>              
Revolving Facility with GE Capital                                                       $    75,606         $    51,765
Securitization Note Payable                                                                   44,596              49,967
Note Payable Collateralized by the Common Stock of our Securitization Subsidiaries            19,999              12,234
Note Payable Collateralized by Finance Receivables Contracts                                  28,876                   -
Mortgage Loan with Finance Company                                                             3,386               3,386
Others                                                                                           897                 967
                                                                                         ------------        ------------
Subtotal                                                                                     173,360             118,319
Less:  Unamortized Loan Fees                                                                   1,456               1,025
                                                                                         ------------        ------------
Notes Payable                                                                            $   171,904         $   117,294
                                                                                         ============        ============
</TABLE>

Note 5.  Common Stock Equivalents

    Net  Earnings  (Loss) per common  share  amounts  are based on the  weighted
average number of common shares and common stock equivalents outstanding for the
three month  periods  ended March 31, 1999,  and 1998 as follows (in  thousands,
except for per share amounts):
<TABLE>
<CAPTION>
                                                                         March 31,         March 31,
                                                                           1999               1998
                                                                     ----------------  ----------------

<S>                                                                  <C>               <C>              
Income from Continuing Operations                                    $           420   $         3,729
                                                                     ================  ================
Net Earnings (Loss)                                                  $           420   $        (1,866)
                                                                     ================  ================
Basic EPS-Weighted Average Shares Outstanding                                 15,650            18,557
                                                                     ================  ================
Basic Earnings (Loss) Per Share from:
Continuing Operations                                                $          0.03   $          0.20
                                                                     ================  ================
Net Earnings (Loss)                                                  $          0.03   $         (0.10)
                                                                     ================  ================

Basic EPS-Weighted Average Shares Outstanding                                 15,650            18,557
Effect of Diluted Securities:
  Warrants                                                                         -                87
  Stock Options                                                                  135               449
                                                                     ----------------  ----------------
Dilutive EPS-Weighted Average Shared Outstanding                              15,785            19,093
                                                                     ================  ================
Diluted Earnings (Loss) Per Share from:
Continuing Operations                                                $          0.03   $          0.20
                                                                     ================  ================
Net Earnings (Loss)                                                  $          0.03   $         (0.10)
                                                                     ================  ================
Warrants Not Included in Diluted EPS Since Antidilutive                        1,556               715
                                                                     ================  ================
Stock Options Not Included in Diluted EPS since Antidilutive                   1,153               603
                                                                     ================  ================
</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 6
<PAGE>

    A summary of  operating  activity by business  segment for the three  months
ended March 31, 1999 and 1998 follows (in thousands):


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

<S>                                    <C>        <C>         <C>       <C>           <C>          <C>           <C>         
1999:
Sales of Used Cars                     $ 106,443  $        -  $       - $        -    $         -  $          -  $   106,443
Less:  Cost of Used Cars Sold             60,097           -          -          -              -             -       60,097
  Provision for Credit Losses             21,893       5,871          -        797              -             -       28,561
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
                                          24,453      (5,871)          -      (797)             -             -       17,785
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------

Interest Income                                -      10,312         61      3,317            313             -       14,003
Servicing and Other Income                     6       2,883         45         47          6,691             -        9,672
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
Income before Operating Expenses          24,459       7,324        106      2,567          7,004             -       41,460
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
Operating Expenses:
Selling and Marketing                      6,378                                35              3             -        6,416
General and Administrative                11,102       4,590      5,332        963          5,821           745       28,553
Depreciation and Amortization                791         283        521         78            321           141        2,135
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
                                          18,271       4,873      5,853      1,076          6,145           886       37,104
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
Operating Income                       $   6,188  $    2,451  $  (5,747)$    1,491    $       859  $       (886) $     4,356
                                       ========== =========== ========= ===========   ============ ============= ============


1998:
Sales of Used Cars                     $  72,973  $        -  $       - $        -    $         -  $          -  $    72,973
Less:  Cost of Used Cars Sold             39,731           -          -          -              -             -       39,731
  Provision for Credit Losses             15,034           -          -        328              -             -       15,362
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
                                          18,208           -          -      (328)              -             -       17,880
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------

Interest Income                                -       3,816         64      1,598            727             -        6,205
Gain on Sale of Loans                          -       4,614          -          -              -             -        4,614
Servicing and Other Income                    41       3,825         46          -              -             -        3,912
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
Income before Operating Expenses          18,249      12,255        110      1,270            727             -       32,611
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
Operating Expenses:
Selling and Marketing                      4,878           -          -         43              -             -        4,921
General and Administrative                10,506       4,555      2,619        515              -           591       18,786
Depreciation and Amortization                613         337        201         22              -             -        1,173
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------

                                          15,997       4,892      2,820        580              -           591       24,880
                                       ---------- ----------- --------- -----------   ------------ ------------- ------------
Operating Income                       $   2,252  $    7,363  $  2,710) $      690    $       727  $      (591)  $     7,731
                                       ========== =========== ========= ===========   ============ ============= ============
</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 substantially  completed the
branch office closure as of March 31, 1998. We are continuing to negotiate lease
settlements and terminations  with respect to our branch office network closure.
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.

     The  components  of Net Assets of  Discontinued  Operations as of March 31,
1999 and December 31, 1998 follow (in thousands):
<TABLE>
<CAPTION>
                                                                   March 31,      December 31,
                                                                     1999             1998
                                                                ---------------- ----------------
        <S>                                                     <C>              <C>             
        Finance Receivables, net                                      $  24,282        $  30,649
        Residuals in Finance Receivables Sold                             6,052            7,875
        Investments Held in Trust                                         2,971            3,665
        Disposal Liability                                               (3,000)          (3,673)
                                                                ---------------- ----------------
        Net Assets of Discontinued Operations                         $  30,305        $  38,516
                                                                ================ ================
</TABLE>
                                     Page 7
<PAGE>



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 statement 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, in
the amounts of approximately $34.5 million and $25.6 million,  respectively,  at
March 31, 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 8
<PAGE>



                                     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, 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

    General.  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
will  typically  have  limited  credit  histories,  low  incomes or past  credit
problems. At March 31, 1999, we operated 58 dealerships located in several large
markets, including Los Angeles, Atlanta, Tampa, San Antonio, Phoenix and Dallas.

    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  receivablesowned  by
          others, and
     o    manage  selected  financial  assets that we acquire  from  financially
          distressed third parties.

    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 discontinued  these operations in
1998.

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

    [OBJECT OMITTED]


    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.

                                     Page 9
<PAGE>



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 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.

Company Dealership Operations

    We  commenced  dealership  operations  in 1992 with the  acquisition  of two
dealerships  in Arizona,  and have  expanded  aggressively  since then through a
combination of acquisitions and development of new stores.  Our most significant
growth  occurred in 1997,  when 
     o    we  acquired  from  Seminole  Finance,   Inc.  and  related  companies
          (Seminole),  four  dealerships in Tampa/St.  Petersburg and a contract
          portfolio of approximately $31.1 million;
     o    we purchased from E-Z Plan, Inc. (E-Z Plan),  seven dealerships in San
          Antonio and a contract portfolio of approximately $24.3 million;
     o    we  purchased  from  Kars-Yes  Holdings,  Inc.  and related  companies
          (Kars),  six dealerships in the Los Angeles  market,  two in the Miami
          market, two in the Atlanta market, and two in the Dallas market; and
     o    we opened our first used car  dealership in the Las Vegas market,  two
          additional  dealerships in the  Albuquerque  market and one additional
          dealership  in the  Phoenix  market.  We also closed a  dealership  in
          Arizona.

    We continued our aggressive growth in 1998, adding 17 new dealerships in our
existing  markets.  We opened one  dealership in the  Albuquerque  market,  four
dealerships in the Atlanta market,  three dealerships in the Dallas market,  two
dealerships in the Los Angeles  market,  two  dealerships in the Phoenix market,
two  dealerships in the San Antonio market,  and three  dealerships in the Tampa
market. We also closed two dealerships in Miami and exited that market. We had a
total of 56 dealerships in operation at December 31, 1998.

    In the first  quarter of 1999, we added a dealership in the Tampa and Dallas
markets,  which  brought our total number of  dealerships  to 58. The  following
table  summarizes the number of stores we had in operation by major market as of
March 31, 1999, and each of the last three years ended December 31, 1998:
<TABLE>
<CAPTION>

                        Number of Stores by Market
         ----------------------------------------------------------------

                            March 31,            December 31,
                         ---------------  -------------------------------
                              1999          1998       1997       1996
                           ----------    ---------   ---------  ---------
          <S>            <C>              <C>        <C>        <C>      
          Phoenix                  9            9           7          5
          San Antonio              9            9           7          -
          Atlanta                  9            9           5          -
          Los Angeles              8            8           6          -
          Tampa                    9            8           5          -
          Dallas                   7            6           3          -
          Tucson                   3            3           3          3
          Albuquerque              3            3           2          -
          Las Vegas                1            1           1          -
          Miami                    -            -           2          -
                            ---------    ---------   ---------  ---------
                                  58           56          41          8
                            =========    =========   =========  =========
</TABLE>

Non-Dealership Operations

    Cygnet Dealer Program. In 1997 we began operating the Cygnet dealer program,
which  provides  qualified  dealers  with  warehouse  purchase   facilities  and
revolving lines of credit primarily  secured by the dealers' finance  receivable
portfolios.  We extend credit facilities that are subject to various  collateral
coverage ratios, maximum advance rates, and performance measurements,  depending
on the  financial  condition  of the  dealer  and  the  quality  of the  finance
receivables originated. The dealer remains responsible for collection of finance
receivable  payments  and retains  control of the  customer  relationship.  As a
condition to  providing  financing,  each dealer is required to satisfy  certain
criteria to qualify for the program,  report  collection  activities  to us on a
daily basis and provide us with periodic financial statements.  In addition, our
dealers are "audited" by our audit department on a periodic basis.

    Bulk Purchasing and Loan Servicing Operations.  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 April
1999, we decided to close our loan servicing  facility in Nashville,  Tennessee,
and  consolidate  all of our  loan  servicing  operations  in our two  remaining
facilities, which are located in Aurora, Colorado and Plano, Texas.

                                    Page 10
<PAGE>



    In April 1998,  we announced  that our Board of  Directors  had directed our
management  team  to  separate  our  dealership  operations  and  non-dealership
operations into separate,  publicly held companies.  Our stockholders approved a
proposal  to  split-up  the  company  through a rights  offering  at the  annual
stockholders meeting held in August 1998. Due to a lack of stockholder interest,
however,  we canceled  the rights  offering.  In the first  quarter of 1999,  we
discontinued  efforts to sell or spin off the  Cygnet  dealer  program  and bulk
purchasing and loan servicing operations.

Discontinued Operations

    In 1994, we acquired  Champion  Financial  Services,  Inc.,  an  independent
automobile  finance  company.  In April 1995, we initiated an aggressive plan to
expand  Champion's  branch office network and, by December 31, 1997, we operated
83 branch  offices  across the  country.  In February  1998,  we  announced  our
intention to close the branch  office  network and exit this line of business in
the  first  quarter  of 1998.  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. In addition,  a $6.0 million
charge  (approximately  $3.6 million,  net of income taxes) was taken during the
third quarter of 1998 due primarily to higher than  anticipated  loan losses and
servicing expenses.  The branch office closure was substantially complete by the
end of the first quarter of 1998.

    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 first quarter of 1999 compared to the
first quarter of 1998.

Results of Operations for the Three Months Ended March 31, 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


                                    Page 11
<PAGE>

<TABLE>
<CAPTION>

                 Sales of Used Cars and Cost of Used Cars Sold

                          Three Months Ended March 31,
                             (dollars in thousands)
                                                1999           1998
                                             -----------     ----------
            <S>                              <C>             <C>       
            Used Cars Sold (Units)               12,754          9,439
                                             ===========     ==========

            Sales of Used Cars                $ 106,443      $  72,973
            Cost of Used Cars Sold               60,097         39,731
                                             -----------     ----------
            Gross Margin                      $  46,346      $  33,242
                                             ===========     ==========

            Gross Margin %                         43.5%          45.6%
                                             ===========     ==========

            Per Unit Sold:
            Sales of Used Cars                $   8,346      $   7,731
            Cost of Used Cars Sold                4,712          4,209
                                             -----------     ----------
            Gross Margin                      $   3,634      $   3,522
                                             ===========     ==========
</TABLE>


    The number of cars we sold  (units)  increased by 35.1% for the three months
ended March 31, 1999 over the same period in 1998. Same store unit sales for the
three  months ended March 31, 1999  increased  5.0 % compared to the three month
period  ended  March 31,  1998.  The  increase  in our same store unit sales was
primarily a result of the maturation of stores purchased or opened in late 1997.
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 45.9% for the three ended March 31,
1999 over the same period  ended March 31,  1998.  The growth for these  periods
reflects  increases in the number of  dealerships  in operation  and the average
unit sales  price.  The Cost of Used Cars Sold  increased by 51.3% for the three
months ended March 31, 1999 over the same period ended March 31, 1998. The gross
margin  on used car  sales  (Sales  of Used  Cars  less  Cost of Used  Cars Sold
excluding  Provision for Credit Losses)  increased by 39.4% for the three months
ended March 31, 1999 over the same period ended March 31, 1998. The gross margin
per car sold for the first quarter of 1999 is comparable to the first quarter of
1998.

    Our average sales price per car increased by 8.0% for the three months ended
March 31, 1999 over the three months  ended March 31, 1998.  The increase in the
average  sales price was  necessary  to offset the  increase in the Cost of Used
Cars Sold.  On a per unit basis,  the Cost of Used Cars Sold  increased by 12.0%
for the three  months ended March 31, 1999 over the three months ended March 31,
1998.  The increase in our average cost per used car sold is primarily due to an
increase in the direct cost of the cars we acquire and re-sell.


                                    Page 12
<PAGE>


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>
                                                            Three Months Ended
                                                                March 31,

                                                            1999          1998
                                                        -------------  ------------
        <S>                                             <C>           <C>          
        Provision for Credit Losses (in thousands)           $27,764       $15,034
                                                        =============  ============
        Provision per contact originated                      $2,198        $1,610
                                                        =============  ============
        Provision as a percentage of
          principal balances originated                        27.0%         21.6%
                                                        =============  ============
</TABLE>


    The Provision for Credit Losses in our  dealership  operations  increased by
84.7% in the three months ended March 31, 1999 over the three months ended March
31, 1998. The Provision for Credit Losses per unit originated at our dealerships
increased  by $588 or 36.5% in the three  months  ended  March 31, 1999 over the
three  months   ended  March  31,  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  the  provision  for  credit  losses at 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 143.0% to $797,000 in the three months
ended March 31, 1999 from $328,000 in the three months ended March 31, 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 (defined below).
Interest Income  increased by 167.3% to $10.4 million for the three months ended
March 31, 1999 from $6.5 million for the three months ended March 31, 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.

                          Three Months Ended March 31,
                                               1999             1998
                                           ------------      ---------
    Percentage of sales revenue financed       96.5%           95.5%

    Percentage of sales units financed         99.1%           98.9%

                                    Page 13
<PAGE>

         As a result of our  expansion  into markets with  interest rate limits,
the yield on our  dealership  receivable  contracts  has gone down.  The average
effective yield on finance  receivables  from our dealerships was  approximately
25.3% for the three  months  ended March 31, 1999 and 26.0% for the three months
ended March 31, 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  decreased  by 56.9% to $313,000 for the three
months  ended March 31, 1999 from  $727,000 for the three months ended March 31,
1998. Interest Income from the Cygnet dealer program increased by 107.6% to $3.3
million for the three  months  ended  March 31,  1999 from $1.6  million for the
three months ended March 31, 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 March 31, 1999  compared to the three
months ended March 31, 1998.

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  (Securitization  Contract  Sales).
During  the fourth  quarter of 1998,  we began  structuring  our  securitization
transactions as Securitized  Borrowings  (defined below) for accounting purposes
instead of sales transactions and, therefore, we will not recognize gains on the
sale of loans from securitization  transactions in the future. We recorded Gains
on Sale of Loans  related to  securitized  contract  sales of zero for the three
months ended March 31, 1999 and $4.6 million during the three months ended March
31, 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 ending March 31, 1999 and 1998 (in thousands):

                            Dealership        Non-Dealership
                            Operations          Operations              Total
                          ---------------     --------------        ------------

      March 31, 1999           $   2,934          $   6,738            $  9,672
                          ===============     ==============        ============

      March 31, 1998           $   3,912          $       -            $  3,912
                          ===============     ==============        ============


     Dealership  Operations.  Servicing  and Other Income  decreased by 25.0% to
$2.9  million in the three  months  ended  March 31,  1999  compared to the $3.9
million  recognized  in the three months  ended March 31,  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
decline as the principal balance of the contracts serviced under the Securitized
Contract  Sales  agreements  and the third  party  portfolio  will  continue  to
decrease.
                                    Page 14
<PAGE>



    Non-Dealership  Operations.  Our Service  Fee and Other  Income in the first
quarter 1999 totaled $6.7  million.  Our servicing fee is generally a percentage
of the portfolio  balance  (generally 3.25% to 4.0% per year) with a minimum fee
per loan serviced  (generally  $14 to $17 per month).  Our service fee income is
tied to the  contract  principal  dollars  and units  that we  service  and will
continue to decline,  subject to the  incentive  compensation  discussed  below,
unless we increase the number and amount of contracts we are servicing.  We have
not entered into any loan servicing  agreements thus far in 1999 and expect that
our service fee income will continue to decline as the principal balances of the
portfolios that we are currently  servicing  decrease.  We did not recognize any
servicing  income in the first quarter 1998, as we did not begin servicing loans
in our non-dealership operations until April 1998.

    Our  non-dealership  operations have entered into servicing  agreements with
two  companies  that have filed and  subsequently  emerged from  bankruptcy  and
continue to operate  under their  approved  plans of  reorganization.  Under the
terms  of  the   respective   servicing   agreements   and  approved   plans  of
reorganization,  once certain creditors of the bankrupt companies have been paid
in full,  we are  entitled to certain  incentive  compensation  in excess of the
servicing  fees that we have earned to date.  As of March 31, 1999,  we estimate
that the total incentive  compensation  from both agreements could range from $0
to $8.0 million. We have not accrued any fee income from these incentives.

Income before Operating Expenses

    As a result of our continued  expansion,  Income before  Operating  Expenses
grew by 27.1% to $41.5  million for the three  months  ended March 31, 1999 from
$32.6 million for the three months ended March 31, 1998. Growth of Sales of Used
Cars,  Interest  Income,  and  Servicing  and  Other  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.


                                    Page 15
<PAGE>


     A summary of operating  expenses  for our  business  segments for the three
months ended March 31, 1999 and 1998 follows (in thousands):
<TABLE>
<CAPTION>

                                           Dealership Operations                 Non-Dealership Operations
                                   ------------------------------------   -----------------------------------
                                                Company
                                    Company     Dealership   Corporate    Cygnet      Cygnet Loan  Corporate
                                   Dealerships Receivables   and Other    Dealer      Servicing    and Other    Total
                                   ----------------------------------------------------------------------------------------
<S>                                <C>          <C>          <C>          <C>          <C>         <C>         <C>         
1999:
Selling and Marketing              $  6,378     $     -      $    -       $   35        $    3      $   -       $ 6,416
General and Administrative           11,102       4,590       5,332          963         5,821        745        28,553
Depreciation and Amortization           791         283         521           78           321        141         2,135
                                   =========    ========     =======      =======       =======     ======      ========
                                   $ 18,271     $ 4,873      $5,853       $1,076        $6,145      $ 886       $37,104
                                   =========    ========     =======      =======       =======     ======      ========
1998:
Selling and Marketing              $  4,878     $     -      $    -       $   43        $    -      $   -       $ 4,921
General and Administrative           10,506       4,555       2,619          515             -        591        18,786
Depreciation and Amortization           613         337         201           22             -          -         1,173
                                   =========    ========     =======      =======       =======     ======      ========
                                   $ 15,997     $ 4,892      $2,820       $  580        $    -      $ 591       $24,880
                                   =========    ========     =======      =======       =======     ======      ========
</TABLE>


         Selling and  Marketing  Expenses.  A summary of Selling  and  Marketing
Expense as a percentage of Sales of Used Cars and Selling and Marketing  Expense
per car sold from our dealership operations follows:

                                                      1999        1998
                                                    --------     -------
      Selling and Marketing Expense as a
      Percent of Sales of Used Cars                     6.0%        6.7%
                                                    ========     =======

      Selling and Marketing Expense
      per Car Sold                                    $ 500       $ 517
                                                    ========     =======



    For the three  months ended March 31, 1999 and 1998,  Selling and  Marketing
Expenses consisted almost entirely of advertising costs and commissions relating
to our dealership operations.  Selling and Marketing Expenses increased by 30.8%
to $6.4  million for the three months ended March 31, 1999 from $4.9 million for
the three  months ended March 31,  1998.  The decrease in Selling and  Marketing
Expense as a percentage  of Sales of Used Cars and on a per unit basis from 1998
to 1999 is due to the  significant  increase  in the number of cars sold in 1999
compared  to 1998  and an  increase  in the  selling  price  of  units  sold and
management's decision to reduce expenditures for advertising on a per car basis.

    General and Administrative  Expenses.  General and  Administrative  Expenses
increased  by 52.0% to $28.6  million for the three  months ended March 31, 1999
from $18.8  million for the three months  ended March 31, 1998.  The increase in
General and  Administrative  Expenses was  primarily a result of the addition of
our  bulk   purchasing   and  loan  servicing   operations,   the  expansion  of
infrastructure  to administer  the increased  number of used car  dealerships in
operation, and the growth of the Cygnet dealer program.

     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 82.0% to
$2.1 million for the three months ended March 31, 1999 from $1.2 million for the
three  months ended March 31, 1998.  The increase in 1999 was  primarily  due to
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 143.4% to $3.7 million for the three months
ended March 31,  1999 from $1.5  million  for the three  months  ended March 31,
1998.  The increase in the first  quarter of 1999 was primarily due to increased
borrowings under our Securitization Note Payable, Notes Payable and Subordinated
Notes  Payable.  The  increased  borrowings  were  used  primarily  to fund  the
increases in Finance Receivables in our dealership operations and Cygnet dealer.

                                    Page 16
<PAGE>



Income Taxes

    Income taxes totaled $280,000 for the three months ended March 31, 1999, and
$2.5 million for the three months ended March 31, 1998.  Our  effective tax rate
was 40.0%  for the three  months  ended  March 31,  1999 and 40.1% for the three
months ended March 31, 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 three months ended March
31, 1999.

Financial Position

     Total assets  increased  by 17.5% to $406.6  million at March 31, 1999 from
$346.0  million at December  31,  1998.  The  increase  was due  primarily to an
increase in Finance  Receivables of $74.7 million to $237.9 million at March 31,
1999 from $163.2  million at  December  31,  1998.  Our  dealership  operations'
Finance Receivables increased approximately $63.9 million and our non-dealership
operations' Finance Receivables increased  approximately $10.8 million primarily
as a result of growth of the Cygnet dealer program.

    We financed the increases in assets primarily through additional borrowings,
represented  by increases in Notes  Payable.  Notes  Payable  increased by $54.6
million to $171.9  million at March 31, 1999 from $117.3 million at December 31,
1998.  We obtained a $30  million  repurchase  facility in the first  quarter of
1999,  which  resulted in the  increase in  Collateralized  Notes  Payable.  The
increase in our Notes Payable is  attributable  to an increase in the balance of
our revolving line of credit, which totaled approximately $75.6 million at March
31, 1999, compared to $51.8 million at December 31, 1998.

    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.

<TABLE>
<CAPTION>

                  Total Contracts Outstanding - Dealership Operations
                (In thousands, except number of contracts)

                                                           March 31, 1999                  December 31, 1998
                                                ---------------------------------  ----------------------------------
                                                     Principal       Number of          Principal        Number of
                                                      Amount         Contracts            Amount         Contracts
                                                ---------------------------------  ----------------------------------
        <S>                                         <C>                <C>              <C>                <C>       
        Managed Portfolio                           $ 341,040          56,333           $ 292,683           49,601
        Less: Portfolios Securitized and Sold         158,890          28,409             198,747           37,186
                                                ---------------------------------  ----------------------------------
          Total Retained Principal                  $ 182,150          27,924           $  93,936           12,415
                                                =================================  ==================================
</TABLE>

    In  addition  to the loan  portfolio  summarized  above,  the  Company  also
services loan portfolios totaling approximately $92.1 million ($36.1 million for
Kars and $56.0 million from branch office originations) as of March 31, 1999 and
$121.2  million  ($47.9  million for Kars and $73.3  million from branch  office
originations) as of December 31, 1998.

    The following table reflects the growth in contract originations measured in
terms of the principal amount and the number of contracts.

                                    Page 17
<PAGE>





          Total Contracts Originated/Purchased - Dealership Operations:
        (In Thousands, Except Number of Contracts and Average Principal)


                                    Three Months Ending March 31,
                                    1999                   1998
                               ---------------     ---------------------
     Principal Amount              $  102,733                 $  69,708
     Number of Contracts               12,634                     9,339
     Average Principal             $    8,131                 $   7,464


    Finance   Receivable   principal  balances  generated  or  acquired  by  our
dealership  operations during the three months ended March 31, 1999 increased by
47.4% to $102.7  million from $69.7 million for the three months ended March 31,
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  March  31,  1999  our
non-dealership bulk purchasing/loan  servicing operations were servicing a total
of approximately  $480.0 million in finance  receivables  (approximately  70,000
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   $16.3   million   representing
approximately 30.1% of Cygnet dealer's net finance  receivables  portfolio as of
March 31, 1999. We did not have any other third party dealer loans that exceeded
10% of our Cygnet dealer finance receivable portfolio as of March 31, 1999.

Allowance for Credit Losses

     We have  established  an Allowance for Credit Losses  (Allowance)  to cover
inherent  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 of our  dealership
operations,  as well as information  regarding charge off activity for the three
months ended March 31, 1999 and 1998, in thousands.

<TABLE>
<CAPTION>

                                                                            1999                 1998
                                                                      ------------------   -----------------
    <S>                                                               <C>                  <C>              
    Allowance Activity:
    Balance, Beginning of Period                                             $   24,777          $   10,356
    Provision for Credit Losses                                                  27,764              15,034
    Reduction Attributable to Loans Sold                                              -             (17,090)
    Net Charge Offs                                                              (3,913)             (2,147)
                                                                      ------------------   -----------------
    Balance, End of Period                                                   $   48,628          $    6,153
                                                                      ==================   =================
    Allowance as a Percent of Period End Balances                                 26.7%               18.5%
                                                                      ==================   =================
    Charge off Activity:
    Principal Balances                                                       $    5,155          $    3,197
    Recoveries, Net                                                              (1,242)             (1,050)
                                                                      ------------------   -----------------
    Net Charge Offs                                                          $   (3,913)         $   (2,147)
                                                                      ==================   =================
    Net Charge Offs as a Percent of Average Principal Outstanding                  11.4%               13.1%
                                                                      ==================   =================
    Average Principal Balance Outstanding                                    $  137,669          $   65,567
                                                                      ==================   =================
</TABLE>
                                    Page 18
<PAGE>


    The  Allowance  on contracts  from  dealership  operations  was 26.7% of the
outstanding  principal  balances as of March 31,  1999 and 18.5% of  outstanding
principal  balances as of March 31,  1998.  The increase is due to the change in
the  structure to  securitized  borrowings,  which  resulted in us retaining the
securitized  loans from our fourth quarter  securitization  on balance sheet. We
increased the  provision  for credit losses to 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.

    The Allowance on contracts  from  non-dealership  operations was 3.5% of the
outstanding  principal  balances  as of March 31,  1999 and 2.9% of  outstanding
principal  balances  as of March  31,  1998.  In  addition,  our  non-dealership
operations held non-refundable  discounts and security deposits from third party
dealers totaling $22.3 million, which represented 32.2% of outstanding principal
balances as of March 31, 1999. Our non-dealership operations held non-refundable
discounts and security  deposits from third party dealers totaling $9.1 million,
which  represented 27.6% of the outstanding  principal  balances as of March 31,
1998.

    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 24.1% for the three months ended March 31, 1999
compared to 32.8% for the three  months ended March 31,  1998.  Recoveries  as a
percentage  of principal  balances  charged off from  non-dealership  operations
averaged  52.4% for the year three months ended March 31, 1999 compared to 29.7%
for the three months ended March 31, 1998.

    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 of 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
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 April 30, 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).


                                    Page 19
<PAGE>

<TABLE>
<CAPTION>

                                    POOL'S CUMULATIVE NET LOSSES AS PERCENTAGE OF POOL'S ORIGINAL
                                                   AGGREGATE PRINCIPAL BALANCE

                                        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%     22.2%      22.6%       99.9%
      3rd Quarter            $ 10,106    2.5%       7.9%     12.2%      18.8%     22.2%     23.6%      24.2%       99.5%
      4th Quarter            $  8,426    1.5%       6.6%     11.7%      18.2%     22.6%     24.1%      24.7%       99.2%
      1996:
      1st Quarter            $ 13,635    1.6%       8.0%     13.7%      20.7%     24.8%     26.2%      27.1%       97.8%
      2nd Quarter            $ 13,462    2.2%       9.2%     13.4%      22.1%     26.1%     27.7%      28.9%       95.4%
      3rd Quarter            $ 11,082    1.6%       6.9%     12.5%      21.5%     25.7%     28.0%      28.5%       91.8%
      4th Quarter            $ 10,817    0.6%       8.5%     16.0%      25.0%     29.3%     31.2%      31.2%       88.5%
      1997:
      1st Quarter            $ 16,279    2.1%      10.6%     17.9%      24.6%     29.6%     30.9%      31.3%       83.8%
      2nd Quarter            $ 25,875    1.5%       9.9%     15.9%      22.8%     27.3%     27.5%      27.5%       75.9%
      3rd Quarter            $ 32,147    1.4%       8.4%     13.3%      22.6%     25.3%     26.4%      26.4%       68.7%
      4th Quarter            $ 42,529    1.5%       6.9%     12.7%      21.6%     23.4%        X       23.4%       61.8%
      1998:
      1st Quarter            $ 69,708    0.9%       6.9%     13.6%      22.0%        X          -      20.1%       53.6%
      2nd Quarter            $ 66,908    1.1%       8.1%     14.3%         X          -         -      16.9%       40.5%
      3rd Quarter            $ 71,027    1.0%       8.1%        X           -         -         -      11.7%       27.7%
      4th Quarter            $ 69,583    1.0%         X          -          -         -         -       4.7%       13.1%
      1999:
      1st Quarter            $102,733      X           -         -          -         -         -       0.3%        0.0%
</TABLE>


    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
                                ------------------------------------
         March 31, 1999:
         31 to 60 days               2.3%          4.9%         3.5%
         61 to 90 days               1.1%          2.8%         1.9%

         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 March 31, 1999 and December 31, 1998.

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

                                    Page 20
<PAGE>



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).  This change will not affect
our  prior  securitizations.  Historically,  Gains  on Sale of Loans  have  been
material to our reported  revenues and net  earnings.  Altering the structure of
these transactions so that no gain is recognized at the time of a securitization
transaction  will  have a  material  effect  on our  reported  revenues  and net
earnings  until such time as we accumulate  Finance  Receivables  on our balance
sheet  sufficient to generate  interest income (net of interest,  credit losses,
and  other  expenses)  equivalent  to the  revenues  that  we  had  historically
recognized on our securitization transactions.

    Under our  securitization  program,  we  transfer  the  securitized  Finance
Receivables to our securitization  subsidiaries who then assign and transfer the
Finance Receivables to separate trusts for either Securitized  Contract Sales or
Securitized  Borrowings.  The trusts issue Class A certificates and subordinated
Class  B   certificates   (Residuals  in  Finance   Receivables   Sold)  to  the
securitization subsidiaries. The securitization subsidiaries then sell the Class
A certificates to the investors and retain the Class B certificates. 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  (the  Class  B
certificates) 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 securitization
trusts using the out of the trust  method.  The net cash flows out of the trusts
are  the  collections  on the  loans  in the  trust  in  excess  of the  Class A
certificate principal and interest payment 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 20.5% as of March 31, 1999, compared to
22.0%  as of  December  31,  1998.  The  balance  of the  Residuals  in  Finance
Receivables  sold was $28.5  million at March 31,  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 Class A certificates 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% of  the  initial  underlying  Finance  Receivables  principal
balance,  and pledges this cash to the spread  account  agent.  The trustee then
makes  additional  deposits  to the spread  account  out of  collections  on the
securitized  receivables  as  necessary  to  maintain  the  spread  account to 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 Class B certificates unless:

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

    At March 31, 1999, we met the targeted  spread  account  balances  under our
securitization agreements of $19.8 million. We also maintain spread accounts for
the  securitization  transactions  that  were  consummated  by our  discontinued
operations.  We had  satisfied  the spread  account  funding  obligation of $3.0
million as of March 31, 1999 with respect to these securitization transactions.

    Certain financial  information regarding  securitizations.  During the first
quarter of 1998,  we  securitized  $86.9  million in  contracts,  issuing  $62.6
million in Class A certificates,  and $24.3 million in Class B certificates.  We
recorded the carrying value of the related Residuals in Finance Receivables Sold
at $14.7  million.  We did not enter into a  securitization  transaction  in the
first quarter of 1999.

                                    Page 21
<PAGE>



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    in the past, 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.

Operating Cash Flow

    Net Cash Provided by Operating  Activities increased by $23.6 million in the
three months ended March 31, 1999 to $47.0 million  compared to the three months
ended March 31, 1998 of $23.4  million.  The change in  inventory  and  accounts
payable and accrued expenses  contributed to the increase in operating cash flow
for the quarter.

     Net Cash Used in Investing  Activities  increased by $79.5 million to $99.9
million in the three  months ended March 31, 1999  compared to $20.4  million in
the three  months  ended  March 31,  1998.  The  increase  is  primarily  due to
increases  in Cash  Used in  Investing  Activities  from  purchases  of  Finance
Receivables,  net decreases in Cash advanced under our Notes  Receivable,  which
were  offset  by  increased   collections  of  Finance   Receivables  and  Notes
Receivable.

     Net Cash  Provided by Financing  Activities  increased by $32.7  million to
$46.3 million in the three months ended March 31, 1999 compared to $13.6 million
in the three months  ended March 31,  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 22
<PAGE>


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 $8.0 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 June 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 March 31, 1999, our borrowing  capacity  under the revolving  facility
was  $97.1  million,  the  aggregate  principal  amount  outstanding  under  the
revolving facility was approximately $75.6 million,  and the amount available to
be borrowed under the facility was $21.5 million.  The revolving  facility bears
interest at the 30-day LIBOR plus 3.15%,  payable  daily (total rate of 8.09% as
of March 31, 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 32.0% of our common stock at March 31, 1999.

    In addition, we are also required to:

     o    be Year 2000  compliant  no later than June 30,  1999 (see  discussion
          below under the Year 2000 Readiness Disclosure), and
     o    maintain specified financial ratios,  including a debt to equity ratio
          of 2.2 to 1 and a net worth of at least $110 million.

     Under the terms of the revolving  facility,  we are required to maintain an
interest  coverage ratio that we failed to satisfy during the three months ended
March 31, 1999. We failed to meet this  covenant  primarily due to the reduction
in  earnings  we  recognized  as a result of the  change  in our  securitization
structure. GE Capital has waived the covenant violation as of March 31, 1999. In
May 1999,  GE Capital  amended  the  interest  coverage  ratio  required  by the
agreement to reflect the anticipated changes in our operating results due to the
change in securitization structure.

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

                                    Page 23
<PAGE>



     In April 1999, we closed a  securitization  transaction  through  Greenwich
Capital.  Under this transaction,  we securitized  approximately $120 million of
contracts and issued  approximately  $87 million of Class A certificates with an
annual interest rate of 5.7%. We received approximately $87 million in cash that
we used to repay our  repurchase  facility  and pay down our  revolving  line of
credit.

    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  and Chief  Executive  Officer,  Ernest C. Garcia II. The
Subordinated  Notes Payable balances  outstanding to Verde totaled $10.0 million
as of March 31, 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
$10.0 million in 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 $13.8 million at
March 31, 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.  Under the terms of the loan
agreement,  we were required to issue warrants to purchase 115,000 shares of our
common stock by December 31, 1998 if the loan was not paid in full by that date.
The  warrants  were to have  been  issued  at an  exercise  price of 120% of the
average  trading price for our common stock for the 20 consecutive  trading days
prior to the issuance of the warrants.  In the first quarter of 1999, we prepaid
$3.0 million of the loans and the lenders waived their right to a  proportionate
amount of the warrants. We have agreed to pay the remaining $2.0 million on June
30,  1999 and we  anticipate  not having to issue the  remaining  warrants if we
repay the loan by that date.

                                    Page 24
<PAGE>



     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
$20.0 million for a term of 278 days from  Greenwich  Capital.  $1.5 million was
used to repay the remaining balance of the $15.0 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.

    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 subsequent
to March 31, 1999. In addition,  in March 1999, we executed a commitment  letter
with Greenwich Capital in which,  subject to satisfaction of certain conditions,
Greenwich  Capital  agreed  to  provide  us with a $100  million  surety-wrapped
warehouse line of credit at a rate equal to LIBOR plus 110 basis points.

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

Capital Expenditures and Commitments

    During the three months ended March 31, 1999, we opened two new dealerships.
We also have 6 more 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.

    On July 11,  1997,  we  entered  into an  agreement  to  provide  debtor  in
possession  financing to First Merchants (DIP  facility).  As of March 31, 1999,
the maximum commitment on the DIP facility was $11.5 million and the outstanding
balance on the DIP facility totaled $11.1 million. We have obligations under our
debtor-in-possession credit facility. First Merchants is currently in default on
the DIP facility.  We have  negotiated a settlement with them that will increase
our funding  obligation  by $2.0  million,  subject to  satisfaction  of certain
conditions.

    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.

    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 stock repurchase  program.  We have repurchased a total of one million
shares of our  common  stock  under the  program,  which is the total  number of
shares the Board of Directors authorized.  In April 1999, our Board of Directors
authorized,  subject to certain  conditions,  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.

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 problem.  Failures of our own business  systems due
to the Year 2000 problem 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.


                                    Page 25
<PAGE>


    Our Year 2000 compliance program consists of:

     o    identification and assessment of critical computer programs,  hardware
          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 and regression testing on the program code modifications for our
integrated car sales and loan  servicing  system (CLASS  System).  We placed the
modified  program code into  production in April 1999 and have begun  performing
future 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.  We anticipate  performing and completing
independent Year 2000 compliance testing in May 1999.

    We believe the  remediation  of the  critical  business  systems used by our
dealership and non-dealership  operations will be substantially completed during
the second quarter of 1999.

    Assessment of Business Partners

    We have also  identified  critical  suppliers,  vendors,  and other business
partners and we are taking 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:

     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.


                                    Page 26
<PAGE>


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.

Costs

     We currently  estimate that remediation and testing of our business systems
will cost  between $2.2  million and $2.7  million.  Most of these costs will be
expensed and funded by our operating line of credit.  Costs to date  approximate
$2.0  million,  including  approximately  $140,000  of internal  payroll  costs,
substantially  all of which  have been  charged to  general  and  administrative
expense.  Costs  incurred  in the  three  month  period  ended  March  31,  1999
approximated  $600,000.  No such costs were incurred in the comparable period in
1998.  We  cannot  currently  estimate  costs  associated  with  developing  and
implementing  contingency  measures.  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 July 1,
1999. We believe the adoption of SFAS No. 133 will not have a material impact on
us.


                                    Page 27
<PAGE>



                           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.  Although we cannot determine at this
time the amount of the ultimate exposure from these lawsuits,  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.

     See  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations -- Liquidity and
Capital Resources -- Financing Resources

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

    None.

Item 5.  Other Information.

    In April 1999, Mr. Garcia advised our Board of Directors that during 1999 he
intends  to step down  from his  position  as Chief  Executive  Officer  of Ugly
Duckling.  He will remain as our  Chairman  of the Board.  Mr.  Garcia  plans to
transition  his CEO duties to Gregory B.  Sullivan,  our current  president  and
Chief  Operating  Officer  and  one of our  directors,  in  anticipation  of Mr.
Sullivan being appointed as our Chief Executive Officer.

                                    Page 28
<PAGE>

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

    (a) Exhibits

          Exhibit  10.1--Engagement  Letter between  Greenwich  Capital Markets,
          Inc.  and  Registrant  dated  March 16, 1999 for  Greenwich  to Act as
          Placement Agent for not less than $300 Million of Securitized Loans

          Exhibit  10.2--Commitment  Letter between  Greenwich  Capital Markets,
          Inc.  and  Registrant  dated  March 17,  1999 with Term Sheet for $100
          Million Revolving Credit Facility

          Exhibit  10.3--$20  Million Loan agreement  between  Greenwich Capital
          Financial Products, Inc. and Registrant dated March 18, 1999

          Exhibit   10.3(a)--Stock  Pledge  Agreement  among  Greenwich  Capital
          Financial  Products,  Inc.,  Registrant,  and certain related parties,
          dated March 18, 1999

          Exhibit 10.4 -- Amendment  to the Amended and Restated  Motor  Vehicle
          Installment  Contract  Loan and  Security  Agreement  between  General
          Electric  Capital  Corporation  and  Registrant  dated  March 25, 1999
          regarding year 2000 date change

          Exhibit 11 -- Statement regarding  computation 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

    (b) Reports on Form 8-K.

     During the first quarter of 1999, the Company filed one report on Form 8-K.
The report on Form 8-K, dated and filed March 16, 1999,  pursuant to Items 5 and
7 filed as an  exhibit  to the Form 8-K a press  release  dated  March 16,  1999
titled "Ugly Duckling  Corporation  Announces  Reclassification of Cygnet Dealer
Into  Continuing  Operations and Anticipated  First Quarter  Results." After the
first quarter of 1999, the Company has not filed a report on Form 8-K.

                                    Page 29
<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: May 13, 1999










                                    Page 30
<PAGE>



                                  EXHIBIT INDEX

Exhibit     
Number                             Description
-------                        ------------------

10.1      Engagement  Letter  between   Greenwich  Capital  Markets,   Inc.  and
          Registrant  dated March 16,  1999 for  Greenwich  to Act as  Placement
          Agent for not less than $300 Million of Securitized Loans

10.2      Commitment  Letter  between   Greenwich  Capital  Markets,   Inc.  and
          Registrant  dated  March 17,  1999 with  Term  Sheet for $100  Million
          Revolving Credit Facility

10.3      $20  Million  Loan  agreement   between  Greenwich  Capital  Financial
          Products, Inc. and Registrant dated March 18, 1999

10.3(a)   Stock Pledge Agreement among Greenwich Capital Financial  Products,
          Inc., Registrant, and certain related parties, dated March 18, 1999

10.4      Amendment  to the  Amended  and  Restated  Motor  Vehicle  Installment
          Contract Loan and Security  Agreement between General Electric Capital
          Corporation  and  Registrant  dated March 25, 1999 regarding year 2000
          date change

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







                                    Page 31