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

                       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, 2001

                        Commission File Number 000-20841

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

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

                       2525 E. Camelback Road, Suite 500,
                             Phoenix, Arizona 85016
                   (Address of principal executive (Zip Code)
                                    offices)

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                 [X] Yes [ ] No


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

    At May 11, 2001, there were approximately 12,301,000 shares of Common Stock,
$0.001 par value, outstanding.

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


<PAGE>



                           UGLY DUCKLING CORPORATION

                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>


                          Part I - FINANCIAL STATEMENTS                                                                   Page
<CAPTION>


  <S>                <C>                                                                                                   <C>

  Item 1.            FINANCIAL STATEMENTS
                     Condensed Consolidated Balance Sheets-- March 31, 2001 and December 31, 2000...........................1
                     Condensed Consolidated Statements of Operations-- Three Months Ended
                           March 31, 2001 and 2000..........................................................................2
                     Condensed Consolidated Statements of Cash Flows-- Three Months Ended
                         March 31, 2001 and 2000............................................................................3
                     Notes to Condensed Consolidated Financial Statements...................................................4

  Item 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................9
  Item 3.            MARKET RISK...........................................................................................22
                     Part II.-- OTHER INFORMATION
  Item 1.            LEGAL PROCEEDINGS.....................................................................................23
  Item 2.            CHANGES IN SECURITIES.................................................................................23
  Item 3.            DEFAULTS UPON SENIOR SECURITIES.......................................................................23
  Item 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................................23
  Item 5.            OTHER INFORMATION                                                                                     23
  Item 6.            EXHIBITS AND REPORTS ON FORM 8-K......................................................................24
                     SIGNATURES............................................................................................25


</TABLE>

<PAGE>

                                                                 ITEM 1.

                                      UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                                   (In thousands)
<TABLE>
<CAPTION>


                                                                            March 31,             December 31,
                                                                              2001                    2000
                                                                       ----------------     ------------------
                            ASSETS
<S>                                                                    <C>                  <C>

Cash and Cash Equivalents                                              $          8,579     $             8,805
Finance Receivables, Net                                                        522,893                 500,469
Note Receivable from Related Party                                               12,000                  12,000
Inventory                                                                        43,434                  63,742
Property and Equipment, Net                                                      39,215                  38,679
Intangible Assets, Net                                                           12,288                  12,527
Other Assets                                                                     17,779                  11,724
Net Assets of Discontinued Operations                                             3,282                   4,175
                                                                       ----------------      ------------------
                                                                       $        659,470      $          652,121
                                                                       ================      ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:

  Accounts Payable                                                     $          1,782      $            2,239
  Accrued Expenses and Other Liabilities                                         29,600                  36,830
  Notes Payable - Portfolio                                                     390,615                 406,551
  Other Notes Payable                                                            39,444                  16,579
  Subordinated Notes Payable                                                     40,807                  34,522
                                                                       ----------------      ------------------
     Total Liabilities                                                          502,248                 496,721
                                                                       ----------------      ------------------
Stockholders' Equity:
  Preferred Stock $.001 par value, 10,000 shares authorized
   none issued and outstanding                                                        -                       -
  Common Stock $.001 par value, 100,000 shares authorized,
   18,764 issued and 12,292 outstanding                                              19                      19
   Additional Paid-in Capital                                                   173,723                 173,723
   Retained Earnings                                                             23,594                  21,772
   Treasury Stock, at cost                                                     (40,114)                (40,114)
                                                                       ----------------      ------------------
     Total Stockholders' Equity                                                 157,222                 155,400
   Commitments and Contingencies                                                      -                       -
                                                                       ----------------      ------------------
                                                                       $        659,470      $          652,121
                                                                       ================      ==================
</TABLE>





     See accompanying notes to Condensed Consolidated Financial Statements.

                                                         1
<PAGE>




                                 UGLY DUCKLING CORPORATION AND SUBSIDIARIES

                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                Three months Ended March 31, 2001 and 2000
                            (In thousands, except earnings per share amounts)
                                               (unaudited)

<TABLE>

                                                                       Three Months Ended
                                                                            March 31,
                                                                   ----------------------------
                                                                       2001           2000
                                                                   -------------  -------------
<CAPTION>

<S>                                                                <C>            <C>

Cars Sold                                                                 14,851         15,802
                                                                   =============  =============

Total Revenues                                                     $     164,030  $     158,317
                                                                   =============  =============

Sales of Used Cars                                                 $     130,186  $     132,786
Less:
   Cost of Used Cars Sold                                                 72,841         72,942
   Provision for Credit Losses                                            39,020         34,573
                                                                   -------------  -------------
                                                                          18,325         25,271
                                                                   -------------  -------------
Other Income (Expense):
   Interest Income                                                        33,844         25,531
   Portfolio Interest Expense                                            (8,519)        (5,029)
                                                                   -------------  -------------
      Net Interest Income                                                 25,325         20,502
                                                                   -------------  -------------


Income before Operating Expenses                                          43,650         45,773

Operating Expenses:
   Selling and Marketing                                                   7,626          8,135
   General and Administrative                                             27,438         25,538
   Depreciation and Amortization                                           2,407          2,208
                                                                   -------------  -------------
   Operating Expenses                                                     37,471         35,881
                                                                   -------------  -------------

Income before Other Interest Expense                                       6,179          9,892

Other Interest Expense                                                     3,091          2,292
                                                                   -------------  -------------

Earnings before Income Taxes                                               3,088          7,600
Income Taxes                                                               1,266          3,117
                                                                   -------------  -------------
Net Earnings                                                       $      1,822   $       4,483
                                                                   =============  =============
Net Earnings per Common Share:
   Basic                                                           $       0.15  $         0.30
                                                                   =============  =============
   Diluted                                                         $       0.15  $         0.30
                                                                   =============  =============
Shares Used in Computation:
   Basic Weighted Average Shares Outstanding                              12,292         14,905
                                                                   =============  =============
   Diluted Weighted Average Shares Outstanding                            12,325         15,153
                                                                   =============  =============

</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements.


                                                         2
<PAGE>





                                    UGLY DUCKLING CORPORATION AND SUBSIDIARIES


                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    Three months ended March 31, 2001 and 2000
                                                (In thousands)
                                                 (unaudited)
<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                 ----------------------------
                                                                                     2001           2000
                                                                                 ------------ ---------------
<S>                                                                              <C>          <C>
Cash Flows from Operating Activities:
   Net Earnings                                                                  $      1,822 $         4,483
Adjustments to Reconcile Net Earnings to Net Cash Provided
   by Operating Activities:
   Provision for Credit Losses                                                         39,020          34,573
   Depreciation and Amortization                                                        3,564           3,239
   Loss from Disposal of Property and Equipment                                           423               3
   Collections from Residuals in Finance Receivables Sold                               1,136           3,994
   Decrease in Inventory                                                               20,308          13,807
Inrease in Other Assets                                                                   945           (309)
Increase (Decrease) in Accounts Payable, Accrued Expenses and Other                   (7,866)           3,353
   liabilities
   Increase (Decrease) in Income Taxes Payable                                            179         (1,208)
                                                                                 ------------ ---------------
       Net Cash Provided by Operating Activities                                       59,531          61,935
                                                                                 ------------ ---------------
Cash Flows Used in Investing Activities:
   Increase in Finance Receivables                                                  (119,405)       (133,887)
   Collections on Finance Receivables                                                  62,726          49,974
   Decrease in Investments Held in Trust on Finance Receivables Sold                    1,398           4,354
   Proceeds from Disposal of Property and Equipment                                        46           1,330
   Purchase of Property and Equipment                                                 (3,173)         (2,278)
                                                                                  ------------ --------------
       Net Cash Used in Investing Activities                                         (58,408)        (80,507)
                                                                                  ------------ --------------
Cash Flows from Financing Activities:
   Initial Deposits at Securitization into Investments Held in Trust                  (3,532)               -

   Additional Deposits into Investments Held in Trust                                (29,688)        (14,168)
   Collections from Investments Held in Trust                                          25,921          13,479
   Additions to Notes Payable Portfolio                                               161,691          96,700
   Repayment of Notes Payable Portfolio                                             (178,288)        (90,302)
   Additions to Other Notes Payable                                                    22,792               -
   Repayment of Other Notes Payable                                                     (138)         (3,220)
   Repayment of Subordinated Notes Payable                                            (1,000)               -
   Proceeds from Issuance of Common Stock                                                   -             390
                                                                                 ------------ ---------------
       Net Cash Provided (Used) by Financing Activities                               (2,242)           2,879
                                                                                 ------------ ---------------
Net Cash Provided by Discontinued Operations                                              893          18,340
                                                                                 ------------ ---------------
Net Increase (Decrease) in Cash and Cash Equivalents                                    (226)           2,647
Cash and Cash Equivalents at Beginning of Period                                        8,805           3,683
                                                                                 ------------ ---------------
Cash and Cash Equivalents at End of Period                                       $      8,579 $         6,330
                                                                                 ============ ===============
Supplemental Statement of Cash Flows Information:
   Interest Paid                                                                 $      9,795 $         7,140
                                                                                 ============ ===============
   Income Taxes Paid                                                             $      1,445 $         4,325
                                                                                 ============ ===============
</TABLE>


     See accompanying notes to Condensed Consolidated Financial Statements.


                                                         3

<PAGE>
                            UGLY DUCKLING CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.  Basis of Presentation

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

Note 2.  Summary of Finance Receivables

    A summary of Finance Receivables, net, follows ($ in thousands):
<TABLE>
                                                      March 31,          December 31,
                                                        2001                 2000
                                                    --------------     -----------------
<CAPTION>
<S>                                                 <C>                <C>
Contractually Scheduled Payments                    $      726,515     $         696,220
Unearned Finance Charges                                 (191,476)             (181,274)
                                                    --------------     -----------------
Principal Balances, net                                    535,039               514,946
Accrued Interest                                             5,213                 5,655
Loan Origination Costs                                       7,601                 7,293
                                                    --------------     -----------------
  Principal Balances, net                                  547,853               527,894
Investments Held in Trust                                   77,040                71,139
Residuals in Finance Receivables Sold                            -                 1,136
                                                    --------------     -----------------
Finance Receivables                                        624,893               600,169
Allowance for Credit Losses                              (102,000)              (99,700)
                                                    --------------     -----------------
Finance Receivables, net                            $      522,893     $         500,469
                                                    ==============     =================

Allowance as % of Ending Principal Balances, net             19.1%                 19.4%
                                                    ==============     =================
</TABLE>
     Investments Held in Trust represent funds held by trustees on behalf of our
securitization bond holders.  The balance of Investments Held in Trust increased
from December 31, 2000 due to deposits into the trust  accounts  arising from an
additional  securitization completed during the first quarter of 2001, partially
offset by distribution of funds  associated with portfolios  securitized  during
prior periods.

     Residuals in Finance  Receivables Sold represent our subordinated  interest
in loans sold through securitizations. The reduction to zero from the balance at
December 31, 2000 is  attributable to the repurchase of the sole remaining trust
recorded as gain on sale, thus, the balance of the remaining  residual  interest
is now included in finance receivables. At March 31, 2001 and December 31, 2000,
the balance of  securitized  principal  outstanding  was zero and $4.1  million,
respectively.

Note 3.  Notes Receivable- Related Party

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

                                                         4
<PAGE>

     Under the terms of the agreement,  Mr. Garcia will be allowed to reduce the
principal  balance up to a maximum of $8 million by  surrendering to the Company
shares of Ugly  Duckling  common  stock  (valued  at 98% of the  average  of the
closing  prices of the stock on NASDAQ  for the ten  trading  days  prior to the
surrender)  as long as Mr.  Garcia's  ownership  interest of the Company  voting
stock does not fall below 15% and the  acceptance  of such stock by the  Company
does not result in a breach of a covenant.


Note 4.  Notes Payable

          Notes  Payable,  Portfolio A summary of Notes  Payable,  Portfolio  at
          March 31, 2001 and December 31, 2000 follows ($ in thousands):
<TABLE>

                                                                                          March 31,             December 31,
                                                                                             2001                   2000
                                                                                      -------------------     -----------------
<CAPTION>
<S>                                                                                   <C>                     <C>

Revolving Facility for $125.0 million with GE Capital, secured by substantially
    all assets of the Company, including $49.5 million in finance receivables         $            21,256     $          53,326
Class A obligations issued pursuant to the Company's Securitization Program,
    secured by underlying pools of finance receivables and Investments Held in
    Trust totaling $562.7 million at March 31,  2001                                              372,234               355,972
                                                                                      -------------------     -----------------
    Subtotal                                                                                      393,490               409,298
    Less:  Unamortized Loan Fees                                                                    2,875                 2,747
                                                                                      -------------------     -----------------
    Total                                                                             $           390,615     $         406,551
                                                                                      ===================     =================
</TABLE>

     The revolving  facility  note payable has interest  payable daily at 30 day
LIBOR plus 3.15% (8.68% at March 31,  2001)  through  June 2001.  The  revolving
facility  agreement  contains  various  reporting  and  performance   covenants,
including  the  maintenance  of  certain   ratios,   limitations  on  additional
borrowings from other sources, restrictions on certain operating activities, and
a restriction on the payment of dividends under certain circumstances.  At March
31, 2001, the Company was in compliance  with these covenants with the exception
of interest coverage ratios, for which the Company has obtained a waiver.

     Effective  April 2001,  the Company has replaced the warehouse  receivables
portion of this  facility  and has  secured an option to extend the $25  million
inventory  line of credit  portion  of the  facility  from June 30,  2001  until
December 31, 2001. The extension on the inventory line of credit with GE Capital
requires the payment of a fee for each quarterly  extension after June 30, 2001,
and,  after June 30, 2001,  the interest rate on the line  increases by 50 basis
points to LIBOR plus 3.65%.  The  Company  continues  to search for  replacement
financing for the inventory line of credit.

     The new  revolving  facility  allows for maximum  borrowings of $75 million
during the period May 1 through November 30 and increases to $100 million during
the period  December 1 through  April 30. The term of the  facility  is 364 days
with a renewal option,  upon mutual consent,  for an additional  364-day period.
The borrowing  base  consists of up to 65% of the principal  balance of eligible
loans  originated from the sale of used cars. The lender  maintains an option to
adjust the advance rate on the principal to reflect changes in market conditions
or portfolio performance. The interest rate on the facility is LIBOR plus 2.80%.
The  facility is secured  with  substantially  all Company  assets.  The line is
subject to several  covenants,  including  certain  financial and loan portfolio
related covenants.

     Class A  obligations  have interest  payable  monthly at rates ranging from
5.09% to 7.26%. Monthly principal reductions on Class A obligations  approximate
70% of the principal  reductions on the  underlying  pool of finance  receivable
loans. See "Management's  Discussion and Analysis - Securitizations" for further
information on the Class A bonds.

                                                         5
<PAGE>

Other Notes Payable
A summary of Other Notes Payable at March 31, 2001 and December 31, 2000
follows ($ in thousands):
<TABLE>

                                                                                               March 31,         December 31,
                                                                                                  2001               2000
                                                                                             ---------------    ----------------
<CAPTION>
<S>                                                                                          <C>                <C>
Note payable, secured by the capital stock of UDRC and UDRC II and certain other
     receivables                                                                             $        35,000    $         11,141
Other notes payable bearing interest at rates ranging from 7.5% to 11.0% due through
     July 2003, secured by certain real property and certain property and
     equipment                                                                                         5,500               5,637
                                                                                             ---------------    ----------------
     Subtotal                                                                                         40,500              16,778
     Less:  Unamortized Loan Fees                                                                      1,056                 199
                                                                                             ---------------    ----------------
     Total                                                                                   $        39,444    $         16,579
                                                                                             ===============    ================

</TABLE>
<TABLE>

Subordinated Notes Payable
A summary of Subordinated Notes Payable at March 31, 2001 and December 31,
2000 follows ($ in thousands):

                                                                                                March 31,         December 31,
                                                                                                  2001                2000
                                                                                              --------------    -----------------
<CAPTION>
<S>                                                                                           <C>               <C>

$13.5 million senior subordinated notes payable to unrelated parties, bearing
     interest at 15% per annum payable quarterly, principal due February 2003
     and  senior to subordinated debentures                                                   $       10,500     $         11,500
$7.0 million senior subordinated note payable to a related party, bearing
     interest at LIBOR plus 6% per annum payable quarterly, principal due February 2010                7,000                    -
$17.5 million subordinated debentures, interest at 12% per annum
     (approximately 18.8% effective rate) payable semi-annually, principal
     balance due October 23, 2003                                                                     17,479               17,479
$11.9 million subordinated debentures, interest at 11% per annum
     (approximately 19.7% effective rate) payable semi-annually, principal
     balance due April 15, 2007                                                                       11,940               11,940
                                                                                              --------------    -----------------
     Subtotal                                                                                         46,919               40,919
     Less:  Unamortized Loan Fees                                                                          -                   31
            Unamortized Discount - subordinated debentures                                             6,112                6,366
                                                                                              --------------    -----------------
     Total                                                                                    $       40,807    $          34,522
                                                                                              ==============    =================


</TABLE>
                                                         6
<PAGE>
Note 5.  Common Stock Equivalents

     Net  Earnings per common  share  amounts are based on the weighted  average
number of  common  shares  and  common  stock  equivalents  outstanding  for the
three-month periods ended March 31, 2001, and 2000.

     Net earnings  per common  share are as follows ($ and shares in  thousands,
except for per share amounts):
<TABLE>

                                                                         Three Months Ended
                                                                              March 31,
                                                                 ------------------------------------
                                                                       2001               2000
                                                                 -----------------  -----------------
<CAPTION>

<S>                                                               <C>               <C>
Net Earnings                                                     $           1,822  $           4,483
                                                                 =================  =================
Basic Net Earnings Per Share                                     $            0.15  $            0.30
                                                                 =================  =================
Diluted Net Earnings Per Share                                   $            0.15  $            0.30
                                                                 =================  =================

Basic EPS-Weighted Average Shares Outstanding                               12,292             14,905
Effect of Diluted Securities:
   Warrants                                                                      -                 14
   Stock Options                                                                33                234
                                                                 -----------------  -----------------
Dilutive EPS-Weighted Average Shares Outstanding                            12,325             15,153
                                                                 =================  =================
Warrants Not Included in Diluted EPS Since Antidilutive                      1,195              1,156
                                                                 =================  =================
Stock Options Not Included in Diluted EPS Since Antidilutive                 1,446                875
                                                                 =================  =================
</TABLE>
Note 6.  Business Segments

     The Company has three distinct business  segments.  These consist of retail
car sales operations (Retail Operations),  the income resulting from the finance
receivables  generated at the Company dealerships  (Portfolio  Operations),  and
corporate and other operations  (Corporate  Operations).  In computing operating
profit by business segment, the following items were considered in the Corporate
Operations category:  portions of administrative expenses,  interest expense and
other items not considered  direct operating  expenses.  Identifiable  assets by
business segment are those assets used in each segment of Company operations.

     A summary of operating  activity by business segment for the three and nine
month periods ended March 31, 2001 and 2000 follows ($ in thousands):
<TABLE>
                                                  Retail         Portfolio        Corporate           Total
                                             ---------------  --------------   --------------   ---------------
<CAPTION>
<S>                                          <C>              <C>              <C>              <C>
March 31, 2001:
Sales of Used Cars                           $       130,186  $            -   $            -   $        130,186
Less: Cost of Cars Sold                               72,841               -                -             72,841
    Provision for Credit Losses                       26,652          12,368                -             39,020
                                             ---------------  --------------   --------------   ----------------
                                                      30,693        (12,368)                -             18,325

Net Interest Income                                       -           25,195              130             25,325
                                             ---------------  --------------   --------------   ----------------
Income before Operating Expenses                      30,693          12,827              130             43,650
Operating Expenses:
Selling and Marketing                                  7,626               -                -              7,626
General and Administrative                            14,658           8,008            4,772             27,438
Depreciation and Amortization                          1,326             264              817              2,407
                                             ---------------  --------------   --------------   ----------------
                                                      23,610           8,272            5,589             37,471
                                             ---------------  --------------   --------------   ----------------
Income (loss) before Other Interest Expense  $         7,083  $        4,555   $      (5,459)   $          6,179
                                             ===============  ==============   ==============   ================
Capital Expenditures                         $         2,087  $          229   $          857   $          3,173
                                             ===============  ==============   ==============   ================
Identifiable Assets                          $        85,204  $      525,773   $       45,211   $        656,188
                                             ===============  ==============   ==============   ================




                                                         7
<PAGE>
                                                  Retail         Portfolio         Corporate          Total
                                             ---------------  --------------   --------------   ----------------
March 31, 2000:
Sales of Used Cars                           $        132,786  $            -  $            -   $        132,786
Less: Cost of Cars Sold                                72,942               -               -             72,942
    Provision for Credit Losses                        27,094           7,479               -             34,573
                                             ----------------  --------------  --------------   ----------------
                                                       32,750         (7,479)               -             25,271
Net Interest Income                                         -          20,392             110             20,502
                                             ----------------  --------------  --------------   ----------------
Income before Operating Expenses                       32,750          12,913             110             45,773
                                             ----------------  --------------  --------------   ----------------
Operating Expenses:
Selling and Marketing                                   8,135               -               -              8,135
General and Administrative                             14,190           6,077           5,271             25,538
Depreciation and Amortization                           1,071             300             837              2,208
                                             ----------------  --------------  --------------   ----------------
                                                       23,396           6,377           6,108             35,881
                                             ----------------  --------------  --------------   ----------------
Income (loss) before Other Interest Expense  $          9,354  $        6,536  $      (5,998)   $          9,892
                                             ================  ==============  ==============   ================
Capital Expenditures                         $          1,273  $          99  $          906   $           2,278
                                             ================  ==============  ==============   ================
</TABLE>


Note 7.  Use of Estimates

     The preparation of our condensed consolidated financial statements requires
us to make estimates and  assumptions  that affect the reported amount of assets
and liabilities and disclosure of contingent  assets and liabilities at the date
of the financial  statements  and the reported  amounts of revenues and expenses
during the reporting period. Actual results could differ from our estimates.

Note 8.  Reclassifications

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


Note 9.  Subsequent Events

     On April 16, 2001, as previously announced,  Mr. Ernest Garcia, II, made an
offer to the board of directors to purchase  all of the  outstanding  shares the
Company  common stock not already held by him. The Company's  board of directors
established  a  special   transaction   committee,   composed  of  disinterested
directors, to evaluate the proposal and make a recommendation to the full board.
Under the terms of the offer,  the holders of the  outstanding  shares of common
stock would  receive  $7.00 per share,  $2.00 in cash and $5.00 in  subordinated
debentures from the acquiring  company.  The subordinated  debentures would have
interest payable at 10%, interest only payments  semiannually until maturity and
a ten-year  term.  Mr.  Garcia's  offer also  states that Greg  Sullivan,  chief
executive  officer and  president  of the  Company,  would  receive an option to
purchase a 20% interest in the acquiring company.

     In April 2001, Verde Investments,  Inc., an affiliate of Mr. Ernest Garcia,
II, purchased one property at book value, including land and building, currently
owned by the Company, for approximately $1.7 million.  This purchase was made in
connection with the purchase options granted to Verde Investments,  Inc. as part
of the $7 million  loan to the Company  required by the $35 senior  secured loan
agreement originated in January 2001.




                                                         8
<PAGE>
                                     ITEM 2.

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


Introduction

     We operate the largest chain of buy here-pay here used car  dealerships  in
the United  States.  At March 31, 2001,  we operated 77  dealerships  located in
eleven metropolitan areas in eight states. We have one primary line of business:
to sell and finance  quality used vehicles to customers  within what is referred
to as the  sub-prime  segment of the used car market.  The  sub-prime  market is
comprised of customers who typically have limited credit histories,  low incomes
or past credit problems.

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

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

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

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

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

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

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

     In the  following  discussion  and  analysis,  we  explain  the  results of
operations   and  general   financial   condition  of  Ugly   Duckling  and  its
subsidiaries.  In particular,  we analyze and explain the changes in the results
of operations of our business  segments for the three-month  periods ended March
31, 2001 and 2000.

                                                         9
<PAGE>
<TABLE>

                                                        UGLY DUCKLING CORPORATION
                                                  SELECTED CONSOLIDATED FINANCIAL DATA
                                         ($ in millions, except per car sold and per share data)
                                                               (Unaudited)
<CAPTION>
                                                                             At or For the Three Months Ended
                                                       -----------------------------------------------------------------------------
<S>                                                         <C>              <C>           <C>            <C>            <C>
Operating Data:                                             March 2001       Dec 2000      Sept 2000      June 2000      March 2000
                                                            ----------       --------      ---------      ---------      ----------
Total Revenues                                                 $ 164.0        $ 135.2       $  158.1       $  151.4        $  158.3
Sales of Used Cars                                             $ 130.2        $ 102.3       $  126.6       $  121.5        $  132.8
Earnings per Share                                             $  0.15        $ (0.20)      $   0.21       $   0.31        $   0.30
EBITDA                                                         $  17.1          $ 8.7       $   16.5       $   18.2        $   17.1
E-Commerce Revenue as % of Used Car Sales                        11.6%          13.6%           9.5%           5.3%            4.3%
Number Dealerships in Operation                                     77             77             77             77              75
Average Sales per Dealership per Month                              64             51             64             62              70
Number of Used Cars Sold                                        14,851         11,874         14,825         14,369          15,802
Sales Price - Per Car Sold                                     $ 8,766        $ 8,618       $  8,542       $  8,458        $  8,403
Cost of Sales - Per Car Sold                                   $ 4,905        $ 4,727       $  4,773       $  4,761        $  4,616
Gross Margin - Per Car Sold                                    $ 3,861        $ 3,891       $  3,769       $  3,696        $  3,787
Provision - Per Car Sold                                       $ 2,627        $ 3,292       $  2,435       $  2,242        $  2,188
Total Operating Expense - Per Car Sold                         $ 2,523        $ 2,832       $  2,495       $  2,425        $  2,271
Total Operating Income - Per Car Sold                          $   416        $ (168)       $    466       $    691        $    626
Total Operating Income                                         $   6.2        $ (2.0)       $    6.9       $    9.9        $    9.9
Earnings (loss) before Income Taxes                            $   3.1        $ (4.2)       $    4.5       $    7.3        $    7.6
Cost of Used Cars as Percent of Sales                            56.0%          54.8%          55.9%          56.3%           54.9%
Gross Margin as Percent of Sales                                 44.0%          45.2%          44.1%          43.7%           45.1%
Provision - % of Originations                                    31.0%          38.8%          29.0%          27.1%           27.0%
Total Operating Expense - % of Total Revenues                    22.8%          24.9%          23.4%          23.0%           22.7%
Segment Operating Expense Data:
Retail Operating Expense - Per Car Sold                        $ 1,590        $ 1,710       $  1,549       $  1,611        $  1,481
Retail Operating Expense-% of Used Car Sales                     18.1%          19.8%          18.1%          19.1%           17.6%
Corporate/Other Expense - Per Car Sold                         $   376        $   417       $    428       $    418        $    387
Corporate/Other Expense - % of Total Revenue                      3.4%           3.7%           4.0%           4.0%            3.9%
Portfolio Exp. Annualized - % of EOP Managed Principal            6.2%           6.7%           6.1%           5.0%            5.5%
Balance Sheet Data:
Finance Receivables, net                                       $ 522.9        $ 500.5       $  491.9       $  451.2        $  407.3
Inventory                                                      $  43.4        $  63.7       $   43.7       $   45.9        $   49.1
Total Assets                                                   $ 659.5        $ 652.1       $  618.5       $  577.5        $  548.0
Notes Payable - Portfolio                                      $ 390.6        $ 406.6       $  362.3       $  316.0        $  282.9
Subordinated Notes Payable                                     $  40.8        $  34.5       $   36.1       $   37.3        $   28.9
Total Debt                                                     $ 470.9        $ 457.7       $  416.3       $  381.0        $  345.2
Common Stock                                                   $ 173.7        $ 173.7       $  173.7       $  173.7        $  173.7
Treasury Stock                                                 $(40.1)        $(40.1)       $ (39.4)       $ (28.4)        $ (20.3)
Total Stockholder's Equity                                     $ 157.2        $ 155.4       $  158.5       $  166.8        $  170.6
Common Shares Outstanding - End of Period                       12,292         12,292         12,378         13,899          14,980
Book Value per Share                                           $ 12.79        $ 12.64       $  12.81       $  12.00        $  11.39
Tangible Book Value per Share                                  $ 11.79        $ 11.62       $  11.78       $  11.02        $  10.43
Total Debt to Equity                                               3.0            2.9            2.6            2.3             2.0
Loan Portfolio Data:
Interest Income                                                $  33.8        $  32.9       $   31.4       $   29.9        $   25.5
Average Yield on Portfolio                                       26.3%          26.1%          26.1%          26.8%           26.2%
Principal Balances Originated                                  $ 126.0        $ 100.8       $  124.4       $  118.8        $  128.1
Principal Balances Originated as % of Sales                      96.8%          98.5%          98.2%          97.7%           96.5%
Number of Loans Originated                                      14,776         11,906         14,748         14,291          15,721
Average Original Amount Financed                               $ 8,528        $ 8,468       $  8,433       $  8,311        $  8,150
Number of Loans Originated as % of Units Sold                    99.5%         100.3%          99.5%          99.5%           99.5%
Managed Portfolio Delinquencies:
     Current                                                     78.6%          66.1%          72.4%          71.9%           74.8%
     1 to 30 days                                                15.7%          26.1%          19.3%          20.9%           19.9%
     31 to 60 days                                                3.3%           4.7%           4.9%           4.5%            3.4%
     Over 60 days                                                 2.4%           3.1%           3.4%           2.7%            1.9%
Principal Outstanding - Managed                                $ 535.0        $ 519.0       $  525.5       $  500.0        $  461.8
Principal Outstanding - Retained                               $ 535.0        $ 514.9       $  512.8       $  472.3        $  418.9
Number of Loans Outstanding - Managed                           87,033         84,864         85,240         81,407          75,496
Number of Loans Outstanding - Retained                          87,033         82,598         79,848         71,518          62,459

</TABLE>
                                                        10
<PAGE>

First Quarter highlights include:

o   Total revenues were $164.0 million
o   E-Commerce  generated  $15.1  million in revenues  and 1,725 cars sold
    during the first  quarter of 2001 as compared to $13.7 illion in revenues
    and 1,553 cars sold during the fourth quarter of 2000
o   Loan portfolio principal balance reached $535.0 million, representing a 28%
    increase over the year-ago quarter
o   New loan originations were $126.0 million, consistent with the year ago
    quarter
o   Entered into a $35 million Senior Secured Loan facility to replace our
    previous $38 million Senior Secured facility
o   Entered into a $75-$100 million warehouse receivables line of credit with
    Greenwich Capital Financial Products, Inc.
o   Secured an option to extend until December 31, 2001, our existing $25
    million inventory line of credit
o   Closed 19th Securitization with loan principal balances of approximately
    $117.7 million and Class A bonds issued of $83.6 million
o   Incurred $368,000 after tax charge to earnings in connection with the
    closing of Florida and Texas collection and loan administration centers
o   Our  Chairman of the Board and largest  shareholder,  Ernest C.  Garcia II,
    made an offer to purchase  all of our  outstanding stock

Sales of Used Cars and Cost of Used Cars Sold
<TABLE>

                                           Three Months Ended
                                               March 31,
                                   -----------------------------------
<CAPTION>

    ($ in thousands)                      2001                2000            % Change
<S>                                <C>                  <C>               <C>
-------------------------------    ----------------     --------------    -------------
Number of Used Cars Sold                     14,851             15,802        (6.0)%
                                   ================     ==============
Sales of Used Cars                 $        130,186     $      132,786        (2.0)%

Cost of Used Cars Sold                       72,841             72,942        (0.1)%
                                   ----------------     --------------
Gross Margin                       $         57,345     $       59,844        (4.2)%
                                   ================     ==============
Gross Margin %                                44.0%              45.1%

Per Car Sold:
Sales                              $          8,766     $        8,403         4.3%
Cost of Used Cars Sold                        4,905              4,616         6.3%
                                   ----------------     --------------
Gross Margin                       $          3,861     $        3,787         2.0%
                                   ================     ==============
</TABLE>

     For the  three-month  period ended March 31, 2001,  the number of cars sold
decreased by 6% and Used Car Sales revenues decreased by 2% over the same period
in 2000.  During  2000,  we  developed a risk  management  department,  which is
currently  focusing on credit risk  modeling  techniques.  The  decrease in both
units sold and revenues is primarily  the result of  initiatives  which have put
more stringent  guidelines in place  regarding  income  qualifications  and down
payment requirements in an effort to improve the quality of loans generated from
used car sales.

     Our Internet site continues to be a valuable tool  generating an increasing
number of credit  applications.  We accept credit  applications  from  potential
customers  via  our  website,  located  at  http://www.uglyduckling.com.  Credit
inquiries received over the web are reviewed by our employees,  who then contact
the customers and schedule appointments.  We continue to monitor and enhance our
Internet  application  levels.  These efforts  continue to provide an increasing
number of used cars sold.  During the first  quarter of 2001, we sold 1,725 cars
generating  $15.1 million in revenue versus 1,553 cars totaling $13.7 million in
revenue  during the fourth quarter of 2000 and up from 1,417 cars sold and $12.0
million in revenue  during the third quarter of 2000.  The  E-commerce  customer
group generally outperforms other customers in terms of loan performance.

     The Cost of Used Cars Sold for the three-month period ended March 31, 2001,
remained consistent with the comparable period of the previous year. The Cost of
Used Cars  Sold on a per car basis  increased  6.3% for the three  months  ended
March 31, 2001 over the same period of the prior year. The increase is due to an
effort to purchase higher quality vehicles as a result
                                                        11
<PAGE>

of research completed by our risk management department,  which indicated better
loan  performance on the loans  associated with the higher cost inventory.  This
increase  was more than offset by an increase in the sales price earned per car.
The gross  margin  on used car sales  (Sales of Used Cars less Cost of Used Cars
Sold excluding  Provision for Credit Losses) as a percentage of related  revenue
decreased  to 44.0% for the three  months  ended March 31, 2001 versus 45.1% for
the three-month  period ended March 31, 2000. The decrease is due to the cost of
used cars sold rising at a higher pace than the related  revenues.  On a per car
sold  basis,  gross  margin  increased  slightly to $3,861 per car for the three
month  period  ended March 31, 2001 from $3,787  during the same  quarter of the
previous year. This increase is due to an increase in the overall revenue earned
per car,  partially  offset  by the  increase  in the per unit cost of used cars
sold.

     We finance  substantially all of our used car sales. The percentage of cars
sold financed has remained constant in 2001 versus 2000. The percentage of sales
revenue  financed has also  remained  relatively  constant for the quarter ended
March 31, 2001. The following  table indicates the percentage of sales units and
revenue financed:
<TABLE>
<CAPTION>

                                                  Three Months Ended
                                                       March 31,
                                           ----------------------------------
                                                 2001              2000
                                           ------------------ ---------------
<S>                                        <C>                <C>
Percentage of used cars sold financed            99.5%            99.5%
                                           ================== ===============

Percentage of sales revenue financed             96.8%            96.5%
                                           ================== ===============
</TABLE>

Provision for Credit Losses
<TABLE>

    The following is a summary of the Provision for Credit Losses:

<CAPTION>
                                                   Three Months Ended
                                                       March 31,
                                               ---------------------------
                                                   2001          2000         % Change
                                               -------------- ------------  --------------
<S>                                            <C>            <C>           <C>
Provision for Credit Losses ($ in thousands)   $       39,020 $     34,573           12.9%
                                               ============== ============
Provision per loan originated                  $        2,641 $      2,199           20.1%
                                               ============== ============
Provision as a percentage of
  principal balances originated                         31.0%        27.0%
                                               ============== ============
</TABLE>

     The  Provision  for  Credit  Losses is the  amount  we  charge  to  current
operations  on each car sold to establish an allowance  for credit  losses.  The
Provision  for Credit  Losses for the  three-month  period  ended March 31, 2001
increased  12.9% over the comparable  period of the prior year. The increase was
primarily due to an increase in the overall  provision charged from 27% of loans
originated  in the first quarter of 2000 to 31% of loans  originated  during the
first  quarter of 2001.  The  increase  was  necessary  to establish an adequate
allowance for the on balance sheet portfolio.  The provision per loan originated
increased 20.1% over the same period of the previous year due to the increase in
the overall provision  mentioned above,  coupled with an increase of $378 in the
average  amount  financed  for the  three-month  period  ended March 31, 2001 of
$8,528 per unit versus $8,150 during the same period of the previous year.

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


                                                        12
<PAGE>
<TABLE>
Net Interest Income
<CAPTION>

                                             Three Months Ended
                                                  March 31,
                                       ---------------------------------
                                            2001             2000            % Change

                                       ---------------- ---------------- -----------------
<S>                                    <C>              <C>                   <C>
($ in thousands)
Interest Income                        $         33,844 $         25,531      32.6%
Portfolio Interest Expense                        8,519            5,029      69.4%
                                       ---------------- ----------------
Net Interest Income                    $         25,325 $         20,502      23.5%
                                       ================ ================
Average Retained Prinicpal Balance     $        525,465 $        386,824
                                       ================ ================
Average Effective Yield                           26.1%            26.5%
                                       ================ ================
Average Notes Payable Balance          $        384,121 $        280,241
                                       ================ ================
Average Borrowing Cost                             8.9%             8.0%
                                       ================ ================
</TABLE>

     Interest  Income  consists  primarily  of  interest  on finance  receivable
principal  balances retained on our balance sheet.  Retained  principal balances
grew to $522.9  million at March 31, 2001 from $407.3 million at March 31, 2000.
The growth in retained  principal balances is primarily due to the change in the
way we structure our  securitizations  to the  collateralized  borrowing  method
during the fourth quarter of 1998.  Since that time, all  securitized  loans are
retained on our balance sheet and the income is recognized  over the life of the
loan.

     Portfolio  interest  expense  increased to $8.5 million for the three-month
period  ending  March 31, 2001  versus  $5.0  million for the same period of the
previous year.  The increase is due to the increase in Portfolio  Notes Payable,
which consist of our Class A obligations,  related to our securitization program
along with our  revolving  credit  facility  with GE Capital.  This  increase in
interest  expense is offset by the  additional  interest  income earned from the
growth in finance receivables retained on our balance sheet.


Income before Operating Expenses

     Income before  Operating  Expenses  decreased 4.6% to $43.7 million for the
three-month  period  ended March 31,  2001 as compared to $45.8  million for the
three-month  period ended March 31, 2000. The decrease resulted from an increase
in the amount charged to current  operations for the provision for credit losses
from 27% in the first quarter of 2000 to 31% in the first  quarter of 2001,  and
an  increase in interest  expense  resulting  from  additional  portfolio  notes
payable, partially offset by an increase in interest income due to the growth in
the finance receivables portfolio.
<TABLE>

Operating Expenses
<CAPTION>

                                              Three Months Ended
                                                  March 31,
                                       ---------------- ----------------
                                            2001             2000            % Change
                                       ---------------- ---------------- ----------------
<S>                                    <C>              <C>                    <C>
($ in thousands)
Operating Expenses                     $         37,471 $         35,881        4.4%
                                       ================ ================
Per Car Sold                           $          2,523  $         2,271       11.1%
                                       ================ ================

As % of Total Revenue                             22.8%            22.7%
                                       ================ ================

</TABLE>

     Operating  expenses,  which  consist of  selling,  marketing,  general  and
administrative and  depreciation/amortization  expenses,  increased quarter over
quarter but remained  constant as a percentage  of total  revenues.  Included in
these expenses is a pre-tax charge of approximately  $600,000 for the closing of
the collection and loan administration  centers in Florida and Texas. During the
first  quarter of 2001,  we initiated a plan to close our  collections  and loan
administration operations in Clearwater, Florida, Plano, Texas and Dallas, Texas
and move them to our stores or to our Gilbert, Arizona collection facility. As a
result of these closings, we took an after tax charge of approximately  $368,000
to cover payroll,  severance and certain property related expenses. We expect to
take an additional  restructuring  charge in the second quarter related to costs
of  abandoned  assets  still  in use  with a  carrying  value  of  approximately
$500,000.

                                                        13
<PAGE>
The estimated impact resulting from the shut down of these operations, including
the impact of future  charges,  is estimated to be break even over the remainder
of 2001 and to decrease operating expenses by $1.5 million annually beginning in
2002. 13

Interest Expense

     Interest  expense arising from our other,  non-portfolio  debt totaled $3.1
million for the three  months  ended March 31, 2001 versus $2.3  million for the
three  months ended March 31, 2000.  The increase is primarily  attributable  to
interest  expense arising from our exchange debt on the exchange offer completed
in April 2000.

Income Taxes

     Income taxes  totaled  $1.3  million and $3.1  million for the  three-month
period ended March 31, 2001 and 2000,  respectively.  Our effective tax rate was
41% for both periods presented.

Net Earnings

     Net Earnings operations totaled $1.8 million and $4.5 million for the three
months ended March 31, 2001 and 2000,  respectively.  The decrease for the three
months  ended  March  31,  2001 is  primarily  a result of the  increase  in the
provision  for credit  loss from 27% to 31% of  originations  and an increase in
portfolio interest expense, partially offset by an increase in interest income.

Business Segment Information

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

     Operating Expenses for our business  segments,  along with a description of
the included  activities,  for the three-month  periods ended March 31, 2001 and
2000 are as follows:

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

<TABLE>
<CAPTION>

                                          Three Months Ended
                                               March 31,
                                       --------------------------
                                          2001          2000        % Change
                                       ------------  ------------  ------------
<S>                                    <C>           <C>              <C>
Retail Operations:
    Selling and Marketing              $      7,626  $      8,135     (6.3)%
    General and Administrative               14,658        14,190       3.3%
    Depreciation and Amortization             1,326         1,071      23.8%
                                       ------------  ------------
    Retail Expense                     $     23,610  $     23,396       0.9%
                                       ============  ============
Per Car Sold:
    Selling and Marketing              $        514  $        515     (0.2)%
    General and Administrative                  987           898       9.9%
    Depreciation and Amortization                89            68      30.9%
                                       ------------  ------------
                                       $      1,590  $      1,481       7.4%
                                       ============  ============
As % of Used Cars Sold Revenue:
    Selling and Marketing                      5.9%          6.1%
    General and Administrative                11.3%         10.7%
    Depreciation and Amortization              1.0%          0.8%
                                       ------------  ------------
                                              18.2%         17.6%
                                       ============  ============

</TABLE>
                                                        14
<PAGE>
     Selling and Marketing  expenses both as a percentage of related revenue and
on a per car sold basis have remained  relatively  constant for the three months
ended March 31, 2001 versus the same period of the previous year.

     General and Administrative expenses increased only slightly as a percentage
of related revenue for the three-month period ended March 31, 2001,  principally
as a result of increases in salary and benefit costs,  but have grown almost 10%
on a per car sold  basis  over the first  quarter  of 2000.  The  reason for the
slight increase as a percentage of revenue is due to expenses  increasing  along
with an increase in the  average  selling  price per car to $8,766 for the first
quarter of 2001,  compared to $8,403 for the first quarter of 2000.  The expense
increase is more apparent on a per car sold basis as the expenses have risen but
the  volume  of  cars  sold  has  decreased,  primarily  due to  more  stringent
underwriting guidelines.

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

<TABLE>
<CAPTION>

                                                 Three Months Ended
                                                      March 31,
                                              --------------------------
                                                  2001          2000         % Change
                                              -----------   ------------   ------------
<S>                                           <C>           <C>            <C>
Portfolio Operations:
  General and Administrative                  $     8,008   $      6,077
  Depreciation and Amortization                       264            300      (12.0)%
                                              -----------   ------------
    Portfolio Expense                         $     8,272   $      6,377        29.7%
                                              ===========   ============
Expense per Month per Loan Serviced           $     31.33   $      28.75
                                              ===========   ============
Annualized Expense as % of EOP Managed
    Principal Balances                               6.2%           6.2%
                                              ===========   ============

</TABLE>
     The  increase  in  portfolio  expenses as well as the expense per month per
loan serviced for the three-month  period ended March 31, 2001 for our Portfolio
segment is primarily a result of the increased number of loans in our portfolio.
Also attributing to the increase were approximately $600,000 in costs accrued in
relation to the closing of the collection and loan administration  facilities in
Florida and Texas, mentioned previously.

     Corporate Operations.  Operating expenses for our Corporate segment consist
of costs to provide managerial oversight and reporting for the Company,  develop
and implement  policies and procedures,  and provide expertise to the Company in
areas such as finance,  legal, human resources and information  technology ($ in
thousands, except per car sold data).
<TABLE>
<CAPTION>

                                                 Three Months Ended
                                                      March 31,
                                              --------------------------
                                                  2001          2000         % Change
                                              -----------   ------------   ------------
<S>                                           <C>           <C>            <C>
Corporate Operations:
 General and Administrative                   $     4,772   $      5,271      (9.5)%
    Depreciation and Amortization                     817            837      (2.4)%
                                              -----------   ------------
         Corporate Expense                    $     5,589   $      6,108      (8.5)%
                                              ===========   ============
Per Car Sold                                  $       376   $        387
                                              ===========   ============
As % of Total Revenues                               3.4%           3.9%
                                              ===========   ============
</TABLE>


     Operating  expenses related to our Corporate  segment as a percent of total
revenue  remained  relatively  consistent  for the three  months ended March 31,
2001, versus the same period of 2000. However, on a per car sold basis corporate
expenses decreased $11 per car for the quarter ended March 31, 2001, as compared
to the same quarter of the previous year.
                                                        15
<PAGE>

Financial Position

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

<TABLE>
<CAPTION>
                                                      March 31,         December 31,
                                                       2001                2000             % Change
                                               ---------------------------------------  ---------------
<S>                                            <C>                  <C>                     <C>
Total Assets                                   $           659,470  $          652,121         1.1%
                                               ===================  ==================
Inventory                                                   43,434              63,742      (31.9)%
Finance Receivables, Net                                   522,893             500,469         4.5%
Net Assets of Discontinued Operations                        3,282               4,175      (21.4)%

Total Debt                                     $           470,866  $          457,652         2.9%
                                               ===================  ==================
Notes Payable - Portfolio                      $           390,615  $          406,551       (3.9)%
Other Notes Payable                                         39,444              16,579       137.9%
Subordinated Notes Payable                                  40,807              34,522        18.2%
Stockholders' Equity                           $           157,222  $          155,400         1.2%
                                               ===================  ==================

</TABLE>

     Total Assets.  Total assets has remained  relatively stable as the increase
in Finance Receivables, Net, was offset by the decrease in Inventory.

     Inventory. Inventory represents the acquisition and reconditioning costs of
used cars located at our dealerships and our inspection  centers.  The change in
inventory  from  December  31,  2000 to March  31,  2001 is due to  management's
decision to increase  inventory levels at the end of the year in preparation for
the strong  seasonal  sale  periods,  which are  typically  the first and second
quarters of the year.  We generally  acquire our used car  inventory  from three
sources:  approximately 50% from auctions, 30% from wholesalers and 20% from new
car dealerships.

     Growth in Finance Receivables, net. Due to the lack of growth in the volume
of cars sold, Finance Receivables,  net as of March 31, 2001 increased only 4.5%
from  December 31, 2000.  See Note (2) to the Condensed  Consolidated  Financial
Statements for the details of the components of Finance Receivables, net.

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

<TABLE>
<CAPTION>

                                                                             Managed Loans
                                              ------------------------------------------------------------------------------
                                                       Principal Balances                         Number of Loans
                                                   March 31,          December 31,           March 31,          December 31,
                                                     2001                 2000                 2001                 2000
                                              ----------------    -----------------     ----------------    -----------------
<S>                                           <C>                 <C>                   <C>                 <C>
Principal-Managed                             $        535,039    $         519,005     $         87,033    $          84,864
Less:  Principal - Securitized and Sold                      -                4,059                    -                2,266
                                              ----------------    -----------------     ----------------    -----------------
Principal - Retained on Balance Sheet         $        535,039    $         514,946     $         87,033    $          82,598
                                              ================    =================     ================    =================

</TABLE>

     At March 31, 2001, the entire loan portfolio is on-balance sheet. Principal
Balances - Retained on Balance Sheet has increased 3.9%. As we continue to focus
on the underwriting  guidelines,  we do not expect the portfolio balance grow as
significantly as in past quarters.  Although the volume of loans is leveling, we
anticipate  the quality of the loans written to improve,  with the ultimate goal
of improving  loan losses.  The number of used cars sold totaled  14,851 for the
quarter  ended March 31, 2001,  versus sales of 15,802 used cars during the same
quarter of the prior year.

                                                        16
<PAGE>

     The following  table reflects  activity in the Allowance for Credit Losses,
as well as information regarding charge off activity, for the three months ended
March 31, 2001 and 2000 ($ in thousands):
<TABLE>
<CAPTION>

                                                               March 31,
                                                 ---------------------------------------
                                                        2001                2000
                                                 -------------------  ------------------
<S>                                              <C>                  <C>
Allowance Activity:
Balance, Beginning of Period                     $            99,700  $           76,150
Provision for Credit Losses                                   39,020              34,573
Other Allowance Activity                                          42                 104
Net Charge Offs                                             (36,762)            (23,242)
                                                 -------------------  ------------------
Balance, End of Period                           $           102,000  $           87,585
                                                 ===================  ==================
Allowance as % Ending Principal Balances                       19.1%               20.9%
                                                 ===================  ==================
Charge off Activity:
Principal Balances                               $          (47,156)  $         (31,166)
Recoveries, Net                                               10,394               7,924
                                                 -------------------  ------------------
Net Charge Offs                                  $          (36,762)  $         (23,242)
                                                 ===================  ==================
</TABLE>

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

Static Pool Analysis

     We use a "static  pool  analysis to monitor  performance  for loans we have
originated at our dealerships. In a static pool analysis, we assign each month's
originations  to a  unique  pool  and  track  the  charge  offs  for  each  pool
separately.  We  calculate  the  cumulative  net charge  offs for each pool as a
percentage of that pool's original  principal  balances,  based on the number of
complete  payments  made by the  customer  before  charge  off.  The table below
displays the cumulative net charge offs of each pool as a percentage of original
loan cumulative  balances,  based on the quarter the loans were originated.  The
table is further  stratified  by the number of  payments  made by our  customers
prior to charge off.  For periods  denoted by "x",  the pools have not  seasoned
sufficiently to allow us to compute  cumulative  losses.  For periods denoted by
"-",  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  due to ongoing  collection  efforts on charged off  accounts,  and the
difference  between final proceeds on the sale of repossessed  collateral versus
our  estimates of the sale  proceeds.  Management,  however,  believes that such
variation will not be material.

     The following  table sets forth as of April 30, 2001,  the  cumulative  net
charge offs as a percentage of original loan cumulative  (pool) balances,  based
on the quarter of  origination  and segmented by the number of monthly  payments
completed  by customers  before  charge off. The table also shows the percent of
principal  reduction  for each pool since  inception  and  cumulative  total net
losses incurred (TLI).

                                                        17
<PAGE>
<TABLE>

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


                                                  Monthly Payments Completed by Customer Before Charge Off
                                      ----------------------------------------------------------------------------------
    <S>                   <C>         <C>       <C>       <C>        <C>       <C>       <C>       <C>        <C>
                              Orig.       0         3         6         12        18        24        TLI      Reduced
                          ----------  --------  --------  --------   --------  --------  --------  --------   --------
    1993                  $   12,984      8.8%     22.1%     28.5%      33.8%     35.9%     36.5%     36.8%     100.0%
    1994                  $   23,589      5.3%     14.8%     19.9%      25.6%     28.0%     28.7%     28.8%     100.0%
    1995                  $   36,569      1.9%      8.1%     13.1%      19.0%     22.2%     23.5%     24.1%     100.0%
    1996:                 $   48,996      1.5%      8.1%     13.9%      22.1%     26.2%     27.9%     28.9%     100.0%
    1997:
       1st Quarter        $   16,279      2.1%     10.7%     18.2%      24.8%     29.8%     32.0%     33.5%     100.0%
       2nd Quarter        $   25,875      1.5%      9.9%     15.8%      22.7%     27.4%     29.5%     30.6%      99.9%
       3rd Quarter        $   32,147      1.4%      8.3%     13.2%      22.4%     26.9%     29.1%     30.6%      99.8%
       4th Quarter        $   42,529      1.4%      6.8%     12.6%      21.8%     26.1%     28.8%     30.0%      99.6%
    1998:
       1st Quarter        $   69,708      0.9%      6.9%     13.4%      20.9%     26.4%     28.8%     29.9%      99.1%
       2nd Quarter        $   66,908      1.1%      8.1%     14.2%      21.7%     27.3%     29.2%     30.2%      98.3%
       3rd Quarter        $   71,027      1.0%      7.9%     13.3%      23.0%     27.8%     30.3%     30.9%      97.6%
       4th Quarter        $   69,583      0.9%      6.6%     13.1%      24.3%     29.0%     31.5%     31.8%      94.1%
    1999:
       1st Quarter        $  103,068      0.8%      7.5%     15.1%      23.6%     29.5%       x       31.4%      88.9%
       2nd Quarter        $   95,768      1.1%      9.9%     16.7%      25.4%     31.5%      --       32.5%      82.5%
       3rd Quarter        $  102,585      1.0%      8.3%     14.2%      25.3%       x        --       30.3%      75.6%
       4th Quarter        $   80,641      0.7%      5.9%     12.6%      23.7%      --        --       25.7%      65.9%
    2000:
       1st Quarter        $  128,123      0.3%      6.5%     14.6%        x        --        --       23.0%      56.5%
       2nd Quarter        $  118,778      0.6%      8.6%     16.0%       --        --        --       19.6%      45.1%
       3rd Quarter        $  124,367      0.7%      7.8%       x         --        --        --       12.5%      31.2%
       4th Quarter        $  100,823      0.6%       x        --         --        --        --        5.1%      16.7%
    2001:
       1st Quarter        $  126,015       x        --        --         --        --        --        0.3%       6.5%


</TABLE>

                                                        18
<PAGE>


     The following table sets forth the principal balances delinquency status as
a percentage of total outstanding  contract  principal  balances from dealership
operations.

                                                   March 31,      December 31,
                                                      2001             2000
                                               ---------------- ----------------
      Days Delinquent:
      Current                                        78.6%            66.1%
      1-30 Days                                      15.7%            26.1%
      31-60 Days                                      3.3%             4.7%
      61-90 Days                                      2.4%             3.1%
                                               ---------------- ----------------
      Total Portfolio                               100.0%           100.0%
                                               ================ ================

     In accordance  with our charge off policy,  there are no accounts more than
90 days delinquent as of March 31, 2001.

     Primarily  as a  result  of  our  in  dealership  collectors,  our  current
accounts, those accounts not one day delinquent,  have continued to improve both
over the same  quarter of 2000 as well as over the third and fourth  quarters of
2000. Current accounts at March 31, 2001 were 78.6% versus 66.1% at December 31,
2000.  Current  accounts at the end of the third  quarter of 2000 were 72.4% and
were 74.8% at the end of the first  quarter of 2000. As a result of the apparent
success  of the in store  collectors,  we are in the  process of adding in store
collectors to service the 31-60 day  delinquent  accounts at the  dealerships in
addition to the 1-30 days delinquent  accounts currently  serviced.  The 31+ day
accounts  have  remained  relatively  constant  at 5.7% at the end of the  first
quarter of 2001, as compared to 5.3% at the end of the same quarter of 2000.

     Based upon our continued review of the adequacy of the Allowance for Credit
Losses,  we have recorded a provision for loan losses for the three months ended
March 31, 2001 at 31% of  originations.  The 31% provision is 1% higher than the
effective 30% provision for 2000 and 4% greater than the 27% recorded during the
first quarter of 2000, as losses on our existing,  older  portfolio  continue to
emerge at higher than expected levels.  With the provision  recorded during this
quarter,  we believe the  Allowance  balance as of March 31,  2001  remains at a
level that we  estimate  to be adequate to cover net charge offs for the next 12
to 15 months.

Securitizations

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

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

     Reserve Account Requirements.  Under our current securitization  structure,
we make an initial cash deposit into a reserve account,  generally equivalent to
3.0%-6.0% of the initial underlying Finance Receivables  principal balance,  and
pledge this cash to the reserve account agent. The trustee then makes additional
deposits  to  the  reserve   account  out  of  collections  on  the  securitized
receivables as necessary to fund the reserve account to a specified  percentage,
ranging from 8.0% to 11.0%,  of the underlying  Finance  Receivables'  principal
balance. The trustee makes distributions to us when:

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

                                                        19
<PAGE>
Certain Financial Information Regarding Our Securitizations

     During  March  2001,  we  closed  our  19th   securitization  in  which  we
securitized  $117.7  million  of  loans,   issuing  $83.6  million  in  Class  A
certificates  with  an  annual  interest  rate  of  5.09%,  a  significant  rate
improvement from our securitizations closed during 2000.


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 loan  portfolio,   o the seasonal purchase of inventories,
o working capital and general            and,
  corporate purposes,                  o the purchase of property
o common  stock  repurchases,            and equipment.



    We fund our capital requirements primarily through:

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

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

Cash Flow

     Net cash provided by operating  activities  decreased $2.4 million to $59.5
million in the three months ended March 31, 2001.  The decrease is primarily due
to a significant  decrease in accrued  liabilities at March 31, 2001 offset by a
decrease in inventory levels.

     Net cash used in  investing  activities  decreased  $22.1  million to $58.4
million  during the three  months  ended  March 31,  2001 as  compared  to $80.5
million used during the same period of 2000.  The reason for the decrease is due
to increased  collections on finance receivables and a lower increase in finance
receivables.

     Financing activities used $2.2 million for the three months ended March 31,
2001,  versus  generating  $2.9 million  during the three months ended March 31,
2000.  The change is due to net payments made on Notes Payable.

Financing Resources

     Revolving  Facility.  Under our $125  million  revolving  facility  with GE
Capital,  our borrowing base consists of up to 65.0% of the principal balance of
eligible  loans  originated  from the sale of used  cars and the  lesser  of $25
million or 58% of the direct vehicle costs for eligible vehicle inventory. As of
March 31, 2001, our borrowing  capacity  under the revolving  facility was $28.8
million, the aggregate principal amount outstanding under the revolving facility
was approximately  $21.3 million,  and the amount available to be borrowed under
the facility was $7.5 million.  The  revolving  facility  bears  interest at the
30-day  LIBOR plus  3.15%,  payable  daily  (total rate of 8.68% as of March 31,
2001). In addition, we are also required to maintain specified financial ratios.
As of March 31, 2001, we were in compliance with the covenants of this agreement
with the  exception of interest  coverage  ratios,  for which we have received a
waiver.

     In April  2001,  we  replaced  the  warehouse  receivables  portion of this
facility and have secured an option to extend the $25 million  inventory line of
credit portion of this facility from June 20, 2001 until December 31, 2001.

     Our new  revolving  facility  allows for maximum  borrowings of $75 million
during the period May 1 through November 30 and increases to $100 million during
the period  December 1 through  April 30. The term of the  facility  is 364 days
with a renewal option,  upon mutual consent,  for an additional  364-day period.
The borrowing  base  consists of up to 65% of the principal  balance of eligible
loans  originated from the sale of used cars. The lender  maintains an option to
adjust the advance  rate to reflect  changes in market  conditions  or portfolio
performance. The interest rate on the facility is LIBOR plus 2.80%. The facility
is secured with substantially all Company assets. The line is subject to several
covenants, including certain financial and loan portfolio related covenants.

                                                        20
<PAGE>

     The extension on the inventory line of credit  requires us to pay a fee for
each  quarterly  extension  after June 30, 2001,  and after June 30,  2001,  the
interest rate on the line  increases by 50 basis points to LIBOR plus 3.65%.  We
continue to search for replacement financing for our inventory line of credit.

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

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

     Supplemental  Borrowings.  In May 1999,  we  borrowed  approximately  $38.0
million from an unrelated  party for a term of two years maturing on May 1, 2001
(Residual Loan). The note called for monthly principal payments of generally not
less than $800,000  through May 2000 and not less than $1.7 million  thereafter,
plus interest at a rate equal to LIBOR plus 550 basis  points.  The loan balance
was $11.1  million at December 31,  2000.  This loan  agreement  was replaced in
January 2001.  The new  agreement has a $35 million  principal due February 2003
with interest payable monthly at LIBOR plus 600 basis points. The new loan, like
the previous loan, is secured by our Residuals in Finance  Receivables  Sold and
certain Finance Receivables.

     As a condition  to the $35 million  senior  secured loan  agreement,  Verde
Investments, Inc., an affiliate of Mr. Garcia, was required to invest $7 million
in us through a subordinated loan. The funds were placed in escrow as additional
collateral  for the $35 million  senior secured loan. The funds will be released
in July 2001 if, among other conditions,  we have at least $7 million in pre-tax
income  through June of 2001 and, at that time, Mr. Garcia  guarantees  33.3% of
the $35 million  facility.  If the loan with Verde and the  guarantee of the $35
million  senior  secured  loan are not removed by July 25, 2001,  Mr.  Garcia is
entitled to receive  warrants from us for 1.5 million  shares of stock,  vesting
over a  one-year  period,  at an  exercise  price of $4.50  subject  to  certain
conditions.  Also as  consideration  for the loan,  we  released  all options to
purchase real estate that is currently  owned by Verde and leased to us. We also
granted  Verde the option to  purchase,  at book  value,  any or all  properties
currently  owned by us, or acquired  by us prior to the earlier of December  31,
2001, or the date the loan is repaid.  Verde agreed to lease the properties back
to us, on terms  similar to our current  leases,  if it exercises  its option to
purchase any of the properties. The loan is secured by residual interests in our
securitization  transactions  but is  subordinate  to the  senior  secured  loan
facility.  The loan requires quarterly interest payments at LIBOR plus 600 basis
points and is subject to pro rata  reductions if certain  conditions are met. An
independent  committee  of our  board  reviewed  and  negotiated  terms  of this
subordinated  loan and we also  received an opinion from an  investment  banker,
which  deemed  the  loan  fair  from a  financial  point  of  view  both  to our
shareholders and us.


Capital Expenditures and Commitments

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

Accounting Matters

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

     In June 2000, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No. 138,  "Accounting  for Certain  Derivative
Instruments and Certain Hedging  Activities" (SFAS No. 138). SFAS No. 138 amends
a limited number of issues causing implementation difficulties for entities that
apply SFAS No. 133. SFAS No. 138 is effective for fiscal years  beginning  after
June 15, 2000.  Statement of Financial Accounting Standards No. 133, "Accounting
for

                                                        21
<PAGE>

Derivative  Instruments  and Hedging  Activities"  (SFAS No. 133)  required  all
derivatives  to be recorded on the balance  sheet at fair value and  establishes
new accounting  rules for hedging  instruments.  The adoption of SFAS No. 138 or
No. 133 did not have a material effect on us.

We Make Forward Looking Statements

     This report includes statements that constitute  forward-looking statements
within the  meaning of the safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995. We claim the protection of the  safe-harbor  for
our  forward   looking   statements.   Forward-looking   statements   are  often
characterized  by  the  words  "may,"  "anticipates,"  "believes,"  "estimates,"
"projects,"  "expects"  or similar  expressions  and do not  reflect  historical
facts.  Forward-looking  statements in this report relate,  among other matters,
to:  anticipated  financial  results,  such as continuing growth of sales, other
revenues and loan  portfolios,  improvements  in  underwriting,  adequacy of the
allowance  for  credit  losses,   and   improvements   in  recoveries  and  loan
performance,  including delinquencies and charge offs; roll-out of collectors to
our dealerships;  and e-commerce  related growth and loan  performance.  Forward
looking  statements  include  risks,  uncertainties  and other factors which may
cause our actual results, performance or achievements to be materially different
from those  expressed or implied by such  forward  looking  statements,  some of
which we cannot  predict or quantify.  Factors that could affect our results and
cause  or  contribute  to  differences  from  these  forward-looking  statements
include,  but are not limited to: any decline in consumer  acceptance of our car
sales strategies or marketing campaigns; any inability to finance our operations
in light of a tight  credit  market for the  sub-prime  industry and our current
financial  circumstances;  any deterioration in the used car finance industry or
increased competition in the used car sales and finance industry;  any inability
to monitor and improve our underwriting and collection processes; any changes in
estimates  and  assumptions  in, and the ongoing  adequacy of, our allowance for
credit  losses;  any  inability  to continue to reduce  operating  expenses as a
percentage of sales; any material litigation against us or material,  unexpected
developments in existing litigation; any new or revised accounting, tax or legal
guidance  that  adversely  affect used car sales or financing  and Mr.  Garcia's
offer to take us private.  Forward-looking  statements speak only as of the date
the statement was made. Future events and actual results could differ materially
from the  forward-looking  statements.  When  considering  each  forward-looking
statement,  you should keep in mind the risk factors and  cautionary  statements
found  in  the  sections  entitled  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations -- Risk  Factors,"  "Factors That
May Affect Future Results and Financial  Condition" and "Factors That May Affect
Future Stock  Performance" in our most recent report on Form 10-K, in Exhibit 99
attached to this  Quarterly  Report on Form 10-Q and elsewhere in our Securities
and Exchange Commission  filings. In addition,  the foregoing factors may affect
generally our business,  results of operations and financial position. There may
also be other factors that we are currently unable to identify or quantify,  but
may arise or become known in the future.  Forward looking  statements speak only
as of the dated the statement was made. We are not obligated to publicly  update
or  revise  any  forward  looking  statements,   whether  as  a  result  of  new
information, future events, or for any other reason. References to Ugly Duckling
Corporation  as the largest chain of buy-here  pay-here used car  dealerships in
the  United  States is  management's  belief  based  upon the  knowledge  of the
industry and not on any current independent third party study.

                                     ITEM 3.

Market Risk

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

     Our  financial   instruments   consist  primarily  of  fixed  rate  finance
receivables,  residual  interests  in pools of fixed rate  finance  receivables,
short-term variable rate revolving Notes Receivable, and variable and fixed rate
Notes  Payable.  Our finance  receivables  are  classified as subprime loans and
generally  bear  interest  at the lower of 29.9% or the  maximum  interest  rate
allowed in states that impose  interest  rate  limits.  At March 31,  2001,  the
scheduled  maturities on our finance  receivables  ranged from one to 48 months,
with a weighted  average  maturity of 23.6 months.  The interest rates we charge
our customers on finance receivables has not changed as a result of fluctuations
in market interest rates,  although we may increase the interest rates we charge
in the future if market interest rates  increase.  A large component of our debt
at March 31, 2001 is the  Collateralized  Notes  Payable  (Class A  obligations)
issued under our securitization program. Issuing debt through our securitization
program  allows us to mitigate our interest rate risk by reducing the balance of
the variable  revolving  line of credit and replacing it with a lower fixed rate
note  payable.  We are subject to interest rate risk on fixed rate Notes Payable
to the extent that future  interest  rates are lower than the interest  rates on
our existing Notes Payable.

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

                                                        22
<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,  and are the subject of regulatory or
governmental  investigations.  Although  we  cannot  determine  at this time the
amount of the ultimate exposure from such matters,  if any, we do not expect the
final outcome to have a material adverse effect on the Company.

     There has also been  litigation  filed in connection with or related to the
intent  and/or  offer  of our  chairman,  Mr.  Garcia,  to  purchase  all of our
outstanding common stock not owned by him (See Item 5 below). On March 20, 2001,
a  shareholder  derivative  complaint was filed,  purportedly  on behalf of Ugly
Duckling Corporation,  in the Court of Chancery for the State of Delaware in New
Castle County,  captioned Berger v. Garcia,  et al., No. 18746NC.  The complaint
alleges that the Company's current directors  breached  fiduciary duties owed to
the Company in connection with certain  transactions between the Company and Mr.
Garcia and various entities  controlled by Mr. Garcia. The complaint was amended
on April 17, 2001 to add a second cause of action,  on behalf of all persons who
own the Company's common stock, and their successors in interest,  which alleges
that the Company's  current  directors  breached  fiduciary duties in connection
with the proposed  acquisition by Mr. Garcia of all of the outstanding shares of
the Company's common stock.  The Company is named as a nominal  defendant in the
action.  The original cause of action seeks to void all  transactions  deemed to
have been  approved in breach of  fiduciary  duty and recovery by the Company of
alleged  compensatory  damages  sustained as a result of the  transactions.  The
second  cause of action  seeks to enjoin the Company  from  proceeding  with the
proposed   acquisition  by  Mr.  Garcia,   or,  in  the  alternative,   awarding
compensatory damages to the class.

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

     We expect all of these cases to be  consolidated  and intend to  vigorously
defend the  allegations  in the  complaints  and  believe  that the  actions are
without merit.

Item 2.  Changes in Securities and Use of Proceeds.

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

Item 3.  Defaults Upon Senior Securities.

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

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

    None

Item 5.  Other Information.

     On April 16, 2001, as previously announced,  Mr. Ernest Garcia, II, made an
offer to the board of directors to purchase all of the outstanding shares of our
common  stock  not  already  held by  him.  The  Company's  board  of  directors
established  a  special   transaction   committee,   composed  of  disinterested
directors, to evaluate the proposal and make a recommendation to the

                                                        23
<PAGE>
full board.  Under the terms of the offer, the holders of the outstanding shares
of  common  stock  would  receive  $7.00 per  share,  $2.00 in cash and $5.00 in
subordinated  debentures from the acquiring company. The subordinated debentures
would have interest payable at 10%,  interest only payments  semiannually  until
maturity and a ten-year term. Mr. Garcia's offer also states that Greg Sullivan,
chief executive officer and president of the Company, would receive an option to
purchase a 20% interest in the acquiring company.

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

(a)      Exhibits


Exhibit 10.1 - Covenant  Waiver Letter dated May 9, 2001 between the  Registrant
and Sun America Life Insurance Company.

Exhibit 10.2 - Covenant  Waiver Letter dated May 14, 2001 between the Registrant
and GE Capital Corporation

Exhibit 99 - Statement Regarding Forward Looking Statements and Risk Factors

(b)      Reports on Form 8-K.

     During the first  quarter of 2001,  the  Company  filed two reports on Form
8-K. The first report on Form 8-K,  dated January 15, 2001 and filed January 16,
2001,  reported Ugly  Duckling's  closing of a senior  secured loan facility and
subordinated  loan,  and filed as an exhibit  to the form 8-K,  a press  release
dated January 15, 2001,  entitled  "Ugly  Duckling  Announces  Closing of Senior
Secured  Loan  Facility  and   Subordinated   Loan  with  Chairman  and  Largest
Shareholder."  The second report on Form 8-K dated and filed  February 26, 2001,
reported Ugly Duckling's 2000 earnings,  and filed as an exhibit to the Form 8-K
was a press release  dated  February 21, 2001 entitled  "Ugly  Duckling  Reports
Financial Results for 2000"


                                                        24
<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 14, 2001

























                                                        25
<PAGE>






EXHIBIT INDEX

                     Exhibit
                     Number       Description

                     10.1         Covenant Waiver Letter dated May 9, 2001
                                  between the Registrant and Sun America Life
                                  Insurance Company.

                     10.2         Covenant Waiver Letter dated May 14, 2001
                                  between the Registrant and GE Capital
                                  Corporation

                     99           Statement Regarding Forward Looking Statements
                                  and Risk Factors












































                                                        26