<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                 ---------------

                                    FORM 10-Q



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

                                       or

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

               For the quarterly period ended: September 30, 2000

                        Commission File Number 000-20841

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

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

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

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

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

                                 [X] Yes [ ] No

                                ---------------

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

    At November 10, 2000, there were approximately 12,378,000 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, 1999.




<PAGE>



                            UGLY DUCKLING CORPORATION

                                    FORM 10-Q
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


                          Part I - FINANCIAL STATEMENTS
  <S>                <C>                                                                                                  <C>

  Item 1.            FINANCIAL STATEMENTS
                     Condensed Consolidated Balance Sheets-- September 30, 2000 and December 31, 1999.......................1
                     Condensed Consolidated Statements of Operations-- Three and Nine Months Ended
                           September 30, 2000 and 1999......................................................................2
                     Condensed Consolidated Statements of Cash Flows-- Nine Months Ended September 30, 2000 and 1999........3
                     Notes to Condensed Consolidated Financial Statements...................................................4
  Item 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................10
  Item 3.            MARKET RISK...........................................................................................25

                          Part II. -- OTHER INFORMATION

  Item 1.            LEGAL PROCEEDINGS.....................................................................................26
  Item 2.            CHANGES IN SECURITIES.................................................................................26
  Item 3.            DEFAULTS UPON SENIOR SECURITIES.......................................................................26
  Item 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................................26
  Item 5.            OTHER INFORMATION                                                                                     26
  Item 6.            EXHIBITS AND REPORTS ON FORM 8-K......................................................................26
                     SIGNATURES............................................................................................27

</TABLE>


<PAGE>



                                     ITEM 1.

                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES

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


                                                         September 30,     December 31,
                                                             2000              1999
                                                          (unaudited)
                                                        ----------------  ---------------
                       ASSETS
<S>                                                     <C>               <C>

Cash and Cash Equivalents                                     $   6,555        $   3,683
Finance Receivables, net                                        491,880          365,586
Notes Receivable from Related Party                              12,000           12,000
Inventory                                                        43,739           62,865
Property and Equipment, net                                      35,604           31,752
Intangible Assets, Net                                           12,767           14,618
Other Assets                                                     11,727           12,327
Net Assets of Discontinued Operations                             4,211           33,880
                                                        ---------------   --------------
                                                              $ 618,483        $ 536,711
                                                        ================  ===============
</TABLE>

<TABLE>
<CAPTION>


        LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     <S>                                                <C>               <C>

     Accounts Payable                                         $   2,813         $  3,185
     Accrued Expenses and Other Liabilities                      40,815           26,905
     Notes Payable - Portfolio                                  362,255          275,774
     Other Notes Payable                                         17,930           36,556
     Subordinated Notes Payable                                  36,148           28,611
                                                        ---------------   --------------
       Total Liabilities                                        459,961          371,031
                                                        ----------------  --------------
Stockholders' Equity:
    Common Stock                                                     19               19
    Additional Paid-in Capital                                  173,721          173,273
    Retained Earnings                                            24,223           12,709
    Treasury Stock                                             (39,441)         (20,321)
                                                        ----------------  ---------------
       Total Stockholders' Equity                               158,522          165,680
                                                        ----------------  ---------------
                                                              $ 618,483        $ 536,711
                                                        ================  ===============
</TABLE>


                                 Page 1


          See accompanying notes to Condensed Consolidated Financial Statements.


<PAGE>



                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             Three and Nine Months Ended September 30, 2000 and 1999
                (In thousands, except earnings per share amounts)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                        Three Months Ended                Nine Months Ended
                                                           September 30,                    September 30,
                                                   ------------------------------   -------------------------------
                                                       2000            1999             2000             1999
                                                   --------------  --------------   -------------   ---------------
<S>                                                <C>             <C>             <C>             <C>
Sales of Used Cars                                     $ 126,636        $103,314       $ 380,949        $  307,633
Less:
   Cost of Used Cars Sold                                 70,760          57,764         212,119           173,395
   Provision for Credit Losses                            36,092          27,561         102,877            81,113
                                                   --------------  -------------   -------------   ---------------
                                                          19,784          17,989          65,953            53,125
                                                   --------------  -------------   -------------   ---------------
Other Income (Expense):
   Interest Income                                        31,436          19,775          86,838            45,904
   Portfolio Interest Expense                            (7,318)         (4,042)        (18,344)           (9,255)
   Servicing Income                                          308           1,794           1,701             6,988
                                                   --------------  --------------   -------------   ---------------
                                                          24,426          17,527          70,195            43,637
                                                   --------------  --------------   -------------   ---------------
Income before Operating Expenses                          44,210          35,516         136,148            96,762
Operating Expenses:
   Selling and Marketing                                   7,187           6,023          22,748            17,959
   General and Administrative                             27,831          20,294          79,954            61,763
   Depreciation and Amortization                           2,285           1,763           6,724             5,036
                                                   --------------  --------------   -------------   ---------------
                                                          37,303          28,080         109,426            84,758
                                                   --------------  --------------   -------------   ---------------
Operating Income                                           6,907           7,436          26,722            12,004
Interest Expense, Other                                    2,360             877           7,237             1,736
                                                   --------------  --------------   -------------   ---------------

Earnings before Income Taxes                               4,547           6,559          19,485            10,268
Income Taxes                                               1,864           2,902           7,971             4,200
                                                   --------------  --------------   -------------   ---------------
Earnings from Continuing Operations                        2,683           3,657          11,514             6,068
Loss from Discontinued Operations, net                         -             525               -                 5
                                                   --------------  --------------   -------------   ---------------
Net Earnings                                            $  2,683         $ 4,182       $  11,514         $   6,073
                                                   ==============  ==============   =============   ===============

Earnings per Common Share from Continuing Operations:
   Basic                                                $   0.21         $  0.25        $   0.83         $    0.40
                                                   ==============  ==============   =============   ===============
   Diluted                                              $   0.21         $  0.24        $   0.82         $    0.39
                                                   ==============  ==============   =============   ===============
Net Earnings per Common Share:
   Basic                                                $   0.21         $  0.28        $   0.83         $    0.40
                                                   ==============  ==============   =============   ===============
   Diluted                                              $   0.21         $  0.28        $   0.82         $    0.39
                                                   ==============  ==============   =============   ===============
Shares Used in Computation:
   Basic                                                  12,597          14,903          13,847            15,161
                                                   ==============  ==============   =============   ===============
   Diluted                                                12,747          15,167          14,044            15,384
                                                   ==============  ==============   =============   ===============

                                        Page 2
</TABLE>


          See accompanying notes to Condensed Consolidated Financial Statements.

<PAGE>


                   UGLY DUCKLING CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 2000 and 1999
                                 (In thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
<S>                                                                         <C>          <C>

                                                                               2000         1999
                                                                            ---------    ---------
Cash Flows from Operating Activities:
     Net Earnings                                                           $  11,514    $   6,073
Adjustments to Reconcile Net Earnings to Net Cash Provided
     by Operating Activities:
     Provision for Credit Losses                                              102,877       81,113
     Depreciation and Amortization                                             10,453        5,775
     Loss from Disposal of Property and Equipment                                   3           23
     Loss from Discontinued Operations                                              -            5
     Deferred Income Taxes                                                          -      (3,769)
     Collections from Residuals in Finance Receivables Sold                    13,055       13,755
     (Increase) Decrease in Inventory                                          19,126        (737)
     Decrease in Other Assets                                                     600        1,465
     Increase in Accounts Payable, Accrued Expenses and Other Liabilities      14,040       16,354
     Increase (Decrease) in Income Taxes Payable                                 (558)       4,470
                                                                            ---------    ---------
         Net Cash Provided by Operating Activities                            171,110      124,527
                                                                            ---------    ---------
Cash Flows Used in Investing Activities:
     Increase in Finance Receivables                                        (392,788)    (358,067)
     Collections of Finance Receivables                                       157,067       99,962
     Decrease in Investments Held in Trust on Finance Receivables Sold          7,969        3,641
     Advances under Notes Receivable                                                -        (650)
     Proceeds from Disposal of Property and Equipment                           3,142           72
     Purchase of Property and Equipment                                      (11,625)      (6,426)
     Payment for Acquisition of Assets                                              -     (12,095)
     Increase in Intangible Assets from Acquisitions                                -        (464)
                                                                            ---------    ---------
         Net Cash Used in Investing Activities                              (236,235)    (274,027)
                                                                            ---------    ---------
Cash Flows from Financing Activities:
    Initial Deposits at Securitization into Investments Held in Trust        (20,738)     (10,914)
    Additional Deposits into Investments Held in Trust                       (10,849)     (18,144)
    Collections from Investments Held in Trust                                 17,544        3,844
    Additions to Notes Payable Portfolio                                      554,153      561,853
    Repayment of Notes Payable Portfolio                                    (469,481)    (419,046)
    Additions to Other Notes Payable                                            1,267       55,943
    Repayment of Other Notes Payable                                         (20,133)     (36,136)
    Net Issuance of Subordinated Notes Payable                                (1,500)      (1,664)
    Proceeds from Issuance of Common Stock                                       437            -
    Repurchase of Warrants                                                         -        (552)
    Acquisition of Treasury Stock                                           (11,114)      (5,811)
                                                                            ---------    ---------
         Net Cash Provided by Financing Activities                             39,586      129,373
                                                                            ---------    ---------
Net Cash Provided by Discontinued Operations                                   28,411       19,876
                                                                            ---------    ---------
Net Increase (Decrease) in Cash and Cash Equivalents                           2,872         (251)
Cash and Cash Equivalents at Beginning of Period                                3,683        2,544
                                                                            ---------    ---------
Cash and Cash Equivalents at End of Period ..............................   $   6,555    $   2,293
                                                                            =========    =========
Supplemental Statement of Cash Flows Information:
     Interest Paid ......................................................   $  20,712    $  14,178
                                                                            =========    =========
     Income Taxes Paid ..................................................   $   8,524    $    (270)
                                                                            =========    =========
     Acquisition of Treasury Stock with Subordinated Debt ...............   $   8,005    $       -
                                                                            =========    =========
</TABLE>

          See accompanying notes to Condensed Consolidated Financial Statements.

                                        Page 3
<PAGE>


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

Note 1.  Basis of Presentation

    Our accompanying  unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information  and  pursuant to rules and  regulations  of the
Securities and Exchange Commission.  Accordingly, they do not include all of the
information and footnotes required by generally accepted  accounting  principles
for a complete financial statement presentation.  In our opinion, such unaudited
interim  information  reflects  all  adjustments,   consisting  only  of  normal
recurring  adjustments,  necessary to present our financial position and results
of operations for the periods  presented.  Our results of operations for interim
periods are not necessarily  indicative of the results to be expected for a full
fiscal year.  Our Condensed  Consolidated  Balance Sheet as of December 31, 1999
was derived from our audited  consolidated  financial statements as of that date
but does not include all the  information  and  footnotes  required by generally
accepted  accounting  principles.  We suggest that these condensed  consolidated
financial  statements  be read in  conjunction  with  the  audited  consolidated
financial  statements  included in our Annual Report on Form 10-K,  for the year
ended December 31, 1999.

Note 2.  Summary of Finance Receivables

    A summary of Finance Receivables, net, follows ($ in thousands):
<TABLE>
<CAPTION>

      <S>                                              <C>              <C>

                                                          September 30,    December 31,
                                                              2000             1999
                                                       ---------------- ----------------

       Contractually Scheduled Payments                      $   697,527      $ 492,937
       Unearned Finance Charges                                (184,764)      (134,119)
                                                         ---------------- ----------------
       Principal Balances, net                                   512,763        358,818
       Accrued Interest                                            5,272          3,741
       Loan Origination Costs                                      7,466          5,079
                                                         ---------------- ----------------
            Principal Balances, net                              525,501        367,638
       Residuals in Finance Receivables Sold                       3,632         17,382
       Investments Held in Trust                                  62,790         56,716
                                                         ---------------- ----------------
       Finance Receivables                                       591,923        441,736
       Allowance for Credit Losses                             (100,043)       (76,150)
                                                         ---------------- ----------------
       Finance Receivables, net                              $   491,880    $    365,586
                                                         ================ ================
</TABLE>

    Investments  Held in Trust represent funds held by trustees on behalf of our
securitization  lenders.  The  balance of  Investments  Held in Trust  increased
slightly from December 31, 1999 due to deposits into the trust accounts arising
from additional securitizations, partially offset by distribution of funds
associated with of portfolios securitized during prior periods.

    Residuals in Finance Receivables Sold represent our subordinated interest in
loans sold  through  securitizations.  The  decrease  from  December 31, 1999 to
September  30,  2000  is  attributable to no additional loans sold through
securitization  with servicing  retained,  amortization  and release of cash, as
well as the runoff of portfolios securitized and sold during prior periods.

    A summary of Residuals in Finance Receivables Sold follows ($ in thousands):
<TABLE>
<CAPTION>

                                                                                  September 30,      December 31,
      <S>                                                                        <C>                <C>
                                                                                      2000               1999
                                                                                ------------------ --------------
       Retained interest in subordinated securities (B Certificates)............      3,493        17,335
       Net interest spreads, less present value discount........................        640         6,113
       Reduction for estimated credit losses....................................      (501)       (6,066)
                                                                                   -------       --------
      Residuals in finance receivables sold....................................       3,632      $ 17,382
                                                                                   ===========  ===========
       Securitized principal balances outstanding...............................     12,735      $ 65,662
                                                                                   ===========  ===========
       Estimated credit losses as a % of securitized principal balances
       outstanding..............................................................        3.9%         9.2%


                                       Page 4
<PAGE>
</TABLE>

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.  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 September  30, 2000 and December
     31, 1999 follows ($ in thousands):
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

      <S>                                                                                     <C>             <C>
                                                                                               September 30,    December 31,
                                                                                                   2000           1999
                                                                                               ----------       ----------
       Revolving facility for $125.0 million with GE Capital, secured by substantially all
          assets of the Company, including $104.9 million in finance receivables.........      $   50,222    $       41,717
       Class A obligations issued pursuant to the Company's Securitization Program, secured
          by underlying pools of finance receivables and investments held in trust totaling
          $477.0 million at September 30, 2000...........................................         314,725           236,555
                                                                                               ----------    --------------
          Subtotal.......................................................................         364,947           278,272
          Less:  Unamortized Loan Fees...................................................           2,692             2,498
                                                                                               ----------    --------------
          Total..........................................................................      $  362,255    $      275,774
                                                                                               ===========   ==============
</TABLE>

    The  revolving  facility  note payable has interest  payable daily at 30 day
LIBOR plus 3.15% (9.77% at September 30, 2000) 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.  The
Company is currently in compliance with these covenants.

    Class A obligations have interest payable monthly at rates ranging from 5.6%
to 7.26%. Monthly principal reductions on Class A obligations approximate 70% of
the principal reductions on the underlying pool of finance receivable loans.

    Other Notes Payable

    A summary of Other Notes Payable at September 30, 2000 and December 31, 1999
follows ($ in thousands):
<TABLE>
<CAPTION>

                                                                                             September 30,    December 31,

      <S>                                                                                   <C>              <C>
                                                                                                  2000             1999
                                                                                            -------------      ------------
       Note  payable,  secured by the capital  stock of UDRC and UDRC II and certain other
            receivables.........................................................            $      16,339     $       33,900
       Other notes payable bearing  interest at rates ranging from 7.5% to 11% due through
          July 2003, secured by certain real property and certain property and
            Equipment...........................................................                    1,658              2,939
                                                                                            -------------     --------------
                                                                                                   17,997             36,839
          Less:  Unamortized Loan Fees..........................................                       67                283
                                                                                            -------------     --------------
          Total.................................................................            $      17,930     $       36,556
                                                                                            ==============    ==============

</TABLE>

                                        Page 5
<PAGE>



    Subordinated Notes Payable

    A summary of  Subordinated  Notes Payable at September 30, 2000 and December
    31, 1999 follows ($ in thousands):
<TABLE>
<CAPTION>

    <S>                                                                                 <C>             <C>
                                                                                         September 30,    December 31,
                                                                                             2000            1999
                                                                                        --------------   -------------
     $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..................         $     13,500      $     15,000
     $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
                                                                                        -------------       ------------
            Subtotal...................................................................        42,919            32,479
            Less:  Unamortized Loan Fees...............................................           162               605
                       Unamortized Discount - subordinated debentures..................         6,609             3,263
                                                                                          ------------      ------------
            Total......................................................................   $    36,148      $     28,611
                                                                                          ============      ============

</TABLE>


Note 5.  Common Stock Equivalents

    Net  Earnings per common  share  amounts are based on the  weighted  average
number of common shares and common stock  equivalents  outstanding for the three
and  nine-month  periods ended  September  30, 2000, and 1999. During July 2000,
the Company repurchased approxamatly 1.5 million shares of its common stock
pursuant to its stock repurchase program.

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


                                                                         Three Months Ended               Nine Months Ended
                                                                            September 30,                   September 30,

                                                                    ------------------------------  ------------------------------
                                                                         2000           1999             2000           1999
                                                                    --------------- --------------  --------------- --------------
     <S>                                                            <C>             <C>             <C>             <C>

     Earnings from Continuing Operations                                 $   2,683      $   3,657        $  11,514      $   6,068
                                                                    =============== ==============  =============== ==============

     Net Earnings                                                        $   2,683      $   4,182        $  11,514      $   6,073
                                                                    =============== ==============  =============== ==============
     Basic Earnings Per Share From Continuing Operations                 $    0.21      $    0.25        $    0.83      $    0.40
                                                                    =============== ==============  =============== ==============
     Diluted Earnings Per Share From Continuing Operations               $    0.21      $    0.24        $    0.82      $    0.39
                                                                    =============== ==============  =============== ==============
     Basic Earnings Per Share                                            $    0.21      $    0.28        $    0.83      $    0.40
                                                                    =============== ==============  =============== ==============
     Diluted Earnings Per Share                                          $    0.21      $    0.28        $    0.82      $    0.39
                                                                    =============== ==============  =============== ==============

     Basic EPS-Weighted Average Shares Outstanding                          12,597         14,903           13,847         15,161
     Effect of Diluted Securities:
     Warrants                                                                    3             11               10              -
     Stock Options                                                             147            253              187            223
                                                                    --------------- --------------  --------------- --------------
     Dilutive EPS-Weighted Average Shares Outstanding                       12,747         15,167           14,044         15,384
                                                                    =============== ==============  =============== ==============
     Warrants Not Included in Diluted EPS Since Antidilutive                 1,124          1,049            1,124          1,170
                                                                    =============== ==============  =============== ==============
     Stock Options Not Included in Diluted EPS Since Antidilutive              845            979              857          1,054
                                                                    =============== ==============  =============== ==============

</TABLE>

                                        Page 6
<PAGE>




Note 6.  Business Segments

      The Company has three distinct business segments.  These consist of retail
car sales operations (Retail Operations),  the income resulting from the finance
receivables  generated at the Company dealerships  (Portfolio  Operations),  and
corporate and other operations  (Corporate  Operations).  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 September 30, 2000 and 1999 follows ($ in thousands):
<TABLE>
<CAPTION>

                                                       Retail         Portfolio       Corporate       Total

     <S>                                        <C>                 <C>            <C>             <C>

     Three Months Ended September 30, 2000:
     Sales of Used Cars                         $  126,636           $       -      $         -   $ 126,636
     Less: Cost of Cars Sold                        70,760                   -                -      70,760
         Provision for Credit Losses                26,162               9,930                -      36,092
                                                    -------          ---------       ----------      ------
     Net Interest Income                            29,714             (9,930)                -      19,784
                                                         -              24,006              112      24,118
     Servicing and Other Income                          -                 308                -         308
                                                    -------          ---------       ----------      ------
     Income before Operating Expenses                29,714             14,384              112      44,210
                                                    -------          ---------       ----------      ------
     Operating Expenses:
     Selling and Marketing                            7,187                  -                -       7,187
     General and Administrative                      14,570              7,719            5,542      27,831
     Depreciation and Amortization                    1,201                278              806       2,285
                                                    ------           ---------        ----------      ------
                                                     22,958              7,997            6,348      37,303
                                                    ------           ---------        ----------      ------
     Operating Income                           $    6,756            $  6,387      $    (6,236)   $   6,907
                                                    ======           =========        ==========      =======
     Capital Expenditures                       $    2,161            $    615      $      2,338   $   5,114
                                                    ======           =========        ==========      =======
     Identifiable Assets                        $   78,542            $516,337      $     19,353   $ 614,272
                                                    ======           =========        ==========      =======


     Three Months Ended September 30, 1999:
     Sales of Used Cars                         $  103,314            $       -      $          -     103,314
     Less: Cost of Cars Sold                        57,764                    -                 -      57,764
         Provision for Credit Losses                21,528                6,033                 -      27,561
                                                    -------            ---------        ---------     --------
                                                    24,022               (6,033)                -      17,989
     Net Interest Income                                 -                15,555              178      15,733
     Servicing and Other Income                          -                 1,794                -       1,794
                                                    -------            ---------        ---------      -------
     Income before Operating Expenses               24,022                11,316              178      35,516
                                                    -------            ---------        ---------      -------
     Operating Expenses:
     Selling and Marketing                             6,023                   -               -        6,023
     General and Administrative                       11,187               4,796           4,311       20,294
     Depreciation and Amortization                       920                 278             565        1,763
                                                    -------            ---------        ---------      -------
                                                      18,130               5,074           4,876       28,080
                                                    -------            ---------        ---------      -------
     Operating Income                            $     5,892          $    6,242      $   (4,698)   $   7,436
                                                    =======            =========        =========      =======
     Capital Expenditures                        $     1,339          $      346      $       376   $   2,061
                                                    =======            =========        =========      =======
</TABLE>

                                                        Page 7
<PAGE>

<TABLE>
<CAPTION>


    <S>                                           <C>               <C>              <C>             <C>

                                                       Retail         Portfolio       Corporate          Total
      Nine Months Ended September 30, 2000
     Sales of Used Cars                           $  380,949          $        -      $          -   $ 380,949
     Less: Cost of Cars Sold                         212,119                   -                 -     212,119
         Provision for Credit Losses                  77,994              24,883                 -     102,877
                                                    -------            ---------        ----------    ---------
                                                      90,836            (24,883)                 -      65,953
     Net Interest Income                                   -              68,162               332      68,494
     Servicing and Other Income                            -               1,701                 -       1,701
                                                    --------           ---------        ----------    ---------
     Income before Operating Expenses                 90,836              44,980               332     136,148
                                                    --------           ---------        ----------    ---------
     Operating Expenses:
     Selling and Marketing                            22,748                   -                 -      22,748
     General and Administrative                       43,353              20,605            15,996      79,954
     Depreciation and Amortization                     3,405                 858             2,461       6,724
                                                    --------           ---------        ----------    ---------
                                                      69,506              21,463            18,457     109,426
                                                    --------           ---------        ----------    ---------
     Operating Income                             $   21,330          $   23,517       $  (18,125)   $  26,722
                                                    ========           =========        ==========     =========
     Capital Expenditures                         $    5,654          $      909       $     5,062   $  11,625
                                                    ========           =========        ==========     =========
     Identifiable Assets                          $   78,542          $  516,377       $    19,353   $ 614,272
                                                    ========           =========        ==========     =========

     Nine Months Ended September 30, 1999:
     Sales of Used Cars                           $  307,633          $        -       $         -   $ 307,633
     Less: Cost of Cars Sold                         173,395                   -                 -     173,395
         Provision for Credit Losses                  63,552              17,561                 -      81,113
                                                    ---------           --------         ---------     --------
                                                      70,686            (17,561)                 -      53,125
     Net Interest Income                                   -              36,301               348      36,649
     Servicing and Other Income                            -               6,988                 -       6,988
                                                    ---------           --------         ---------     --------
     Income before Operating Expenses                 70,686              25,728               348      96,762
                                                    ---------           --------         ---------     --------
     Operating Expenses:
     Selling and Marketing                            17,959                   -                -       17,959
     General and Administrative                       33,685              13,963           14,115       61,763
     Depreciation and Amortization                     2,572                 841            1,623        5,036
                                                    ---------           --------         ---------     --------
                                                      54,216              14,804           15,738       84,758
                                                    ---------           --------         ---------     --------
     Operating Income                              $  16,470          $   10,924        $  (15,390)   $ 12,004
                                                    =========           ========         =========     ========
     Capital Expenditures                          $   4,854          $      674        $    1,021    $  6,549
                                                    =========           ========         =========     ========
</TABLE>
Note 7.  Discontinued Operations

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

    Effective  December 31, 1999,  the Company  adopted a formal plan to abandon
any effort for its third party dealer  operations  to acquire loans or servicing
rights to  additional  portfolios.  Accordingly,  our Cygnet  Servicing  and the
associated   Cygnet  Corporate  segment  also  are  reported  as  components  of
discontinued operations.  The Company plans to complete servicing the portfolios
that it currently services.

                                Page 8
<PAGE>

   The components of Net Assets of Discontinued  Operations as of September 30,
2000 and December 31, 1999 follow ($ in thousands):
<TABLE>
<CAPTION>
   <S>                                                       <C>                <C>
                                                              September 30,      December 31,
                                                                  2000               1999
                                                             ----------------  -----------------

    Finance Receivables, net                                       $   6,949        $    14,837
    Residuals in Finance Receivables Sold                              2,040              3,742
    Investments Held in Trust                                              -              1,545
    Property and Equipment                                               457              2,114
    Notes Receivable, net of Sub. Notes Payable                            -              6,697
    Servicing Receivable                                               4,234              6,125
    Other Assets, net of Accounts Payable and Accrued
    Liabilities                                                      (9,469)            (1,180)
                                                             ----------------  -----------------
    Net Assets of Discontinued Operations                          $   4,211        $    33,880
                                                             ================  =================
</TABLE>

Note 8.  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 9.  Reclassifications

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


Note 10.  Subsequent Events

    On November 9, 2000, Verde Investments,  Inc. ("Verde"), an affiliate of Mr.
Ernest  Garcia II, our  chairman  and largest  shareholder,  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 ending December
21, 2020,  rent  payable  monthly  with 5% annual rent  adjustments;  triple net
lease;  four  five-year  options to renew;  and,  pursuant to a separate  option
agreement  which  expires  December  31,  2002,  and an option to  purchase  the
property  upon prior notice and at Verde's cost  through  December 31, 2020.  We
intend  to build a new  headquarters  at this  location  over  the next  several
months,  obtain permanent financing upon completion of construction and exercise
our option to purchase the property.

    On October 3, 2000, 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.  Our board of  directors  established  a
special transaction  committee to evaluate and make a recommendation to the full
board. On October 27, 2000, after discussions with us, the board and the special
transaction  committee,  Mr. Garcia  withdrew his offer.  Several  lawsuits were
filed in Delaware as a result of this offer.  At this time,  these  lawsuits are
not  being  actively  litigated  and we do not know  what  will be the  ultimate
outcome of these  filings.  If the  plaintiffs do not dismiss the  lawsuits,  we
intend to vigorously defend against them. In his filings with the Securities and
Exchange Commission, Mr. Garcia has expressed a continuing interest in acquiring
all of the Company's outstanding common stock.


                                     Page 9
<PAGE>




                                     ITEM 2.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                                       AND

                              RESULTS OF OPERATIONS

Introduction

     We operate the largest chain of buy here-pay here used car  dealerships  in
the United States. At September 30, 2000, 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 a customer's
         payday,
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 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  activities  are  classified  as
discontinued  operations  for 1999.  We plan to complete  the  servicing  of the
portfolios that we currently service.

     In the  following  discussion  and  analysis,  we  explain  the  results of
operations   and  general   financial   condition  of  Ugly   Duckling  and  its
subsidiaries.  In particular,  we analyze and explain the changes in the results
of  operations  of our business  segments  for the three and nine month  periods
ended September 30, 2000 and September 30, 1999.

                                      Page 10
<PAGE>


                SELECTED CONSOLIDATED FINANCIAL DATA (unaudited)
                            UGLY DUCKLING CORPORATION
                      SELECTED CONSOLIDATED FINANCIAL DATA
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                      At or for the Three Months Ended

                                            ---------------------------------------------------------------------------------------
Selected Financial Data                         Sept         June        Mar        Dec        Sept        June           Mar
                                                2000         2000        2000       1999       1999        1999          1999
                                            ---------------------------------------------------------------------------------------
Operating Data:                              ($ and shares in millions, except per share, per unit data and number of loan data)
<S>                                              <C>         <C>        <C>        <C>        <C>           <C>           <C>
Total Revenues                                   $  158.4    $  152.0   $  159.1   $  105.4   $  124.9      $  115.9      $  119.7
Sales of Used Cars                               $  126.6    $  121.5   $  132.8   $   82.3   $  103.3      $   97.9      $  106.4
Earnings per Share - Continuing Operations       $   0.21    $   0.31   $   0.30   $   0.17   $   0.24      $   0.12      $   0.04
EBITDA                                           $   16.5    $   18.2   $   17.1   $   13.0   $   13.2      $    8.6      $    4.5
E-Commerce Revenue as % of Used Car Sales            9.5%        5.3%       4.3%       4.7%       2.6%          1.5%          0.0%
Number Dealerships in Operation                        77          77         75         72         67            59            58
Average Sales per Dealership per Month                 64          62         70         45         61            64            73
Number of Used Cars Sold                           14,825      14,369     15,802      9,731     12,219        11,416        12,754
Sales Price - Per Car Sold                       $  8,542    $  8,458   $  8,403   $  8,455   $  8,455      $  8,574      $  8,346
Cost of Sales - Per Car Sold                     $  4,773    $  4,761   $  4,616   $  4,690   $  4,727      $  4,865      $  4,712
Gross Margin - Per Car Sold                      $  3,769    $  3,696   $  3,787   $  3,765   $  3,728      $  3,708      $  3,634
Provision - Per Car Sold                         $  2,435    $  2,242   $  2,188   $  2,245   $  2,256      $  2,259      $  2,177
Total Operating Expense - Per Car Sold           $  2,516    $  2,466   $  2,322   $  2,763   $  2,298      $  2,427      $  2,274
Total Operating Income - Per Car Sold            $    466    $    691   $    626   $    587   $    609      $    321      $     70
Total Operating Income                           $    6.9    $    9.9   $    9.9   $    5.7   $    7.4      $    3.7      $    0.9
Earnings before Income Taxes                     $    4.5    $    7.3   $    7.6   $    4.4   $    6.6      $    2.8      $    0.9
Cost of Used Cars as Percent of Sales               55.9%       56.3%      54.9%      55.5%      55.9%         56.7%         56.5%
Gross Margin as Percent of Sales                    44.1%       43.7%      45.1%      44.5%      44.1%         43.3%         43.5%
Provision - % of Originations                       29.0%       27.1%      27.0%      27.0%      26.9%         26.8%         27.0%
Total Operating Exp. - % of Total Revenues          23.6%       23.3%      23.1%      25.5%      22.5%         23.9%         24.2%
Segment Operating Expense Data:
Retail Operating Expense - Per Car Sold          $  1,549    $  1,611   $  1,481   $  1,775   $  1,484      $  1,562      $  1,431
Retail Operating Expense-% of Used Car Sales        18.1%       19.1%      17.6%      21.0%      17.5%         18.2%         17.1%
Corporate/Other Expense - Per Car Sold           $    428    $    418   $    387   $    357   $    399      $    440      $    458
Corporate/Other Expense - % of Total Revenue         4.0%        3.9%       3.8%       3.3%       3.9%          4.3%          4.9%
Portfolio Exp. Annualized - Managed Principal        6.1%        5.0%       6.2%       6.8%       4.7%          5.1%          5.7%
Balance Sheet Data:
Finance Receivables, net                         $  491.9    $  451.2   $  407.3   $  365.6   $  321.7      $  254.8      $  190.1
Inventory                                        $   43.7    $   45.9   $   49.1   $   62.9   $   45.8      $   37.7      $   39.9
Total Assets                                     $  618.5    $  577.5   $  548.0   $  536.7   $  516.5      $  467.0      $  400.2
Notes Payable - Portfolio                        $  362.3    $  316.0   $  282.9   $  275.8   $  244.4      $  195.2      $  171.5
Subordinated Notes Payable                       $   36.1    $   37.3   $   28.9   $   28.6   $   37.1      $   36.9      $   38.3
Total Debt                                       $  416.3    $  381.0   $  345.2   $  340.9   $  317.4      $  269.7      $  210.4
Common Stock                                     $  173.7    $  173.7   $  173.7   $  173.3   $  173.3      $  173.9      $  173.8
Treasury Stock                                   $ (39.4)    $ (28.4)   $ (20.3)   $ (20.3)   $ (20.3)      $ (19.8)      $ (19.8)
Total Stockholders' Equity                       $  158.5    $  166.8   $  170.6   $  165.7   $  162.5      $  159.4      $  157.9
Common Shares Outstanding - End of Period
                                                   12,378      13,899     14,980     14,888     14,889        14,943        14,939
Book Value per Share                             $  12.81    $  12.00   $  11.39   $  11.13   $  10.91      $  10.67      $  10.57
Tangible Book Value per Share                    $  11.78    $  11.02   $  10.43   $  10.15   $   9.95      $   9.73      $   9.62
Total Debt to Equity                                  2.6         2.3        2.0        2.1        2.0           1.7           1.3
Loan Portfolio Data:
Interest Income                                  $   31.4    $   29.9   $   25.5   $   22.7   $   19.8       $  15.8      $   10.4
Average Yield on Portfolio                          26.1%       26.8%      26.2%      25.4%      25.9%         26.3%         26.2%
Principal Balances Originated                    $  124.4    $  118.8   $  128.1    $  80.9   $  102.6       $  96.1      $  102.7
Principal Balances Originated as % of Sales         98.2%       97.7%      96.5%      98.3%      99.3%         98.2%         96.5%
Number of Loans Originated                         14,748      14,291     15,721      9,650     12,137        11,335        12,634
Average Original Amount Financed                 $  8,433    $  8,311   $  8,150   $  8,384   $  8,453       $ 8,478      $  8,131
# of Loans Originated as % of Units Sold            99.5%       99.5%      99.5%      99.2%      99.3%         99.3%         99.1%
Managed Portfolio Delinquencies:
     Current                                        72.4%       71.9%      74.8%      63.2%      61.5%         63.6%         73.2%
     1 to 30 days                                   19.3%       20.9%      19.9%      28.2%      28.2%         29.1%         21.3%
     31 to 60 days                                   4.9%        4.5%       3.4%       5.7%       6.8%          4.7%          3.5%
     Over 60 days                                    3.4%        2.7%       1.9%       2.9%       3.5%          2.6%          1.9%
Principal Outstanding - Managed                  $  525.5    $  500.0   $  461.8   $  424.5   $  427.4      $  383.6      $  341.0
Principal Outstanding - Retained                 $  512.8    $  472.3   $  418.9   $  358.8   $  332.0      $  256.6      $  182.2
Number of Loans Outstanding - Managed              85,240      81,407     75,496     70,450     68,420        61,661        56,333
Number of Loans Outstanding - Retained             79,848      71,518     62,459     53,081     45,874        34,065        27,924
</TABLE>

                                        Page 11
<PAGE>
Third Quarter highlights include:

o      Earnings from continuing  operations  totaled $2.7 million,  or $0.21 per
       diluted share,  compared with earnings from continuing operations of $3.7
       million, or $0.24 per share in the year-ago quarter
o      Total revenues from continuing operations increased 27% to $158.4 million
       from $124.9  million in the year-ago  quarter
o      E-Commerce  provided $12.0 million in revenue and 1,417 cars sold during
       the third  quarter of 2000 compared with $6.5 million in revenue and 763
       cars sold during the second quarter of 2000
o      On-balance  sheet  loan  portfolio   principal  balances  reached  $512.8
       million, representing a 9% sequential increase over the second quarter of
       2000 and a 55% rise over the year-ago quarter
o      Provision for loan losses  increased 2% to 29% of amount  financed
       (announced September  8,  2000)
o      New  loan  originations  reached  $124.4  million,  a 21% increase over
       the year-ago quarter

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

                                       Three Months Ended                             Nine Months Ended

                                          September 30,         Percentage         September 30,          Percentage
                                     -------------------------                -------------------------
                                        2000         1999         Change         2000          1999         Change
                                     -----------  ------------  ------------  ------------  -----------  -------------
  ($ in thousands)
<S>                                      <C>           <C>            <C>          <C>          <C>             <C>
Number of Used Cars Sold                 14,825        12,219         21.3%        44,996       36,389          23.7%
                                     ===========  ============                ============  ===========
Sales of Used Cars                    $ 126,636     $ 103,314         22.6%     $ 380,949    $ 307,633          23.8%
Cost of Used Cars Sold                   70,760        57,764         22.5%       212,119      173,395          22.3%
                                     -----------  ------------                ------------  -----------
Gross Margin                           $ 55,876      $ 45,550         22.7%     $ 168,830     $134,238          25.8%
                                     ===========  ============                ============  ===========
Gross Margin %                            44.1%         44.1%                       44.3%        43.6%
Per Car Sold:
Sales                                   $ 8,542       $ 8,455          1.0%       $ 8,466      $ 8,454           0.1%
Cost of Used Cars Sold                    4,773         4,727          1.0%         4,714        4,765         (1.1)%
                                     -----------  ------------                ------------  -----------
Gross Margin                          $   3,769       $ 3,728          1.1%       $ 3,752      $ 3,689           1.7%
                                     ===========  ============                ============  ===========
</TABLE>

    For the three and nine-month periods ended September 30, 2000, the number of
cars sold increased by 21.3% and 23.7% and Used Car Sales revenues  increased by
22.6% and 23.8%,  respectively,  over the same periods in 1999.  The increase in
both units sold and  revenues  is  primarily  the result of an  increase  in the
number of  dealerships  in  operation  coupled  with an increase  in  E-commerce
related business.

    During 1999,  we expanded our  marketing  efforts to include  E-commerce  by
accepting 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 third  quarter of 2000,  we sold 1,417 cars  generating  $12.0
million in revenue  versus 763 cars totaling $6.5 million in revenue  during the
second  quarter and up from 561 cars sold and $4.7 million in revenue during the
first quarter of 2000. The  E-commerce  customer  group generally outperforms
other customers in terms of loan performance.

     Same  store  unit  sales for the three  months  ended  September  30,  2000
decreased  approximately  2% from the same three month  period of 1999.  For the
nine months ended September 30, 2000, same store sales decreased  almost 3% from
the corresponding  period of the previous year. The decrease is primarily due to
the increased emphasis on underwriting and obtaining higher quality loans.

    The Cost of Used  Cars  Sold for the  three  and nine  month  periods  ended
September  30,  2000,  increased  by 22.5%  and  22.3%,  respectively,  over the
comparable periods of the previous year. The increases for these periods reflect
a rise in the volume of cars sold due to the  increase in number of  dealerships
in operation and E-commerce related business as previously  mentioned.  The Cost
of Used Cars Sold on a per car basis  increased  1.0% for the three months ended
September 30, 2000 versus a decrease of 1.1% for the nine months ended September
30, 2000 over the same  periods of the prior year.  The increase for the quarter
was more than offset by an increase in the revenue  earned per car. The overall
decrease in the cost of cars sold for the nine

                                Page 12
<PAGE>

month  period  contributed  to an  improvement  in the year to date gross margin
percent.  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 remained constant at 44.1% for the three months ended September 30, 2000
and 1999, and increased .7% for the nine month period ended  September 30, 2000,
to 44.3% from  43.6% for the same  period of the prior  year.  On a per car sold
basis,  gross  margin  increased  slightly to $3,769 per car for the three month
period  ended  September  30,  2000 from $3,728  during the same  quarter of the
previous  year and rose 1.7% to $3,752 per car for the nine month  period  ended
September 30, 2000 as compared to the corresponding period of 1999. The increase
in both  overall  gross  margin as well as on a per car sold  basis for the nine
months ended  September  30, 2000 is  attributable  to a decrease in the cost of
used cars sold coupled with an increase in average revenue per car sold.

    We finance  substantially  all of our used car sales. The percentage of cars
sold  financed  has remained  relatively  constant  from 1999 versus  2000.  The
percentage  of sales  revenue  financed  has  decreased  for the  quarter  ended
September  30, 2000 to 98.2% as  compared  to 99.3% for the same  quarter of the
previous year. The year to date  percentage for 2000 has also decreased to 97.5%
from  98.0% for 1999.  This  decrease  can be  attributed  to the  change in the
minimum down payment  requirement  from $500 to $600 in May 2000.  The following
table indicates the percentage of sales units and revenue financed:

<TABLE>
<CAPTION>

                                                    Three Months Ended            Nine Months Ended
                                                      September 30,                 September 30,

                                                  -----------------------      ------------------------
                                                    2000         1999            2000          1999
                                                  ---------    ----------      ----------    ----------
<S>                                                <C>           <C>             <C>           <C>
   Percentage of used cars sold financed           99.5%         99.3%           99.5%         99.2%
                                                   =====         =====           =====         =====
   Percentage of sales revenue financed            98.2%         99.3%           97.5%         98.0%
                                                   =====         =====           =====         =====
Provision for Credit Losses
</TABLE>

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

                                                Three Months Ended                       Nine Months Ended
                                                   September 30,         Percentage        September 30,         Percentage
                                             --------------------------            --------------------------
                                                2000          1999        Change        2000          1999         Change
                                             ------------ ------------- ------------ ------------ ------------- -------------

<S>                                             <C>           <C>             <C>      <C>            <C>            <C>
Provision for Credit Losses (in thousands)      $ 36,092      $ 27,561        31.0%    $ 102,877      $ 81,113       26.8%
                                             ============ =============              ============ =============
Provision per loan originated                   $  2,447      $  2,271         7.8%     $  2,298      $  2,247        2.3%
                                             ============ =============              ============ =============
Provision as a percentage of
  principal balances originated                    29.0%         26.9%                     27.7%         26.9%
                                             ============ =============              ============ =============
</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 and nine month periods ended September
30, 2000 increased 31.0% and 26.8%, respectively, over the comparable periods of
the prior year.  The increase was  primarily due to an increase in the volume of
loans  originated  in addition to an increase in the overall  provision  charged
from 27% of loans originated to 29%, effective  beginning with the third quarter
of 2000 to establish an adequate  allowance for the on balance sheet  portfolio.
The average amount  financed for the three month period ended September 30, 2000
decreased  $20 to $8,433 per unit versus the same period of the  previous  year.
The average amount  financed for the nine month period ended  September 30, 2000
decreased $53 to $8,295 per unit as compared to the corresponding nine months of
the previous  year.  The  decrease is primarily  due to a change in the required
minimum down payment from $500 to $600,  effective May 1, 2000. The average down
payment for the third quarter of 2000, the first full quarter with the increased
down payment requirement, was $718 versus $665 during the third quarter of 1999.

      See  Management's  Discussion  and Analysis - "Static Pool  Analysis"  for
further Provision for Credit Loss discussion.

                                Page 13
<PAGE>




Net Interest Income
<TABLE>
<CAPTION>

                                  Three Months Ended                           Nine Months Ended
                                      September 30,          Percentage          September 30,          Percentage

                                --------------------------     Change          -------------------        Change
                                   2000          1999                         2000           1999
                                ------------  ------------   ------------  ------------  -------------  ------------
   ($ in thousands)
<S>                                <C>          <C>                <C>       <C>            <C>               <C>
   Interest Income                 $ 31,436     $  19,775          59.0%     $  86,838      $  45,904         89.2%
   Portfolio Interest Expense         7,318         4,042          81.0%        18,344          9,255         98.2%
                                ------------  ------------                 ------------  -------------
   Net Interest Income             $ 24,118     $  15,733          53.3%     $  68,494      $  36,649         86.9%
                                ============  ============                 ============  =============

   Average Effective Yield            26.1%         25.9%           0.8%         26.4%          26.1%          1.1%
   Average Borrowing Cost             10.7%         11.6%         (7.8)%         10.5%          10.9%        (3.7)%
</TABLE>

    Interest  Income  consists  primarily  of  interest  on  finance  receivable
principal  balances retained on our balance sheet.  Retained  principal balances
grew to $512.8  million at September  30, 2000 from $332.0  million at September
30,  1999  primarily  as a result  of the  change  in the way we  structure  our
securitizations to the collateralized borrowing method during the fourth quarter
of 1998. Prior to the fourth quarter of 1998, securitized loans were transferred
off  of  our  balance  sheet  and  a  gain  on  sale  was  recorded.  Under  the
collateralized  borrowing  method,  the  securitized  loans are  retained on our
balance sheet and the income and associated  costs are recognized  over the life
of the loan.

Servicing Income

    We generate  Servicing  Income  primarily  from servicing the remaining loan
portfolios  securitized  under the gain on sale  method.  A summary of Servicing
Income  follows for the three and nine months ended  September 30, 2000 and 1999
($ in thousands):
<TABLE>
<CAPTION>

                                 Three Months Ended      Percentage       Nine Months Ended      Percentage
                                   September 30,           Change           September 30,          Change

                               -----------------------  --------------  ----------------------- --------------
                                 2000         1999                        2000         1999
                               ----------  -----------                  ----------  -----------

<S>                               <C>         <C>             <C>          <C>         <C>            <C>
    Servicing Income              $  308      $ 1,794         (82.8)%      $1,701      $ 6,988        (75.7)%
                               ==========  ===========  ==============  ==========  =========== ==============
</TABLE>

    We service loans for monthly fees ranging from .25% to .33% of the beginning
of month principal  balances (3.0% to 4.0% per year).  The decrease in Servicing
Income for the three and nine month periods  ended  September 30, 2000 is due to
the decrease in remaining principal balances  securitized and serviced under the
gain on sale method from $95.5 million at September 30, 1999 to $12.7 million at
September 30, 2000. We expect the remaining principal balance of $12.7 million
to completely runoff by December 31, 2000.

Income before Operating Expenses

    Income  before  Operating  Expenses  grew by 24.5% to $44.2  million for the
three  month  period  ended  September  30, 2000 and  increased  40.7% to $136.1
million for the nine month  period  ended  September  30,  2000.  Income  before
Operating Expenses for the three and nine month periods ended September 30, 1999
was $35.5 million and $96.8 million, respectively. Growth in Sales of Used Cars,
an increase in gross margins and an increase in Interest Income were the primary
contributors to the increase.

                                Page 14
<PAGE>



Operating Expenses
<TABLE>
<CAPTION>

                                              Three Months Ended      Percentage         Nine Months Ended        Percentage
                                                September 30,           Change             September 30,            Change
                                               2000        1999                        2000           1999
                                            ---------   ---------   --------------  ---------      -------      -------------
<S>                                         <C>         <C>             <C>         <C>            <C>             <C>
    Operating Expenses (in thousands).......$ 37,303    $  28,080       32.8%       $   109,426    $     84,758    29.1%
    Per Car Sold............................$  2,516   $    2,298       9.5%        $     2,432    $      2,329     4.4%
                                            --------   ------------                -------------  ------------
    As % of Total Revenues..................    23.6%        22.5%                       23.3%          23.5%
                                            =========  ===========                  ==========     ==========
</TABLE>


    Operating  expenses,  which  consist  of  selling,  marketing,  general  and
administrative and depreciation/amortization  expenses, increased as a result of
overall  growth in our  operations.  The  increase  in  operating  expenses as a
percentage  of total  revenues for the three months ended  September 30, 2000 is
primarily the result an increase in salary and benefit related costs. The slight
decrease  for the nine month  period  ended  September  30, 2000 versus 1999 was
primarily due to increased  economies of scale related to marketing efforts with
the addition of more dealerships in existing markets,  efficiencies  gained from
enhanced  management  information  systems and an  increase in interest  income,
offset by the additional accruals mentioned above.

Interest Expense

    Portfolio  interest expense  increased to $7.3 million and $18.3 million for
the three and nine month periods  ending  September 30, 2000 versus $4.0 million
and $9.3 million for the same periods of the previous  year. The increase is due
to the  increase  in  Portfolio  Notes  Payable  which  consist  of our  Class A
obligations  related to our  securitization  program  along  with our  revolving
credit facility with GE Capital. The majority of the increase is attributable to
the  securitization  related  on  balance  sheet debt which has grown due to the
change in the way we record  our  securitization  transactions  from the gain on
sale method to the collateralized  borrowing method during the fourth quarter of
1998.  This increase in interest  expense is offset by the  additional  interest
income  earned  from the growth in finance  receivables  retained on our balance
sheet as previously mentioned.

    Interest expense arising from our subordinated debt totaled $2.4 million for
the three  months  ended  September  30, 2000 versus $0.9  million for the three
months ended  September 30, 1999. For the nine month periods ended September 30,
2000 and 1999, interest expense was $7.2 million and $1.7 million, respectively.
While we have  additional  interest  expense  arising  from  subordinated  notes
payable,  a portion of this interest  expense was attributed to the financing of
assets and activities  reported as  discontinued  operations.  As the assets and
activities of discontinued  operations diminish,  we do not expect to retire the
subordinated  notes payable but rather use these  borrowings to fund our growth.
Accordingly,  we would  expect to have a  disproportionate  increase in interest
expense  allocated  to  continuing  operations  in future  periods  as  existing
subordinated debt is used to fund our growth and the allocation of this interest
to discontinued  operations decreases.  Subordinated debt carries interest rates
generally higher than those charged on borrowings  collateralized by our finance
receivables.

Income Taxes

    Income  taxes  totaled  $1.9 million and $8.0 million for the three and nine
month periods ended September 30, 2000, respectively,  and $2.9 million and $4.2
million for the three and nine months ended  September  30, 1999,  respectively.
Our effective tax rate was 41% for the three and nine months ended September 30,
2000 versus 44% and 41% for the three and nine months ended  September 30, 1999,
respectively.

Earnings from Continuing Operations

    Earnings from continuing  operations  totaled $2.7 million and $11.5 million
for the three and nine months ended  September  30, 2000,  respectively,  versus
$3.7 million and $6.1 million,  respectively,  for the same three and nine month
periods of the previous year. The decrease for the three months ended  September
30, 2000 is primarily a result of the increase in the  provision for credit loss
from 27% to 29% of originations effective on loans originated beginning with the
third  quarter of 2000,  partially  offset by an  increase in the amount of used
cars  sold.  The  increase  for the nine  months  ended  September  30,  2000 is
primarily due to an increase in the volume of used cars sold, increases in gross
margin  and growth in  interest  income.  These  improvements  were  offset by a
decrease in servicing income  resulting from the decline in remaining  principal
balances securitized and serviced under the gain on sale method.

Discontinued Operations

                                Page 15
<PAGE>

    Discontinued  operations  provided  no income or loss for the three and nine
months ended  September 30, 2000 versus income,  net of income tax benefits,  of
$.5 million  and  approximately  break even for the three and nine months  ended
September  30, 1999,  respectively.  Effective  December 31, 1999,  we adopted a
formal  plan to abandon  any effort for our third  party  dealer  operations  to
acquire loans or servicing  rights to additional  portfolios.  Accordingly,  our
Cygnet  Servicing and the associated  Cygnet  Corporate  segment are reported as
components  of  discontinued  operations.  We plan  to  complete  servicing  the
portfolios that we currently service.

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.

    Operating  Expenses for our business  segments,  along with a description of
the included  activities,  for the three and nine month periods ended  September
30, 2000 and 1999 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                          Nine Months Ended
                                             September 30,          Percentage          September 30,         Percentage

                                       --------------------------                 --------------------------
                                          2000          1999          Change         2000          1999         Change
                                       ------------  ------------  -------------  -----------   ------------ --------------
  Retail Operations:
<S>                                        <C>           <C>          <C>           <C>            <C>           <C>
    Selling and Marketing                  $ 7,187       $ 6,023      19.3%         $ 22,748       $ 17,959      26.7%
    General and Administrative              14,570        11,187      30.2%           43,353         33,685      28.7%
    Depreciation and Amortization            1,201           920      30.5%            3,405          2,572      32.4%
                                       ------------  ------------                 -----------   ------------
                                           $22,958       $18,130      26.6%         $ 69,506       $ 54,216      28.2%
                                       ============  ============                 ===========   ============
Per Car Sold:
    Selling and Marketing                   $  485        $  493      (1.6)%          $  506         $  494      2.4%
    General and Administrative                 983           916        7.3%             963            925      4.1%
    Depreciation and Amortization               81            75        8.0%              76             71      7.0%
                                        ------------  ------------                 -----------   ------------
                                           $ 1,549       $ 1,484        4.4%         $ 1,545        $ 1,490      3.7%
                                       ============  ============                 ===========   ============
As % of Used Cars Sold Revenue:
    Selling and Marketing                     5.7%          5.8%                        6.0%           5.8%
    General and Administrative               11.5%         10.8%                       11.3%          10.9%
    Depreciation and Amortization             0.9%          0.9%                        0.9%           0.8%
                                       ------------  ------------                 -----------   ------------
                                             18.1%         17.5%                       18.2%          17.6%
                                       ============  ============                 ===========   ============
</TABLE>

   Selling and Marketing  expenses as a percentage of related  revenue  remained
relatively  constant for the three months  ended  September  30, 2000 versus the
same period of the previous year. For the nine month period ended  September 30,
2000,  selling and marketing  expenses increased slightly to 6.0% from 5.8% over
the same period of 1999.  Economies of scale gained from additional  dealerships
in existing  markets and the  additional  revenue from internet based sales have
allowed the Selling and Marketing expenses as a percentage of related revenue to
remain  relatively  stable but have increased on a per car sold basis  primarily
resulting from an increase in commission related expenses.

   General and  Administrative  expenses  increased for the three and nine month
periods ended September 30, 2000, principally as a result of increases in salary
and benefit costs but have shown a slight  decrease  from the second  quarter of
2000 due to the implementation of a cost reduction plan.

                                        Page 16

<PAGE>



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

                                           Three Months Ended                        Nine Months Ended
                                             September 30,         Percentage          September 30,         Percentage
                                         -----------------------                  ------------------------
                                            2000        1999         Change          2000         1999         Change
                                         ----------- -----------  --------------  ------------ -----------  -------------
  Portfolio Expense:
<S>                                         <C>         <C>           <C>             <C>        <C>           <C>
    General and Administrative              $ 7,719     $ 4,796       60.9%           $20,605    $ 13,963      47.6%
    Depreciation and Amortization               278         278        0.0%               858         841       2.0%
                                        ----------- -----------                   ------------ -----------
       Portfolio Expense                    $ 7,997     $ 5,074       57.6%           $21,463    $ 14,804      45.0%
                                         =========== ===========                  ============ ===========
Expense per Month per Loan Serviced         $ 29.89     $ 20.50                       $ 27.57     $ 20.47
                                         =========== ===========                  ============ ===========
Annualized Expense as % of Managed
     Principal Balances                        6.1%        4.7%                          5.4%        4.6%
                                         =========== ===========                  ============ ===========
</TABLE>

    The increase in operating expenses as well as the expense per month per loan
serviced for the three and nine month periods  ended  September 30, 2000 for our
Portfolio  segment is primarily a result of the increased number of loans in our
portfolio.  Also attributing to the increase were costs incurred  resulting from
the deployment of collectors out to our dealerships,  market adjustments made to
collection  staff  wages and a  decrease  in the number of  delinquent  accounts
serviced  per  collector.  We expect the  portfolio  expense and the expense per
month  per loan  serviced  to  remain  at or  about  current  levels  as we have
completed the deployment of collectors to our dealerships.  However,  we believe
the  increase  in expense  will be more than offset by lower  delinquencies  and
ultimately lower loan losses.

    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.
<TABLE>
<CAPTION>

                                           Three Months Ended                        Nine Months Ended
                                             September 30,         Percentage          September 30,          Percentage
                                         -----------------------                  -------------------------
($ in thousands except per car sold        2000         1999         Change          2000         1999          Change
data)
                                         ----------  -----------   ------------   -----------  ------------  ------------
  Corporate Expense:
<S>                                        <C>         <C>             <C>           <C>          <C>           <C>
     General and Administrative            $ 5,542     $  4,311        28.6%         $15,996      $ 14,115      13.3%
     Depreciation and Amortization             806          565        42.7%           2,461         1,623      51.6%
                                         ----------  -----------                  -----------  ------------
       Corporate Expense                   $ 6,348      $ 4,876        30.2%         $18,457      $ 15,738      17.3%
                                         ==========  ===========                  ===========  ============
Per Car Sold                                 $ 428       $  399                       $  410      $    432
                                         ==========  ===========                  ===========  ============
As % of Total Revenues                        4.0%         3.9%                         3.9%          4.4%
                                         ==========  ===========                  ===========  ============
</TABLE>

    Operating  expenses  related to our Corporate  segment as a percent of total
revenue remained relatively  consistent for both the three and nine months ended
September 30, 2000, versus the same periods of 1999.  However, on a per car sold
basis corporate  expenses  increased $29 per car for the quarter ended September
30, 2000, as compared to the same quarter of the previous  year. The increase is
primarily  attributable to an increase in employee benefit related accruals. For
the year to date period ended  September 30, 2000,  corporate  expenses on a per
car sold basis  decreased $22 primarily  due to various  operating  efficiencies
including  those gained by the  consolidation  of all  accounting and management
information to a single computer system in early 1999,  partially  offset by the
increase in employee benefit related accruals mentioned above.  Further,  as new
dealerships  opened in existing markets,  revenue and units sold increased while
related  expenditures  increased  at a lesser  rate.  Finally,  as our  retained
portfolio  increased,  there is a proportionate  increase in net interest income
thereby improving the ratio of corporate expenses to total revenues.

                                       Page 17
<PAGE>



Financial Position

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

                                         September 30,      December 31,     Percentage

                                              2000              1999           Change
                                        ----------------- ------------------ ------------
<S>                                          <C>                <C>                <C>
Total Assets                                 $   618,483        $   536,711        15.2%
Inventory                                         43,739             62,865      (30.4)%
Finance Receivables, net                         491,880            365,586        34.5%
Net Assets of Discontinued Operations              4,211             33,880      (87.6)%

Total Debt                                       416,333            340,941        22.1%
Notes Payable - Portfolio                        362,255            275,774        31.4%
Other Notes Payable                               17,930             36,556       51.0)%
Subordinated Notes Payable                        36,148             28,611        26.3%
Stockholders' Equity                         $   158,522       $    165,680       (4.3)%
</TABLE>


    Total Assets. The increase in total assets is primarily due to the growth in
Finance Receivables,  Net, offset by the decrease in Inventory and Net Assets of
Discontinued Operations.

    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, 1999 to September  30, 2000 is due to  management's
decision to increase  inventory levels at the end of 1999 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 growth in the volume of cars
sold,  Finance  Receivables,  net as of September 30, 2000 increased  34.5% from
December  31,  1999.  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 amount ($ in thousands) and
the number of loans outstanding.
<TABLE>
<CAPTION>

                                                                    Managed Loans Outstanding
                                                ------------------------------------------------------------------
                                                        Principal Balances                 Number of Loans
                                                -------------------------------  ---------------------------------
                                                 September 30,   December 31,     September 30,    December 31,
                                                     2000            1999             2000             1999
                                                -------------------------------  ---------------------------------
                                                -------------------------------  ---------------------------------
<S>                                                <C>            <C>                 <C>              <C>
Principal - Managed.........................       $  525,498     $  424,480          85,240           70,450
Less:  Principal - Securitized and Sold.....           12,735         65,662           5,392           17,369
                                                -------------------------------  ---------------------------------
Principal - Retained on Balance Sheet.......       $  512,763     $  358,818          79,848           53,081
                                                ===============================  =================================
</TABLE>

    The increase in Principal Balances - Retained on Balance Sheet was primarily
due to growth in finance receivables as a result of increased used car sales and
financing,  partially offset by the principal balance runoff of loans originated
in prior periods.  Used Car Sales totaled 14,825 for the quarter ended September
30, 2000,  versus sales of 12,219 used cars during the same quarter of the prior
year. Used Car Sales for the nine months ended September 30, 2000 were 44,996 as
compared to sales of 36,389 for the nine months ended September 30, 1999.

                                Page 18
<PAGE>



    The following table reflects activity in the Allowance for Credit Losses, as
well as information regarding charge off activity, for the three and nine months
ended September 30, 2000 and 1999 ($ in thousands):
<TABLE>
<CAPTION>

                                                         Three Months Ended           Nine Months Ended
                                                            September 30,               September 30,
                                                      --------------------------  --------------------------
                                                          2000         1999           2000         1999
                                                      ------------- ------------  ------------- ------------
Allowance Activity:
<S>                                                       <C>          <C>            <C>          <C>
Balance, Beginning of Period                              $ 98,533     $ 66,905       $ 76,150     $ 24,777
Provision for Credit Losses                                 36,092       27,561        102,877       81,113
Other Allowance Activity                                   (1,250)        3,738        (2,250)        3,835
Net Charge Offs                                           (33,332)     (17,506)       (76,734)     (29,027)
                                                      ------------- ------------  ------------- ------------
Balance, End of Period                                    $100,043      $80,698       $100,043    $  80,698
                                                       ============ ============  ============= ============
Allowance as a Percent of Period End Balances                19.5%        24.3%          19.5%        24.3%
                                                       ============ ============  ============= ============
Charge off Activity:
Principal Balances                                      $ (41,934)   $ (22,030)     $ (99,076)   $ (36,610)
Recoveries, net                                              8,602        4,524         22,342        7,583
                                                      ------------- ------------  ------------- ------------
Net Charge Offs                                         $ (33,332)   $ (17,506)     $ (76,734)   $ (29,027)
                                                      ============= ============  ============= ============
</TABLE>


    Even though a contract is charged off, we continue to attempt to collect the
contract.  Recoveries  as a percentage  of principal  balances  charged off from
retail  operations  averaged 20.5% for the three months ended September 30, 2000
and 1999.  Recoveries  as a percentage  of principal  balances  charged off from
retail  operations  averaged 22.6% for the nine months ended  September 30, 2000
versus 20.7% for the same period of 1999. The increase is due to the initiatives
taken  to  retain  qualified  loan  service  staff  and  reduce  the  number  of
delinquencies serviced per collector.

    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.

                                Page 19
<PAGE>


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

    The following  table sets forth as of October 31, 2000,  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).

          Pool's Cumulative Net Losses as Percentage of Pool's Original

                           Aggregate Principal Balance

                                ($ in thousands)
<TABLE>
<CAPTION>

                                                  Monthly Payments Completed by Customer Before Charge Off
                                      --------------------------------------------------------------------
                              Orig.       0         3         6         12        18        24        TLI      Reduced
                          ----------  --------  --------  --------   --------  --------  --------  --------   --------
<S> <C>                   <C>             <C>      <C>       <C>        <C>       <C>       <C>       <C>       <C>
    1993                  $   12,984      9.1%     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      2.0%      8.1%     13.2%      19.2%     22.3%     23.6%     24.1%     100.0%
    1996:
       1st Quarter        $   13,635      1.7%      8.1%     13.8%      20.8%     24.8%     26.1%     27.1%     100.0%
       2nd Quarter        $   13,462      2.3%      9.3%     13.4%      22.0%     25.9%     27.6%     29.0%     100.0%
       3rd Quarter        $   11,082      1.7%      6.9%     12.5%      21.3%     25.4%     27.5%      28.6%    100.0%
       4th Quarter        $   10,817      0.7%      8.4%     15.9%      24.8%     29.1%     30.9%      32.0%     99.9%
    1997:

       1st Quarter        $   16,279      2.1%     10.8%      18.2%     24.9%     30.0%     32.2%      33.7%    99.7%
       2nd Quarter        $   25,875      1.5%      9.9%      15.8%     22.8%     27.4%     29.5%      30.7%    99.0%
       3rd Quarter        $   32,147      1.4%      8.4%      13.2%     22.5%     27.0%     29.3%      30.6%    98.2%
       4th Quarter        $   42,529      1.4%      6.8%      12.6%     21.9%     26.2%     28.9%      29.9%    97.0%
    1998:

       1st Quarter        $   69,708      0.9%      6.9%      13.5%     21.0%     26.5%     28.9%      29.8%    95.6%
       2nd Quarter        $   66,908      1.1%      8.1%      14.2%     21.8%     27.4%     29.4%      29.8%    92.4%
       3rd Quarter        $   71,027      1.0%      7.9%      13.4%     23.1%     27.9%     x          30.2%    90.1%
       4th Quarter        $   69,583      0.9%      6.6%      13.1%     24.4%     29.3%     -          30.4%    83.6%
    1999:

       1st Quarter        $  102,733      0.8%      7.5%      15.1%     23.7%     x         -          28.7%    75.8%
       2nd Quarter        $   96,098      1.1%      9.9%      16.8%     25.6%     -         -          28.1%    66.6%
       3rd Quarter        $  102,599      1.0%      8.3%      14.2%     x         -         -          23.8%    56.5%
       4th Quarter        $   80,900      0.7%      6.0%      12.9%     -         -         -          17.4%    43.4%
    2000:                                                               -         -         -
       1st Quarter        $  128,123      0.3%      6.6%      x                                        11.8%    32.0%
       2nd Quarter        $  118,778      0.6%      x         -         -         -         -           5.9%    18.1%
       3rd Quarter        $  124,367      x         -         -         -         -         -           0.5%     2.1%

</TABLE>

                                        Page 20

<PAGE>





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

                                                        September 30,    December 31,

                                                            2000             1999
                                                       ---------------- ----------------
     Days Delinquent:

<S>                                                              <C>              <C>
     Current                                                     72.4%            63.2%
     1-30 Days                                                   19.3%            27.8%
     31-60 Days                                                   4.9%             5.9%
     61-90 Days                                                   3.4%             3.1%
                                                       ---------------- ----------------
     Total Portfolio                                            100.0%           100.0%
                                                       ================ ================
</TABLE>

    In accordance with our charge off policy, there are no accounts more than 90
days delinquent as of September 30, 2000.

    Although loan losses on recently  originated  loan pools  indicate  improved
loan performance  over those loan pools  originated in prior years,  based on an
extensive  review of delinquency  trends,  historical  loan losses and projected
charge offs for the entire on balance  sheet  portfolio,  we have  increased our
provision for credit losses  effective  with loans  originated  during the third
quarter of 2000.  The increase  provides for a provision of an  additional 2% of
loans  originated,  which  results in 29% of the amount  financed.  The increase
provides an allowance  for credit loss at quarter end within the targeted  range
for estimated net charge offs for the entire on balance sheet  portfolio for the
next 12 to 15 months.  We will  continue  to monitor  the on balance  sheet loan
portfolio  performance  to evaluate the on going  adequacy of our  provision for
credit losses.

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) to
investors and subordinate classes are retained by us. We continue to service the
securitized loans.

    The Class A obligations have historically received 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 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 4%
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 12.0%, 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.

With our  existing  securitizations,  we are  required to maintain  certain cash
balances in the reserve  accounts.  These  balances vary by trust and may change
based  on the  level  of  delinquencies  and  charge  offs on the  loans  of the
respective  trusts.  As of October 15, 2000,  primarily  due to an increase in
delinquencies on loans in certain trusts,  the targeted reserve account balances
for two  trusts  were  increased  and the  actual  balances  were  $5.8  million
collectively  under  the  increased  specified  levels.  While  these  increased
targeted reserve account  requirements  continue,  collections on receivables in
these  trusts in excess  of  amounts  required  to pay the A  certificates,  our
servicing  fees and certain  other amounts will be used to satisfy the increased
reserve  account  amount  and will not be  distributed  to us. Due to the normal
reduction of the portfolios in these trusts, and historical seasonality declines
in delinquency levels, we expect the targeted reserve account balances for these
trusts to return to their  prior  levels  sometime  during the first  quarter of
2001,  and at that  time any  accumulated  excess  cash  will be  released.  The
balances deposited in the reserve accounts totaled $41.0 million at
September 30, 2000.

                                Page 21
<PAGE>

    Certain Financial Information Regarding Our Securitizations

    During August 2000, we closed a securitized  borrowing  transaction in which
we  securitized  $153.0  million  of loans,  issuing  $108.6  million in Class A
certificates with an annual interest rate of 7.26%.

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:

increases in our loan portfolio,                common stock repurchases,
expansion of our dealership network,            the purchase of inventories, and
working capital and general corporate purposes, the purchase of property and
                                                equipment.

    We fund our capital requirements primarily through:

      operating cash flow,           our revolving facility with GE Capital, and
      securitization transactions,   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 increased by $46.6 million in the
nine  months  ended  September  30,  2000 to  $171.1  million  compared  to cash
generated of $124.5  million for the nine months ended  September  30,1999.  The
increase  is  primarily  due to an  increase  in  net  earnings  coupled  with a
significant   decrease  in  inventory   from  year  end  1999,   resulting  from
management's  policy to increase inventory levels at year end in preparation for
the high seasonal sales, which typically occur in the first quarter of the year,
partially offset by decrease in income taxes payable.

    Net cash used by investing  activities  decreased to $236.2  million for the
nine months ended  September 30, 2000 versus $274.0  million for the same period
of  the  previous  year.  The  decrease  is  due to a  significant  decrease  in
Investments Held in Trust as principal balances  securitized under the gain on
sale method declined,  coupled with  proceeds  used for the purchase of assets
related to dealership acquisitions during the third quarter of 1999.

    Financing  activities  generated  $39.6  million for the nine  months  ended
September 30, 2000 as compared to $129.4 million generated for the corresponding
period of 1999. The reason for the decrease is primarily due to net repayment of
notes  payable  and an increase  in funds used for the  acquisition  of treasury
stock.

Financing Resources

    Revolving Facility. Under our $125 million revolving facility, 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.  The revolving facility
expires in June 2001 if not renewed or extended  by a mutual  agreement  by both
parties.  The revolving facility contains a provision that requires us to pay GE
Capital a termination  fee of $200,000 if we terminate  the  revolving  facility
prior to the expiration date. We secure the facility with  substantially  all of
our assets.

    As of  September  30,  2000,  our  borrowing  capacity  under the  revolving
facility was $80.8 million, the aggregate principal amount outstanding under the
revolving facility was approximately $50.2 million,  and the amount available to
be borrowed under the facility was $30.6 million.  The revolving  facility bears
interest at the 30-day LIBOR plus 3.15%,  payable  daily (total rate of 9.77% as
of September 30, 2000).

    The revolving  facility contains  covenants that, among other things,  limit
our ability to take  certain  actions  without GE Capital's  consent,  including
incur additional indebtedness, make any change in our capital structure, declare
or pay dividends,  and make certain  investments and capital  expenditures.  The
revolving  facility  also  provides  that an event of default  will occur if

                                       Page 22
<PAGE>

Mr. Ernest C. Garcia II owns less than 15.0% of our voting  stock.  Mr. Garcia
owned approximately 36.5% of our common stock at September 30, 2000.

    In addition, we are also required to maintain specified financial ratios. As
of  September  30,  2000,  we were in  compliance  with  the  covenants  of this
agreement.



    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.

Capital Expenditures and Commitments

    During the nine months  ended  September  30, 2000,  we  developed  five new
dealerships  in  existing  markets,  three in the first  quarter  and two in the
second  quarter.  In the fourth  quarter of 1999, we obtained five  dealerships,
including vehicle inventory and a loan portfolio of approximately  $8.0 million,
from Virginia Auto Mart.  The direct cost of opening a dealership is primarily a
function  of whether we lease a  facility  or  construct  a  facility.  A leased
facility costs approximately  $650,000 to develop, while a facility we construct
costs approximately $1.7 million. In addition, we require capital to finance the
portfolio  that  we  carry  on our  balance  sheet  for  each  store.  It  takes
approximately  $2.2  million  in cash to  support  a  typical  stabilized  store
portfolio   with  our   existing   65%  advance  rate  under  our  GE  facility.
Additionally,  it takes approximately 34 months for a store portfolio to reach a
stabilized level.

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

    In April 1999, our Board of Directors  authorized a stock repurchase program
allowing us to repurchase up to 2.5 million shares of our common stock from time
to time.  Purchases  may be made  depending on market  conditions,  share price,
lender   approval  and  other   factors.   During  July  2000,  we   repurchased
approximately  1.5 million shares pursuant to the stock repurchase  program.  We
have repurchased 1,589,425 shares under this program.

    In September 2000, we entered into an agreement  with the  beneficiaries
and/or representative of the estate ("Addink"), of Don Addink, our former Senior
Vice  President  and  Treasurer  who died in July of this  year,  in  which  the
following was agreed to: we would purchase all of his shares of our common stock
at $7.00/share, approximately 98,000 shares; Addink's stock options became fully
vested,  Addink  waived and  released  all claims  under the options and we paid
Addink  $86,250;  and we  waived  all  principal  and  interest  due  under  two
promissory  notes owed to us by Addink  with  aggregate  principal  and  accrued
interest of $351,393.

    We  continue  to believe  that the  repurchase  of our stock is  currently a
better  investment  of our capital  than new stores.  As  additional  capital is
secured, we will consider whether to resume or accelerate our expansion plans or
to continue  repurchasing  our stock. At this time, we will not commit to growth
prior to  securing  the  capital to support  it,  unless the  acquisition  would
require  little to no  capital.  We  continue  to attempt to secure  capital for
further  growth.  We do not  expect a slow down in growth  to  adversely  impact
revenues or earnings in 2001 and any impact on subsequent years will depend upon
the number and timing of future acquisitions.

    With respect to the month of September, 2000, we were not in compliance with
a  provision  related  to cash flows  under that  certain  Senior  Secured  Loan
Agreement dated as of May 14, 1999 for  securitization  residual term financing.
The Lenders under the Loan  Agreement  permanently  waived the failure to comply
and agreed it was not a default or event of  default  under the Loan  Agreement.
Among other terms, we pledged certain  securitization  residuals from our 2000-B
securitization to the Lenders as additional collateral.

    On September 30, 2000, the Loan Agreement,  Warrants and Warrant  Agreements
between us and certain  Lenders under that Loan  Agreement  dated as of February
12,  1998,  as amended on  September  30 of 1999,  was  amended  to:  reduce the

                                Page 23
<PAGE>

outstanding principal balance under the Loan Agreement from $15 million to $13.5
million; require us to take out one of the lenders in the facility by paying off
that lender's $1.5 million  share of the loan (which  occurred),  and cancel the
number  of  outstanding  warrants  attributable  to that  portion  of the  loan;
increase the interest rate under the Loan  Agreement to 15%,  extend the term of
the Loan  Agreement  to February  12,  2003;  and provide for the  repayment  of
principal and the  corresponding  reduction of warrants  under certain terms and
conditions.

    On November 9, 2000, Verde Investments,  Inc. ("Verde"), an affiliate of Mr.
Earnest  Garcia  II,  our  chairman,  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, 2002;  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.  We  intend to build a new  headquarters  at this
location  over  the  next  several  months,   obtain  permanent  financing  upon
completion of construction and exercise our option to purchase the property.

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 the company.


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

We Make Forward Looking Statements

    Our  Quarterly  Report  on Form 10-Q  includes  statements  that  constitute
forward-looking  statements  within the meaning of the safe harbor provisions of
the  Private  and  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,  and
improvements in loan performance, including delinquencies;  anticipated roll-out
of collectors to the Company's dealerships,  anticipated  repurchases of Company
stock and the level of growth in our  dealerships  through  acquisitions  and de
novo dealership  openings;  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.
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 of the Company to finance its operations in light of a
tight credit market for the sub-prime  industry;  any  deterioration in the used
car finance industry or increased  competition in the used car sales and finance
industry;  any inability of the Company to monitor and improve its  underwriting
and collection  processes;  any changes in estimates and assumptions in, and the
ongoing  adequacy of, our  allowance  for credit  losses;  any  inability of the
Company to continue to reduce  operating  expenses as a percentage of sales; any
material litigation against us or material,  unexpected developments in existing
litigation;  and any new or  revised  accounting,  tax or  legal  guidance  that
adversely affect used car sales or financing.  Other factors are detailed 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 reports 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. By making these  forward-looking  statements,  we
undertake no  obligation  to update these  statements  for  revisions or changes
after the date of this report.  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.

                                      Page 24
<PAGE>

                                     ITEM 3.

Market Risk

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

         Our  financial  instruments  consist  primarily  of fixed rate  finance
receivables,  residual  interests  in pools of fixed rate  finance  receivables,
short term variable rate revolving Notes Receivable, and variable and fixed rate
Notes  Payable.  Our finance  receivables  are  classified as subprime loans and
generally  bear  interest  at the lower of 29.9% or the  maximum  interest  rate
allowed in states that impose  interest rate limits.  At September 30, 2000, the
scheduled maturities on our finance receivables range from one to 52 months with
a weighted  average  maturity of 31.3 months.  The interest  rates we charge our
customers on finance  receivables has not changed as a result of fluctuations in
market interest rates,  although we may increase the interest rates we charge in
the future if market interest rates  increase.  A large component of our debt at
September  30,  2000 is the  Collateralized  Notes  Payable  (senior  and junior
securities)  issued under our securitization  program.  Issuing debt through our
securitization  program allows us to mitigate our interest rate risk by reducing
the balance of the  variable  revolving  line of credit and  replacing it with a
lower fixed rate note  payable.  We are  subject to interest  rate risk on fixed
rate Notes Payable to the extent that future  interest rates are higher than the
interest rates on our existing Notes Payable.

         We believe that our market risk information has not changed  materially
from December 31, 1999.

                                    Page 25
<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.

Item 2.  Changes in Securities and Use of Proceeds.

(a)      None
(b)      None
(c)      See Exhibit 4.1 and discussion included in "Management's Discussion and
         Analysis - Capital Expenditures and Commitments"
(d)      Not Applicable

Item 3.  Defaults Upon Senior Securities.

    None.

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

    None

Item 5.  Other Information.

     None

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

(a)      Exhibits

Exhibit 4.1 - Second  Amendment  to Warrant  Agreement  dated  February 12, 1998
between Registrant and each of the Kayne Anderson related lenders named therein,
dated as of September 30, 2000.

Exhibit 10.1 - Amendment  and waiver  letter  agreement  to Senior  Secured Loan
Agreement  dated May 14,  1999  between  CIBC  Inc.,  SunAmerica,  etc.  and the
Registrant dated October 12, 2000.

Exhibit 10.2 - Letter agreement between the beneficiaries and/or representatives
of the estate of Don Addink and the Registrant dated September 14, 2000.

Exhibit 27 -- Financial Data Schedule

Exhibit 99 - Statement Regarding Forward Looking Statements and Risk Factors

(b)      Reports on Form 8-K.

Since June 30, 2000, the Company has filed two reports on Form 8-K. The
first  report on Form 8-K,  dated  October 5, 2000 and filed  October 10,  2000,
reported  Ugly  Duckling's  receipt of the offer to purchase  the Company by Mr.
Ernest C. Garcia II, the Company's Chairman and largest shareholder and filed as
an exhibit to the Form 8-K, a press release dated October 5, 2000 entitled "Ugly
Duckling  Confirms  Receipt of Offer to Purchase  Company from  Chairman/Largest
Shareholder".  The second  report on Form 8-K dated and filed  October 30, 2000,
reported the  withdrawal of the offer to purchase the Company from Mr. Ernest C.
Garcia, II, the Company's Chairman and largest shareholder.  Filed as an exhibit
to the Form 8-K was a press  release  dated  October  27,  2000  entitled  "Ugly
Duckling  Reports  Withdrawal of the  Chairman's  Offer to Purchase  Outstanding
Common Stock"

                                       Page 26
<PAGE>



SIGNATURE

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

         UGLY DUCKLING CORPORATION

         /s/     STEVEN T. DARAK
         -----------------------
         Steven T. Darak
         Senior Vice President and
         Chief Financial Officer

         (Principal Financial and Accounting Officer)

Date:  November 13, 2000

                                     Page 27
<PAGE>

EXHIBIT INDEX

          Exhibit
          Number     Description

          4.1        Second  Amendment to Warrant  Agreement  dated
                     February  12, 1998 between 4.1  Registrant  and each of the
                     Kayne Anderson related lenders named therein, dated as of
                     September 30, 2000
          10.1       Amendment  and waiver  letter  agreement to Senior  Secured
                     Loan  Agreement dated May 14, 1999 between CIBC Inc.,
                     SunAmerica,  etc. and the Registrant dated October 12, 2000
          10.2       Letter agreement between the beneficiaries  and/or
                     representatives  of the estate of Don Addink and the
                     Registrant dated September 14, 2000
          27         Financial Data Schedule
          99         Statement Regarding Forward Looking Statements and Risk
                     Factors