<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
              ----------------------------------------------------
                                    FORM 10-Q

        (MARK ONE)

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

                      For the quarterly period ended        July 31, 1999
                                                   ----------------------------

                                       OR

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

                      For the transition period from____________ to____________

                         Commission file number 1-11601

                           NATIONAL AUTO CREDIT, INC.
                           --------------------------
             (Exact name of registrant as specified in its charter)

                                    Delaware
                                    --------
                         (State or other jurisdiction of
                         incorporation or organization)

                                   34-1816760
                                   ----------
                      (I.R.S. Employer Identification No.)

                      30000 Aurora Road, Solon, Ohio        44139
                      --------------------------------------------
              (Address of principal executive offices and zip code)

                                 (440) 349-1000
                                 --------------
              (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. Yes [ ] No [X]

         Indicate the number of shares outstanding of each of the issuer's class
of common stock, as of the latest practicable date.

         As of November 30, 1999, there were 28,617,333 shares of Common Stock,
$.05 par value, outstanding.


<PAGE>   2


                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----

 PART I.     FINANCIAL INFORMATION


 Item 1.     Financial Statements                                            1

             Report of Independent Certified Public Accountants              1

             Condensed Consolidated Balance Sheets as of
             July 31, 1999 and January  31, 1999                             2

             Condensed Consolidated Statements of Operations for the
             Three Months and Six Months Ended July 31, 1999 and 1998        3

             Condensed Consolidated Statements of Cash Flows for
             the Six Months Ended July 31, 1999 and 1998                     4

             Notes to Condensed Consolidated Financial Statements            5


 Item 2.     Management's Discussion and Analysis of                        11
             Financial Condition and Results of Operations


 Item 3.     Quantitative and Qualitative Disclosures about                 18
             Market Risk


 PART II.    OTHER INFORMATION


 Item 1.     Legal Proceedings                                              19


 Item 5.     Other Information                                              20


 Item 6.     Exhibits and Reports on Form 8-K                               21


 Signatures                                                                 22


<PAGE>   3









PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
National Auto Credit, Inc. and Subsidiaries
Solon, Ohio


         We have reviewed the accompanying condensed consolidated balance sheet
of National Auto Credit, Inc. and its subsidiaries as of July 31, 1999, and the
related statements of operations for each of the three and six month periods
ended July 31, 1999 and 1998, and cash flows for each of the six-month periods
ended July 31, 1999 and 1998. The financial statements are the responsibility of
the Company's management.

         We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted accounting standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

         Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.

         The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note E to these condensed consolidated financial statements,
certain conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note E to these condensed consolidated financial statements. The condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

         We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of January 31, 1999, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended (not presented herein) and in our report
dated June 30, 1999, we expressed an unqualified opinion on those consolidated
financial statements and included an explanatory paragraph concerning matters
that raise substantial doubt about the Company's ability to continue as a going
concern. In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of January 31, 1999, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.



/s/ Grant Thornton LLP
Cleveland, Ohio
September 9, 1999 (except for the last paragraph of Note C as to which the date
 is December 2, 1999 and the first and seventh paragraphs of Note D as to which
 the dates are October 12, 1999 and December 9, 1999, respectively)



                                       1
<PAGE>   4
<TABLE>
<CAPTION>


                                                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                                (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                                             (UNAUDITED)

                                                                                        July 31,              January 31,
                                                                                          1999                    1999
                                                                                      -------------           ------------

<S>                                                                                    <C>                     <C>
ASSETS
Cash and cash equivalents                                                              $  45,750               $  32,109
Installment loans, net (Note B)                                                           44,651                  70,401
Property and equipment, net of accumulated depreciation
  of $5,642, and $5,262, respectively                                                      8,533                   8,558
Affordable housing investments                                                            10,496                  10,270
Income taxes refundable                                                                    3,242                   3,295
Other assets                                                                               1,927                   2,659
                                                                                       ---------               ---------

TOTAL ASSETS                                                                           $ 114,599               $ 127,292
                                                                                       =========               =========




LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Self-insurance claims                                                                  $   3,734               $   4,880
Accrued income taxes                                                                       6,458                   6,510
Other liabilities                                                                         13,464                  16,126
                                                                                       ---------               ---------
                                                                                          23,656                  27,516

COMMITMENTS AND CONTINGENCIES  (Note D)                                                     --                      --


STOCKHOLDERS' EQUITY (Note C)
Preferred stock - $.05 par value,
  authorized 2,000,000 shares, none issued                                                  --                      --
Common stock - $.05 par value,
  authorized 40,000,000 shares, issued 29,989,445 and
  29,982,512 shares, respectively                                                          1,499                   1,500
Additional paid-in capital                                                               166,176                 166,168
Retained deficit                                                                         (64,629)                (55,789)
Treasury stock, at cost, 1,345,968 shares                                                (12,103)                (12,103)
                                                                                       ---------               ---------
                                                                                          90,943                  99,776
                                                                                       ---------               ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $ 114,599               $ 127,292
                                                                                       =========               =========

</TABLE>







See notes to condensed consolidated financial statements.



                                       2
<PAGE>   5

<TABLE>
<CAPTION>

                                                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                                             (UNAUDITED)


                                                          Three Months Ended                    Six Months Ended
                                                                July 31,                            July 31,
                                                     -----------------------------       ----------------------------
                                                         1999            1998               1999            1998
                                                     -------------    ------------       ------------    ------------

<S>                                                    <C>               <C>               <C>               <C>
REVENUE
     Interest income                                   $  1,684          $  4,154          $  3,786          $  9,433
     Fees and other income                                   42               401                87               459
                                                       --------          --------          --------          --------
          Total                                           1,726             4,555             3,873             9,892

COSTS AND EXPENSES
     Provision for credit losses                           (368)              675              (186)            1,399
     Operating                                            2,653             2,666             5,726             5,469
     General and administrative                           1,087             1,200             2,593             2,449
     Litigation and non-recurring charges                 2,031             1,260             3,985             3,328
     Cost related to purchase of shares                   1,500              --               1,500              --
     Interest (income) expense                             (480)            1,319              (905)            2,987
                                                       --------          --------          --------          --------
          Total                                           6,423             7,120            12,713            15,632
                                                       --------          --------          --------          --------

LOSS BEFORE INCOME TAXES                                 (4,697)           (2,565)           (8,840)           (5,740)

Provision for income taxes                                 --                --                --                --
                                                       --------          --------          --------          --------

NET LOSS                                               $ (4,697)         $ (2,565)         $ (8,840)         $ (5,740)
                                                       ========          ========          ========          ========


BASIC AND DILUTED LOSS PER SHARE                       $   (.16)         $   (.09)         $   (.31)         $   (.20)
                                                       ========          ========          ========          ========

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (000'S)
     Basic and Diluted                                   28,641            28,581            28,636            28,571
                                                       ========          ========          ========          ========


</TABLE>








See notes to condensed consolidated financial statements.






                                       3
<PAGE>   6
<TABLE>
<CAPTION>


                                                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (IN THOUSANDS)
                                                             (UNAUDITED)




                                                                                            Six Months Ended
                                                                                                July 31,
                                                                                      -------------------------------
                                                                                          1999                1998
                                                                                      -------------        ----------
<S>                                                                                    <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                               $ (8,840)             $ (5,740)
Adjustments to reconcile net loss to net cash (used in)
  provided by operating activities:
    Depreciation and amortization                                                           676                   659
    Provision for credit losses                                                            (186)                1,399
    Changes in operating assets and liabilities:
      Accrued income tax refundable                                                        --                   4,969
      Other liabilities                                                                  (2,192)               (1,842)
      Self-insurance claims                                                              (1,146)               (2,265)
      Other operating assets and liabilities, net                                           865                 4,409
                                                                                       --------              --------

       Net cash (used in) provided by operating activities                              (10,823)                1,589
                                                                                       --------              --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Principal collected on gross finance receivable                                     37,796                59,473
     Purchase of loans                                                                  (11,763)              (13,904)
     Purchase of other property and equipment                                              (559)                 (297)
     Purchase of affordable housing investments                                          (1,017)               (1,220)
                                                                                       --------              --------

       Net cash provided by investing activities                                         24,457                44,052
                                                                                       --------              --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net payments on notes payable                                                         --                 (35,255)
     Stock issued under benefit plans                                                         7                   111
                                                                                       --------              --------

       Net cash provided by (used in) financing activities                                    7               (35,144)
                                                                                       --------              --------

Increase in cash and cash equivalents                                                    13,641                10,497
Cash and cash equivalents at beginning of period                                         32,109                 4,682
                                                                                       --------              --------
Cash and cash equivalents at end of period                                             $ 45,750              $ 15,179
                                                                                       ========              ========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Interest paid                                                                     $     24              $  1,604
                                                                                       ========              ========
     Income taxes refunded                                                             $   --                $  4,949
                                                                                       ========              ========


</TABLE>






See notes to condensed consolidated financial statements.







                                       4
<PAGE>   7



                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)




NOTE A - Basis of Presentation
         ---------------------

               The accompanying unaudited condensed consolidated financial
statements include the accounts of National Auto Credit, Inc. and subsidiaries
(the "Company") all of which are wholly-owned. The financial statements are
unaudited, but, in the opinion of management, reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the Company's consolidated financial position, results of operations and cash
flows for the periods presented.

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial statements and with the rules of the Securities and
Exchange Commission applicable to interim financial statements, and therefore do
not include all disclosures that might normally be required for interim
financial statements prepared in accordance with generally accepted accounting
principles. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements, including the notes thereto, appearing in the Company's
Annual Report on Form 10-K for the year ended January 31, 1999.

         The preparation of financial statements and the accompanying notes
thereto, in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the respective reporting periods. Actual results could differ
from those estimates.

         Cash and cash equivalents include restricted cash of $3,024,000
deposited in an escrow account at July 31, 1999 relating to an Option Agreement
(see Note C).

         Certain prior year amounts have been reclassified to conform to the
current presentation.


NOTE B - Installment Loans, Net
         ----------------------

         The following tables set forth the components of and changes in the
gross finance receivable, unearned income, credit loss discount and allowance
for credit losses of the Company's net installment loans as of and for the three
and six months ended July 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>


                                          Gross                               Credit          Allowance         Installment
                                         Finance          Unearned             Loss           for Credit           Loans,
                                       Receivable          Income            Discount           Losses              Net
                                       ----------         ---------         ---------         ----------         ---------

<S>                                    <C>               <C>               <C>               <C>               <C>
Balance, April 30, 1999                 $ 102,726         $  (5,917)        $ (25,140)        $ (14,074)        $  57,595
Purchases                                   5,574              (562)           (2,246)             --               2,766
Cash collected                            (17,762)             --                --                --             (17,762)
Charge-offs                                (4,981)             --               3,052             1,929              --
Provision for credit losses                  --                --                --                 368               368
Interest income                              --               1,684              --                --               1,684
Reclassification                             --                (731)              731              --                --
Dealer fees charged                          --                --                --                --                --
                                        ---------         ---------         ---------         ---------         ---------

Balance, July 31, 1999                  $  85,557         $  (5,526)        $ (23,603)        $ (11,777)        $  44,651
                                        =========         =========         =========         =========         =========

</TABLE>





                                       5
<PAGE>   8
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE B - Installment Loans, Net (cont.)
         ------------------------------
<TABLE>
<CAPTION>
                                              Gross                               Credit           Allowance        Installment
                                             Finance           Unearned            Loss           for Credit           Loans,
                                            Receivable          Income            Discount          Losses               Net
                                            ---------         ---------         ---------         ---------         ---------

<S>                                         <C>               <C>               <C>               <C>               <C>
Balance, January 31, 1999                   $ 115,473         $  (7,052)        $ (21,190)        $ (16,830)        $  70,401
Purchases                                      22,888            (1,547)           (9,633)             --              11,708
Cash collected                                (41,430)             --                --                --             (41,430)
Charge-offs                                   (11,374)             --               6,507             4,867              --
Provision for credit losses                      --                --                --                 186               186
Interest income                                  --               3,786              --                --               3,786
Reclassification                                 --                (713)              713              --                --
Dealer fees charged                              --                --                --                --                --
                                            ---------         ---------         ---------         ---------         ---------

Balance, July 31, 1999                      $  85,557         $  (5,526)        $ (23,603)        $ (11,777)        $  44,651
                                            =========         =========         =========         =========         =========


<CAPTION>


                                              Gross                               Credit           Allowance        Installment
                                             Finance           Unearned            Loss           for Credit           Loans,
                                            Receivable          Income            Discount          Losses               Net
                                            ----------         ---------         ---------        ----------         ---------

<S>                                         <C>               <C>               <C>               <C>               <C>
Balance, April 30, 1998                     $ 217,581         $ (15,426)        $ (30,144)        $ (47,920)        $ 124,091
Purchases                                      10,747              (314)           (2,935)             --               7,498
Cash collected                                (31,860)             --                --                --             (31,860)
Charge-offs                                   (19,371)             --               6,838            12,533              --
Provision for credit losses                      --                --                --                (675)             (675)
Interest income                                  --               4,154              --                --               4,154
Reclassification                                 --                --                --                --                --
Dealer fees charged                              --                --                --                (353)             (353)
                                            ---------         ---------         ---------         ---------         ---------

Balance, July 31, 1998                      $ 177,097         $ (11,586)        $ (26,241)        $ (36,415)        $ 102,855
                                            =========         =========         =========         =========         =========


</TABLE>













                                       6
<PAGE>   9
<TABLE>
<CAPTION>
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)




NOTE B - Installment Loans, Net (cont.)
         -----------------------------


                                          Gross                           Credit        Allowance      Installment
                                         Finance         Unearned          Loss         for Credit       Loans,
                                        Receivable        Income         Discount         Losses           Net
                                       -------------   -------------   -------------   -------------   ------------

<S>                                    <C>             <C>             <C>             <C>            <C>
Balance, January 31, 1998               $ 269,690       $ (20,534)      $ (34,920)      $ (61,789)     $ 152,447
Purchases                                  19,986            (485)         (5,391)           --           14,110
Cash collected                            (71,056)           --              --              --          (71,056)
Charge-offs                               (41,523)           --            14,070          27,453           --
Provision for credit losses                  --              --              --            (1,399)        (1,399)
Interest income                              --             9,433            --              --            9,433
Reclassification                             --              --              --              --             --
Dealer fees charged                          --              --              --              (680)          (680)
                                        ---------       ---------       ---------       ---------      ---------

Balance, July 31, 1998                  $ 177,097       $ (11,586)      $ (26,241)      $ (36,415)     $ 102,855
                                        =========       =========       =========       =========      =========

</TABLE>


         The balances at July 31, 1999 and 1998 include amounts related to whole
  loans purchased by the Company, and to loan interests purchased under sharing
  agreements with dealers, as follows (in thousands):
<TABLE>
<CAPTION>




                                          Gross                          Credit        Allowance      Installment
                                         Finance        Unearned          Loss         for Credit        Loans,
                                       Receivable        Income         Discount          Loss            Net
                                       ------------    ------------   -------------   -------------   -------------

<S>                                     <C>              <C>            <C>            <C>             <C>
Balance, July 31, 1999
Whole loans                             $ 35,917         $ (1,874)      $(17,747)      $   (146)       $ 16,150
Loan interests                            49,640           (3,652)        (5,856)       (11,631)         28,501
                                        --------         --------       --------       --------        --------
Total                                   $ 85,557         $ (5,526)      $(23,603)      $(11,777)       $ 44,651
                                        ========         ========       ========       ========        ========

Balance, July 31, 1998
Whole loans                             $    433         $    (13)      $   (141)      $   --          $    279
Loan interests                           176,664          (11,573)       (26,100)       (36,415)        102,576
                                        --------         --------       --------       --------        --------
Total                                   $177,097         $(11,586)      $(26,241)      $(36,415)       $102,855
                                        ========         ========       ========       ========        ========
</TABLE>




         The whole loans and the loans underlying the loan interests outstanding
at July 31, 1999, generally have initial terms ranging from 12 to 48 months,
with average initial terms and amounts of 39 months and $10,100, respectively.
At July 31, 1999 and 1998 the average remaining term was 19 and 22 months,
respectively, and the percentage of loans which were greater than 120 days past
due were 3.4 % and 16.7%, respectively. The decrease in the percentage was
primarily due to the change in accelerating the charge off policy in the fourth
quarter of fiscal 1999.

NOTE C - Stockholder's Equity
         --------------------

         On May 10, 1999, the Company entered into an Option Agreement with an
unaffiliated stockholder to purchase 2,849,630 shares of the Company's common
stock at a price of $1.50 per share. The Company acquired the option by paying
the stockholder $1,000,000, which was paid on May 12, 1999, all of which will be
credited toward the aggregate exercise price payable by the Company upon any
exercise







                                       7
<PAGE>   10
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE C - Stockholder's Equity (cont.)
         --------------------

of its option. On June 24, 1999, the option was extended for an additional 45
days (the "First Extension") until August 8, 1999. In consideration for the
First Extension, the Company paid $500,000, $250,000 of which will be credited
toward the aggregate exercise price payable by the Company upon any exercise of
its option. On August 8, 1999, the option was extended for an additional 120
days (the "Second Extension"). In consideration for the Second Extension, the
Company paid $1,000,000, $750,000 of which will be credited toward the aggregate
exercise price payable by the Company upon any exercise of its option.

         On November 22, 1999, the Board of Directors of the Company approved
the exercise of its option. On December 2, 1999, the Company exercised such
option and paid the unaffiliated stockholder an additional $2,274,445 for the
2,849,630 shares subject to the option, which amount equals the product of
2,849,630 and the $1.50 per share exercise price, less the $2,000,000 in
aggregate credits to which the Company became entitled under the Option
Agreement, the First Extension and the Second Extension.


NOTE D - Commitments and Contingencies
         -----------------------------

        The Company and certain of its former officers and directors have been
named as defendants in eleven purported class action lawsuits which were filed
in the United States District Court for the Northern District of Ohio. The
actions allege fraud and other violations of the federal securities laws. The
actions were consolidated on October 16, 1998, and discovery is presently stayed
pending the courts rulings on various outstanding motions. The consolidated
action seeks money damages as the result of various alleged frauds and
violations of the Securities Exchange Act of 1934, including misrepresentations
about the adequacy of the Company's allowance for credit losses and its loan
underwriting practices. The Company has accrued $3,000,000 to defend against
this action. On October 12, 1999, the Hon. Patricia Hemann, United States
Magistrate Judge, issued a report and recommendation (the "Report") to the Hon.
Solomon Oliver, United States District Judge, recommending that the motions to
dismiss filed by the Company and the other defendants be granted. Plaintiffs
have filed an objection to the Magistrate's Report with the District Court. The
Company has responded to this objection. Although the Company intends to
vigorously defend itself, the ultimate outcome of these actions, including the
range of loss, if any, cannot presently be predicted, and the Company has not
recorded any provision for any damages that may result from these actions. An
unfavorable resolution of these actions could have a material adverse effect on
the Company's financial position, results of operations and liquidity.

        The Securities and Exchange Commission, the United States Attorney for
the Northern District of Ohio, and the Federal Bureau of Investigation are
investigating the issues raised as the result of the resignation of Deloitte &
Touche LLP. The Company is cooperating fully with the investigations. The
ultimate outcome of these investigations on the Company cannot presently be
predicted. An unfavorable resolution of any of these investigations could have a
material adverse effect on the Company's financial position, results of
operations and liquidity.

         Following the resignation of Deloitte & Touche LLP, the Company
instituted investigations of its previous financial reporting and underwent
changes in management. Included in the results of operations for the six months
ended July 31, 1999 and 1998, respectively, are the following costs (in
thousands):



                                       8
<PAGE>   11
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE D - Commitments and Contingencies (cont.)
         -----------------------------
<TABLE>
<CAPTION>


                                                                             Six Months Ended
                                                                                  July 31,
                                                                        ----------------------------
                                                                           1999            1998
                                                                        ------------   -------------

<S>                                                                          <C>            <C>
Crisis management consulting                                                 $1,631         $1,438
Legal fees relating to defending litigation                                   1,318          1,073
Costs of special investigation                                                  255            536
Fees for special independent audits                                             523            270
Financing, loan waiver and prepayment fees                                      258           --
Other                                                                          --               11
                                                                             ------         ------
  Total                                                                      $3,985         $3,328
                                                                             ======         ======
</TABLE>


         As of July 31, 1999 the Company has accrued $3,000,000 for the future
costs of defending the stockholder litigation and responding to the regulatory
investigations.

         In December 1995, the U.S. Department of Labor notified the Company of
its investigation of the Company's pay practices concerning its former employees
in all states during the period from February 1, 1993 through September 30,
1995. On January 15, 1998, the Company reached an agreement in principle with
the Department of Labor to settle the matter in all states for approximately
$2,700,000 including civil penalties, interest and related payroll taxes. The
formal agreement was completed on September 11, 1998. The Company accrued
$2,720,000 in January 1998 for this settlement. The Company made its final
payment as directed by the Department of Labor regarding the settlement of this
issue in July 1999.

           On June 7, 1999, Sam J. Frankino, the former Chairman of the
Company's Board of Directors and its majority stockholder, instituted two
separate civil actions against the Company in the Delaware Court of Chancery.
The first of these actions sought to compel the Company to hold an annual
meeting of stockholders for the election of directors. The second of these
actions sought to inspect the Company's stockholder list materials and other of
its books and records in connection with such annual meeting. On June 21, 1999,
the Company resolved both of these actions by stipulation, agreeing to hold an
annual meeting of stockholders on September 15, 1999 and agreeing to make
available to Mr. Frankino the stockholder list and other materials he had
requested.

           On August 30, 1999, Sam J. Frankino instituted a civil action against
the Company and its current Board of Directors in the Delaware Court of
Chancery, seeking a declaratory judgment confirming that the Company's existing
bylaw not permitting stockholders to act by written consent is not valid and
that he validly elected seven designees to the Company's Board of Directors. On
September 17, 1999, the plaintiff moved for summary judgment regarding his
claims for a declaration that he (i) validly amended the Company's bylaws to
expand the number of directors from six to thirteen and (ii) duly elected seven
of his nominees to fill these newly-created seats on the Board. On that date,
the plaintiff also moved for a protective order regarding defendants' discovery
requests and for an order striking the defendants' affirmative defenses. On
September 28, 1999, the Company and the other defendants cross-moved for summary
judgment and opposed all motions filed by the plaintiff. The Court of Chancery
heard argument on the motions for summary judgment on October 7, 1999. On
November 5, 1999, the Court of Chancery granted plaintiff's motion for summary
judgment and denied the cross motion for summary judgment filed by the Company
and the other defendants. On November 12, 1999, the Court of Chancery denied the
defendants' motion for a stay pending appeal. Plaintiff's nominees were seated
as directors. Certain individual director defendants appealed the Court of
Chancery's summary judgment rulings on an expedited basis. On December 3, 1999,
the parties to the appeal agreed to the dismissal of the Company as a party-



                                       9
<PAGE>   12
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE D - Commitments and Contingencies (cont.)
         -----------------------------

appellant. On December 6, 1999, Messrs. Cohen and Rice agreed to dismiss their
participation in the appeal. See Item 5. Other Information. On December 9, 1999,
the Delaware Supreme Court affirmed the judgment of the Delaware Court of
Chancery.

           In addition, in the normal course of its business, the Company is
named as defendant in legal proceedings. It is the policy of the Company to
vigorously defend litigation and/or enter into settlements of claims where
management deems appropriate.

NOTE E - Going Concern
         -------------

         The accompanying unaudited condensed consolidated financial statements
have been prepared on a going concern basis, which contemplates the realizations
of assets and the settlement of liabilities, including commitments and
contingent liabilities, in the normal course of business. The Company incurred
net losses in the first six months of fiscal 2000, and for the fiscal years
ended January 31, 1999 and 1998. During 1998 and 1999 the Company did not comply
with certain covenants of its loan agreements. The Company was able to obtain
waivers and extensions and in fiscal 1999 completed the repayment of all of its
operating debt. However, to date the Company has been unable to obtain new debt
financing. Additionally, the Company is a defendant in significant stockholder
litigation and is the subject of certain regulatory investigations. These
factors raise substantial doubts about the Company's ability to continue as a
going concern.

         The Company may pursue new debt, or equity financing, for use in
funding its operations and the settlement of its liabilities. However, the
Company's pending litigation and other factors may make obtaining such financing
difficult. Additionally, the Company will examine the sale of non-operating
assets as a source of capital. There can be no assurance that capital will be
obtained from these sources. In the interim, or absent obtaining such capital,
the Company will restrict its purchase of new loans to the cash flows available
from the collections of its existing loans after the use of the cash flows to
pay operating expenses and existing liabilities. The Company had a cash balance
of approximately $45,500,000 as of August 31, 1999, and it believes that such
cash and the cash flows from the collection of existing loans will be sufficient
for it to pay operating expenses, existing liabilities, and make some level of
new loan purchases, over the next twelve months. However, there can be no
assurance that this plan will be successful. Additionally, the restrictions on
the purchase of new loans inherent in such a plan would cause the size of the
Company's investments in loans, and its interest income therefrom, to decline
over time.

         The Company's existing liabilities include the accrual of estimates of
the costs to defend the pending stockholder litigation, and to respond to the
pending regulatory investigations. Such matters represent contingent
liabilities. The ultimate outcome of these matters, including the timing of
their resolution, cannot presently be predicted, and accordingly no provision
has been recorded for any damages that may result from these matters. The
Company intends to vigorously defend the stockholder litigation and to cooperate
fully with the investigations. However, the need to devote significant cash
flows to satisfy any damages resulting from these matters would have a
significant adverse effect on the Company's continued operations.

         As a result of these factors the Company's continuation as a going
concern will ultimately depend on its ability to (i) obtain new debt or equity
financing or other sources of capital which can be invested to achieve
profitable operations through growth in interest income (resulting from growth
in investments in loans) and the control of expenses, and (ii) resolve the
pending litigation and regulatory investigations on terms satisfactory to the
Company. The unaudited financial statements do not include any adjustments
relating to the recoverability of assets or the amount or settlement of
liabilities that might be necessary should the Company be unable to continue as
a going concern.



                                       10
<PAGE>   13




ITEM 2.              MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL
-------

         National Auto Credit, Inc., through NAC, Inc., a wholly-owned
subsidiary, invests in sub-prime used automobile consumer loans, which take the
form of installment loans collateralized by the related vehicle. The Company
purchases such loans, or interests in pools of such loans (collectively "loan
investments"), from member dealers. The Company performs the underwriting and
collection functions for all loans it purchases in whole, and also performs such
functions where the member dealer had sold to the Company, and retained for
itself, interests in a pool of loans. The Company's operations enable member
dealers to provide used car purchase financing to customers who have limited
access to more traditional consumer credit sources that might otherwise be
unable to obtain financing. As of July 31, 1999, the Company had a network of
approximately 600 dealers located throughout the United States.

         The loans in which the Company invests are high risk, in that the
borrowers are individuals with below average credit quality, and the collateral
is subject to loss, damage, significant declines in value and difficulties of
repossession. Accordingly, each individual loan has a significant risk of not
performing in accordance with its contractual terms. The business in which the
Company participates relies on mitigating this risk by acquiring large numbers
of loans, thus reducing the exposure to the risk of the default on any one
particular loan, and on reasonably estimating the credit losses to be incurred
and setting loan purchase prices accordingly. An inability to reasonably predict
the future performance of loans being purchased, or to set loan purchase prices
that properly reflect those estimates, can significantly increase the risk of
material losses from the business of investing in sub-prime used automobile
loans.

         For the six month periods ended July 31, 1999, the Company incurred a
net loss of $8,840,000, primarily as the result of a 60.8% decline in revenues
to $3,873,000, and the incurrence of costs of $5,485,000 associated with certain
litigation, non-recurring charges and cost related to purchase of shares, as
discussed below. The decline in revenues was principally due to the reduction in
the size of the Company's loan portfolio. During fiscal 1999, the Company
revised the manner in which it conducted its loan investment operations in light
of the level of credit losses the Company experienced in fiscal 1997 through
fiscal 1999. The Company developed a dealer scoring model to allow it to
evaluate its dealers and selectively market its new programs to a smaller number
of dealers viewed as more likely to be the source of higher quality loans. The
Company's lack of external financing sources since the repayment of its debt in
November 1998 limited its ability to purchase new loans to the cash available
from the collections from its existing loan portfolio after the use of those
cash flows to pay operating expenses and existing liabilities. These factors led
to a decline in the number of dealers enrolled in the Company's program and to a
decline in the number of loans added.

         As of July 31, 1999, the Company has obtained no external sources of
financing, and is operating on internally generated cash flows, which resulted
from excess of collections on installment loans over the investment in new loans
as the Company reduced the size of its operations. The Company's purchases of
loans will be limited to the cash available from the collections from its
existing loan portfolio after the use of those cash flows to pay operating
expenses and existing liabilities.

         As discussed elsewhere herein, on January 16, 1998, Deloitte & Touche
LLP, the Company's former independent auditors, resigned, advising the Company
that information had come to its attention that led it to no longer be able to
rely on the representations of the then management of the Company. Following the
resignation of Deloitte & Touche LLP, the Board of Directors formed a special
committee to investigate, with the assistance of special independent legal,
accounting and auditing experts, the basis for Deloitte & Touche LLP's decision
to resign as the Company's auditors and to review certain of the Company's
accounting records and financial reporting. As a result of that investigation, a
second investigation conducted by a successor special committee, and Grant
Thornton LLP's reaudit of the fiscal 1997 financial statements, the


                                       11
<PAGE>   14



Company determined that its previously issued fiscal 1995, 1996 and 1997
financial statements required restatement to correct accounting that resulted
from the failure of the Company to properly consider information available at
the time those financial statements were prepared, including information that
may not have been considered due to certain errors or irregularities in certain
accounting or corporate records. The fiscal 1995, 1996 and 1997 financial
statements were restated, as reported in the consolidated financial statements
appearing in the Company's Annual Report on Form 10-K for the year ended January
31, 1999.

           The Company and certain of its former officers and directors have
been named as defendants in eleven purported class action lawsuits which were
filed in the United States District Court for the Northern District of Ohio. The
actions allege fraud and other violations of the federal securities laws. The
actions were consolidated on October 16, 1998, and discovery is presently stayed
pending the courts rulings on various outstanding motions. The consolidated
action seeks money damages as the result of various alleged frauds and
violations of the Securities Exchange Act of 1934, including misrepresentations
about the adequacy of the Company's allowance for credit losses and its loan
underwriting practices. The Company has accrued $3,000,000 to defend against
this action. On October 12, 1999, the Hon. Patricia Hemann, United States
Magistrate Judge, issued a report and recommendation (the "Report") to the Hon.
Solomon Oliver, United States District Judge, recommending that the motions to
dismiss filed by the Company and the other defendants be granted. Plaintiffs
have filed an objection to the Magistrate's Report with the District Court. The
Company has responded to this objection. Although the Company intends to
vigorously defend itself, the ultimate outcome of these actions, including the
range of loss, if any, cannot presently be predicted, and the Company has not
recorded any provision for any damages that may result from these actions. An
unfavorable resolution of these actions could have a material adverse effect on
the Company's financial position, results of operations and liquidity.

         The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities, including commitments and contingent liabilities, in the normal
course of business. The Company incurred losses from continuing operations in
fiscal 1998 and 1999, and continues to incur losses in the current year (fiscal
year 2000). To date the Company has been unable to obtain new debt financing.
Additionally, the Company is a defendant in significant stockholder litigation,
and the Securities and Exchange Commission, the United States Attorney for the
Northern District of Ohio and the Federal Bureau of Investigation are
investigating the issues raised as the result of the resignation of Deloitte &
Touche LLP. These factors raise substantial doubts about the Company's ability
to continue as a going concern.

         The Company may pursue new debt, or equity financing, for use in
funding its operations and the settlement of its liabilities. However, the
Company's pending litigation and other factors may make obtaining such financing
difficult. Additionally, the Company will examine the sale of non-operating
assets as a source of capital. There can be no assurance that capital will be
obtained from these sources. In the interim, or absent obtaining such capital,
the Company will restrict its purchase of new loans to the cash flows available
from the collections of its existing loans after the use of those cash flows to
pay operating expenses and existing liabilities. The Company has a cash balance
of approximately $53,600,000 as of November 30, 1999, and it believes that such
cash and the cash flows from the collection of existing loans will be sufficient
for it to pay operating expenses, existing liabilities, and make some level of
new loan purchases, over the next twelve months. However, there can be no
assurance that this plan will be successful. Additionally, the restrictions on
the purchase of new loans inherent in such a plan would cause the size of the
Company's investments in loans, and its interest income therefrom, to decline
over time.

         The Company's existing liabilities include the accrual of estimates of
the costs to defend the pending stockholder litigation, and to respond to the
pending regulatory investigations. Such matters



                                       12
<PAGE>   15


represent contingent liabilities. The ultimate outcome of these matters,
including the timing of their resolution, cannot presently be predicted, and
accordingly no provision has been recorded for any damages that may result from
these matters. The Company intends to vigorously defend the stockholder
litigation, and to cooperate fully with the investigations. However, the need to
devote significant cash flows to satisfy any damages resulting from these
matters would have a significant adverse effect on the Company's continued
operation.

         As a result of these factors the Company's continuation as a going
concern will ultimately depend on its ability to (i) obtain new debt or equity
financing or other sources of capital which can be invested to achieve
profitable operations through growth in interest income (resulting from growth
in the investments in loans) and the control of expenses, and (ii) resolve the
pending litigation and regulatory investigations on terms satisfactory to the
Company. The financial statements do not include any adjustments relating to the
recoverability of assets or the amount or settlement of liabilities that might
be necessary should the Company be unable to continue as a going concern.


RESULTS OF OPERATIONS
---------------------

         INTEREST INCOME: The Company's loan investments result from purchases
of installment loans at discounts from the face or contractual amount. Those
discounts reflect both (i) an element of interest income that the Company seeks
to earn on its investment in the loans, and (ii) the Company's assessment, at
the time of purchase, that a portion of the loans it purchases are impaired in
that the loans will not be repaid in accordance with their contractual terms.

         At the time of purchase, the Company groups loans into loan pools that
it believes will have common future cash flow characteristics, on the basis of
possessing similar contractual and risk characteristics. Loans are initially
recorded at the cost to purchase the loans, adjusted for any net loan
origination fees and related direct incremental loan origination costs. At the
time of purchase, the Company's net initial investment in the loans is recorded
by establishing as the "gross finance receivable" the contractual cash flows
(including contractual interest) to which the Company is entitled, which is
offset by the difference between the gross finance receivable and the net
initial investment, which is segregated into two components: (i) unearned
income, which represents the difference between the net initial investment and
the Company's estimate of the future cash flows from the gross finance
receivable and (ii) a credit loss discount, which represents the difference
between the Company's estimate of the future cash flows from the gross finance
receivable and its contractual cash flows.

         Unearned income is recognized as income over the life of the loans on
the interest method, using for each pool of loans the interest rate that
reflects the difference between the Company's net investment in the loans and
its estimate of the future cash flows therefrom as determined at the time of the
loan purchase. The Company's net investment in each loan pool includes its net
initial investment, any interest income recognized but not yet collected,
reduced by collections and any previously recorded allowance for credit losses.

         The following sets forth certain information concerning the Company's
investments in and purchases of loans for fiscal 1997 through fiscal 2000:



                                       13
<PAGE>   16
<TABLE>
<CAPTION>

                                                                                                          Number of
                          Installment     Gross Loans      Number of     Enrolled        Average          Contracts
                          Loans, Net      In Force(1)      Contracts     Number of       Contract         Purchased
  Balance as of          (In Millions)   (In Millions)    Outstanding    Dealers        Purchased       During Period
  -------------          -------------   -------------    -----------    -------        ---------       -------------

<S>                       <C>             <C>              <C>            <C>           <C>                <C>
January 31, 1997           $ 283.5         $ 494.2          70,000         3,100         $ 9,900           38,000
January 31, 1998           $ 152.4         $ 347.8          52,000         3,000         $ 8,600           30,000
April 30, 1998             $ 124.1         $ 278.3          43,900         2,900         $ 9,800            1,300
July 31, 1998              $ 102.9         $ 223.0          37,400         2,700         $ 9,500            3,000
January 31, 1999           $  70.4         $ 124.3          24,000           900         $ 8,900            6,000
April 30, 1999             $  57.6         $ 107.0          20,800         1,000         $ 8,700            2,000
July 31, 1999              $  44.7         $  87.2          17,800           600         $ 8,800            2,600
</TABLE>


(1)Gross loans in force represents the total contractual payments (including
payments representing future interest) receivable from the installment loans
which the Company owns, or in which the Company owns an interest through the
purchase of an interest under sharing arrangements with dealers. The amount
includes payments that, if collected, will be remitted to the dealers under
these sharing arrangements. While not a measure of the Company's loan assets
under generally accepted accounting principles, the Company views gross loans in
force as a measure of the level of its activities and the activities of its
competitors.

         Interest income declined to $1,684,000 and $3,786,000 for the three and
six month periods ended July 31, 1999, from $4,154,000 and $9,433,000 for the
same periods in fiscal 1999, representing a decline of approximately 59.5% and
59.9%, respectively. The decline is principally attributable to a 56.6% decrease
in the average size of the Company's total net loan investments from July 31,
1998 to July 31, 1999 (i.e., the gross finance receivables less the unearned
income, credit loss discount and allowance for credit losses). Interest income
declined at a rate slightly greater than the decline in the size of the
Company's total loan investment. The Company's effective yield on its loans,
calculated as interest income as a percentage of the total net investments in
loans declined to 13.2% for the three and six month periods ended July 31, 1999,
from 14.6% and 14.8% for the same periods in fiscal 1999, representing a decline
of 1.4% and 1.6%, respectively. The effective yield declined in fiscal 2000
because of the Company's more selective approach to loan underwriting, which
meant paying generally higher percentages of the loans' face or contractual
amount for higher quality loans, and the use of more conservative estimates of
future loan cash flows, reflecting the deterioration in the collection history
experienced in 1998. Each of these factors reduced the amount of the initial
loan discount attributed to unearned income, and thus the interest yield. At
July 31, 1999, the Company's total net loan investment of $44,651,000 had a
weighted-average yield of 13.1%.

         PROVISION FOR CREDIT LOSSES: The Company's methodology for determining
the allowance for credit losses is to group loans into pools with similar
characteristics and to assess the recoverability of its loan investments on the
basis of the present value of the expected future cash flows, as discussed in
Statement of Financial Accounting Standards ("SFAS") 114 (as amended by SFAS
118), "Accounting by Creditors for Impairment of a Loan." On a continual basis
the Company reviews its estimates of future cash flows for its loan pools. Such
estimates are revised to reflect changes in historical collection rates,
charge-off rates, loan delinquencies and other economic indicators that serve as
the basis for predicting future loan performance. The Company's net investment
in each loan pool is compared to the present value of the revised estimate of
future cash flows, discounted using the rate at which the Company is recognizing
interest income on that pool of loans. Where the estimated cash flows have been
revised downward and, as a result, such a comparison reflects an excess of the
investment over the present value of the future cash flows, the Company records
an allowance for credit losses by a charge to expense, and also reduces unearned
income by a reclassification to the credit loss discount so that future interest
income will reflect the same original annual interest rate on the net investment
in the loan pool. In those instances where a revised estimate of future cash
flows indicates an increase in estimated cash flows over the previous estimate,
the Company first reverses into income any previously recorded



                                       14
<PAGE>   17



provision for credit losses, and then increases the rate at which future
interest income is recognized by a reclassification from the credit loss
discount to unearned income.

         The Company recorded a reversal into income of previously recorded
provision for credit losses of ($368,000) and ($186,000) for the three and six
month periods ended July 31, 1999, as compared to a provision of $675,000 and
$1,399,000 for the same periods of fiscal 1999. In determining the provision for
credit losses, the Company used weighted average estimates of the future cash
flows from its loans, expressed as a percentage of the contractual amounts
receivable, which averaged on a weighted average basis approximately 57.7% and
57.3% at July 31, 1999 and 1998, respectively. During the three months ended
July 31, 1999 the Company increased its estimate of future cash flows over prior
estimates, which resulted in a reversal into income of a previously recorded
provision for credit losses. The Company reviews its estimates of future cash
flows for its loan pools on a continual basis. Such estimates are revised to
reflect changes in historical collection rates, charge-off rates, loan
delinquencies and other economic indications that serve as a basis for
predicting future loan performance. The Company believes it is possible to
experience additional increases in future cash flows from existing loan pools
which would result in a reversal of a previously recorded provision for credit
losses.

         At July 31, 1999, the allowance for credit losses was 20.9% of the
Company's net investment in loans, before the allowance, as compared to 26.1% at
July 31, 1998. The allowance for credit losses as a percentage of the net
investment in the loans before the allowance declined from July 31, 1998 to July
31, 1999 as the result of the change in the Company's charge-off policy.
Effective November 1, 1998, the Company revised its charge-off policy to
charge-off loans as uncollectible at the earlier of (i) the repossession sale of
the collateral, or (ii) a loan becoming 180 days contractually past due.
Previously the Company's policy was to charge-off loans when they became 270
days past due on a recency basis. The change in the charge-off policy, while
affecting the amount of gross finance receivables, the allowance for credit
losses and the credit loss discount, did not have any material affect on the net
loss for the six month period ended July 31, 1999.

         OPERATING EXPENSES: Operating expenses include sales and marketing
costs, collection costs and other operating costs. Operating expenses increased
to $5,726,000 for the six months ended July 31, 1999 from $5,469,000 for the
same period of fiscal 1999. Operating expenses decreased slightly to $2,653,000
for the three months ended July 31, 1999 as compared to $2,666,000 for the
corresponding period of the prior year. As a percentage of revenues, operating
expenses increased to 153.7% and 147.8% for the three and six month periods
ended July 31, 1999, from 58.6% and 55.3% for the same periods in fiscal 1999
due principally to the decline in revenues.

         The majority of the costs that comprise operating expenses are variable
in nature and will generally increase and decrease with the level of the
Company's loan purchase and collection activities. However, changes in the size
of the Company's loan portfolio will not immediately allow personnel reductions
in certain functions and the magnitude and timing of reductions in operating
expenses will generally be less, and later, than declines in revenues. Although
operating expenses are expected to generally vary with revenues, for the six
months ended July 31, 1999 operating expenses increased, despite a decline in
revenues, principally as the result of personnel costs remaining consistent with
the prior year amounts. Personnel costs did not decline for the six months ended
July 31, 1999 because, as of that time, the Company had just completed the
fiscal 1999 audit and was in the process of assessing its current status in
order to formulate its future operating plans. Operating costs for the six
months ended July 31, 1999 were also increased by costs associated with the
installation of upgraded computer and information systems. Management believes
operating expenses will begin to decrease as the effect of personnel reductions,
increased efficiencies and other reductions in operating expenses are initiated.



                                       15
<PAGE>   18




         GENERAL AND ADMINISTRATIVE: General and administrative expenses include
costs of executive, accounting and legal personnel, occupancy, legal,
professional, insurance, and other general corporate overhead costs. General and
administrative expenses are more fixed in nature than operating expenses and are
not expected to vary as directly with revenues. These expenses increased to
$2,593,000 or 66.9% of revenues for the six month periods ended July 31, 1999,
from $2,449,000 or 24.8% of revenues for the same period in fiscal 1999 due to
an increase in professional services offset by lower personnel and occupancy
costs.

         General and administrative expenses decreased to $1,087,000 or 63.0% of
revenues for the three months ended July 31, 1999, from $1,200,000 or 26.3% of
revenues for the same period in fiscal 1999 due to an increase in professional
services offset by lower personnel and occupancy costs, and a credit resulting
from a substantially reduced state tax settlement from amounts previously
accrued.

         LITIGATION AND NON-RECURRING CHARGES: As previously discussed,
following the resignation of Deloitte & Touche LLP, the Company instituted
investigations of its previous financial reporting, and underwent changes in
management. Included in the results of operations for the three and six month
periods ended July 31, 1999 and the same periods in 1998, respectively, are the
following costs related to the investigations and management changes (in
thousands):

<TABLE>
<CAPTION>

                                                          Three Months Ended              Six Months Ended
                                                                 July 31,                       July 31,
                                                      ----------------------------   ----------------------------
                                                         1999            1998           1999            1998
                                                      ------------   -------------   ------------   -------------

<S>                                                     <C>             <C>            <C>              <C>
Crisis management consulting                            $ 1,081         $   605        $ 1,631          $ 1,438
Legal fees relating to defending litigation                 583             410          1,318            1,073
Costs of special investigation                              202              80            255              536
Fees for special independent audits                         182             165            523              270
Financing, loan waiver and prepayment fees                  (17)           --              258             --
Other                                                      --              --             --                 11
                                                        -------         -------        -------          -------
   Total                                                $ 2,031         $ 1,260        $ 3,985          $ 3,328
                                                        =======         =======        =======          =======

</TABLE>


         As of July 31, 1999 the Company has accrued $3,000,000 for the future
costs of defending the stockholder litigation and responding to the regulatory
investigations.

         COST RELATED TO PURCHASE OF SHARES: On May 10, 1999, the Company
entered into an Option Agreement with an unaffiliated stockholder to purchase
2,849,630 shares of the Company's common stock at a price of $1.50 per share.
The Company acquired the option by paying the stockholder $1,000,000 on May 12,
1999. The Company paid an additional $500,000 to extend the option on June 24,
1999 (see Note C of Notes to Condensed Consolidated Financial Statements).

         The Company recorded an expense of $1,500,000 for the three months
ended July 31, 1999 which reflects (i) $1,250,000 for a portion of the premium
of the Option Agreement exercise price of $1.50 over the market price of the
stock of $1.04 on May 10, 1999, expensed in the current period, and (ii)
$250,000 of the $500,000 payment made on June 24, 1999 to extend the Option
Agreement that will not be credited toward the aggregate exercise price payable
by the Company upon exercise of its option.

          The Company will incur additional expenses of approximately $300,000
relating to both the remaining excess premium over market price and an
additional payment made in August 1999 to extend the Option Agreement that will
not be credited toward the aggregate exercise price payable by the Company upon
exercise of its options.



                                       16
<PAGE>   19



         INTEREST (INCOME) EXPENSE: Interest expense decreased to zero for the
three and six month periods ended July 31, 1999, from $1,319,000 and $2,987,000
for the same periods in fiscal 1999, as a result of the Company's level of
outstanding debt, which went from an average of $59,857,000 and $67,318,000 for
three and six month periods, respectively, in fiscal 1999 to zero in fiscal
2000. During the six months ended July 31, 1999, the Company invested its cash
balances in short-term marketable securities to generate income of $905,000, net
of bank charges.

         INCOME TAXES: Due to net operating losses and the availability of net
operating loss carryforwards, no provision for income taxes was required for the
three and six month periods ended July 31, 1999 and July 31, 1998. The Company
has provided a full valuation allowance against its net operating loss
carryforward and other net deferred tax asset items due to the uncertainty of
their future realization.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         During the six months ended July 31, 1999, the Company used $10,823,000
from operating activities as the Company's payments for operating, general and
administrative and litigation and non-recurring expenses continue to exceed
interest income from the declining portfolio balance. The Company generated
$24,457,000 in cash flows from investing activities principally as the result of
$26,033,000 of cash flows generated from the net reduction in the size of its
loan portfolio. The cash flows generated by these sources were used to finance
the negative operating cash flows and retain a cash balance of $45,750,000 at
July 31, 1999.

         During the six months ended July 31, 1998, the Company generated
$1,589,000 in cash flows from operations, and additionally generated $45,569,000
of cash flows from the net reduction in the size of its loan portfolio. The
$1,589,000 of cash flows from operations included the benefit of a net refund of
$4,949,000 of previously paid income taxes generated by the carryback of the
Company's 1998 losses.

         The Company believes that the cash on hand of approximately $53,600,000
at November 30, 1999, plus cash flows from loan collections, will be sufficient
to fund its activities through January 31, 2000. However, as previously
discussed, the Company's lack of external financing sources will limit its
ability to purchase new loans to the net cash available from the collections
from its existing loan portfolio after paying operating expenses and existing
liabilities, including costs associated with pending civil litigation and
investigations. Such limitations may have an adverse impact on the Company's
liquidity and results of operations.

YEAR 2000
---------

         The "Year 2000" issue involves the ability of computer systems to
properly recognize date sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail.

         The Company has conducted a review of its computer systems, and has
identified the remedial actions necessary to make its systems Year 2000
compliant. The remedial actions that have been identified as necessary have been
completed. The costs of Year 2000 compliance, which were expensed as incurred,
were not material. However, there can be no guarantee that the Company will not
encounter unexpected Year 2000 compliance problems that will adversely affect
its operations.



                                       17
<PAGE>   20




         The Company has also reviewed its exposure to the risk that significant
providers of goods and services might not achieve Year 2000 compliance. In
particular, the Company would be at risk to adverse effects on its operations if
the financial institutions which process the Company's disbursements and loan
cash collections were unable to achieve Year 2000 compliance. The Company has
initiated formal communications with those institutions, and on the basis of
those communications believes that it is unlikely that its operations will be
adversely affected by the lack of Year 2000 compliance by these entities.
However, there can be no guarantee that one of the Company's significant
providers of goods and services will not encounter Year 2000 compliance problems
which will adversely affect the Company.


OTHER
-----

         The Company's exposure to the risks of inflation is generally limited
to the potential impact of inflation on the operating and general and
administrative expenses. To date, inflation has not had a material adverse
impact on the Company.

         The Company does not utilize futures, options or other derivative
financial instruments.

FORWARD-LOOKING STATEMENTS
--------------------------

         The preceding paragraphs contain forward-looking comments that are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These comments are subject to, and the actual
future results may be impacted by, the cautionary limitations and factors
outlined in the following narrative comments.

         Forward-looking statements are inherently subject to various risks and
uncertainties with respect to expectations for future periods. The risks and
uncertainties include future developments concerning the Company's relationships
with the dealers from which it purchases loans, the availability of capital and
other factors which may affect the volume of loan purchases by the Company, the
Company's collection experience, the impact of competition, adverse changes in
applicable laws and regulations, adverse changes in economic conditions and
adverse developments or effects of the litigation or investigations now pending.
Significant changes concerning any of these factors could cause future results
to be materially different than any future results discussed in any
forward-looking comments contained herein.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Like virtually all commercial enterprises, the Company can be exposed
to the risk ("market risk") that the cash flows to be received or paid relating
to certain financial instruments could change as a result of changes in interest
rate, exchange rates, commodity prices, equity prices and other market changes.

         The Company does not engage in trading activities and does not utilize
interest rate swaps or other derivative financial instruments or buy or sell
foreign currency, commodity or stock indexed futures or options. Accordingly,
the Company is not exposed to market risk from these sources.

         The Company's loan portfolio is comprised of fixed rate financing
agreements with high credit risk consumers. The rates on these loan agreements
cannot be increased for changes in market conditions, and accordingly these
loans are not subject to market risk.

         As of July 31, 1999 the Company has no interest bearing debt, and
accordingly no market risk associated with increases in interest costs resulting
from changes in market rates.



                                       18
<PAGE>   21


PART II.     OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

        The Company and certain of its former officers and directors have been
named as defendants in eleven purported class action lawsuits which were filed
in the United States District Court for the Northern District of Ohio. The
actions allege fraud and other violations of the federal securities laws. The
actions were consolidated on October 16, 1998, and discovery is presently stayed
pending the courts rulings on various outstanding motions. The consolidated
action seeks money damages as the result of various alleged frauds and
violations of the Securities Exchange Act of 1934, including misrepresentations
about the adequacy of the Company's allowance for credit losses and its loan
underwriting practices. The Company has accrued $3,000,000 to defend against
this action. On October 12, 1999, the Hon. Patricia Hemann, United States
Magistrate Judge, issued a report and recommendation (the "Report") to the Hon.
Solomon Oliver, United States District Judge, recommending that the motions to
dismiss filed by the Company and the other defendants be granted. Plaintiffs
have filed an objection to the Magistrate's Report with the District Court. The
Company has responded to this objection. Although the Company intends to
vigorously defend itself, the ultimate outcome of these actions, including the
range of loss, if any, cannot presently be predicted, and the Company has not
recorded any provision for any damages that may result from these actions. An
unfavorable resolution of these actions could have a material adverse effect on
the Company's financial position, results of operations and liquidity.

           The Securities and Exchange Commission, the United States Attorney
for the Northern District of Ohio and the Federal Bureau of Investigation are
investigating the issues raised as the result of the resignation of Deloitte &
Touche LLP. The Company is cooperating fully with the investigations. The
ultimate outcome of these investigations on the Company cannot presently be
predicted. An unfavorable resolution of any of these investigations could have a
material adverse effect on the Company's financial position, results of
operations and liquidity.

           On June 7, 1999, Sam J. Frankino, the former Chairman of the
Company's Board of Directors and its majority stockholder, instituted two
separate civil actions against the Company in the Delaware Court of Chancery.
The first of these actions sought to compel the Company to hold an annual
meeting of stockholders for the election of directors. The second of these
actions sought to inspect the Company's stockholder list materials and other of
its books and records in connection with such annual meeting. On June 21, 1999,
the Company resolved both of these actions by stipulation, agreeing to hold an
annual meeting of stockholders on September 15, 1999 and agreeing to make
available to Mr. Frankino the stockholder list and other materials he had
requested.

           On August 30, 1999, Sam J. Frankino instituted a civil action against
the Company and its current Board of Directors in the Delaware Court of
Chancery, seeking a declaratory judgment confirming that the Company's existing
bylaw not permitting stockholders to act by written consent is not valid and
that he validly elected seven designees to the Company's Board of Directors. On
September 17, 1999, the plaintiff moved for summary judgment regarding his
claims for a declaration that he (i) validly amended the Company's bylaws to
expand the number of directors from six to thirteen and (ii) duly elected seven
of his nominees to fill these newly-created seats on the Board. On that date,
the plaintiff also moved for a protective order regarding defendants' discovery
requests and for an order striking the defendants' affirmative defenses. On
September 28, 1999, the Company and the other defendants cross-moved for summary
judgment and opposed all motions filed by the plaintiff. The Court of Chancery
heard argument on the motions for summary judgment on October 7, 1999. On
November 5, 1999, the Court of Chancery granted plaintiff's motion for summary
judgment and denied the cross motion for summary judgment filed by the Company
and the other defendants. On November 12, 1999, the Court of Chancery denied the
defendants' motion for a stay pending appeal. Plaintiff's nominees were seated
as directors. Certain individual director defendants appealed the Court of
Chancery's summary judgment rulings on an expedited



                                       19
<PAGE>   22


basis. On December 3, 1999, the parties to the appeal agreed to the dismissal of
the Company as a party- appellant. On December 6, 1999, Messrs. Cohen and Rice
agreed to dismiss their participation in the appeal. See Item 5. Other
Information. On December 9, 1999, the Delaware Supreme Court affirmed the
judgment of the Delaware Court of Chancery.

           In addition, in the normal course of its business, the Company is
named as defendant in legal proceedings. It is the Company's policy to
vigorously defend litigation and/or enter into settlements of claims where
management deems appropriate.


ITEM 5.        OTHER INFORMATION

           On September 15, 1999, the Company held its annual stockholders
meeting at which Sam J. Frankino and William J. Dodero were elected to the Board
of Directors. Below are the results of the election:
<TABLE>
<CAPTION>

Election of Directors             Votes For            Votes Withheld           Abstentions         Broker Non-votes
---------------------             ---------            --------------           -----------         ----------------
<S>                               <C>                      <C>                     <C>                      <C>
John A. Gleason                   11,550,026               179,455                    -                      -
William S. Marshall               11,528,688               200,793                    -                      -
Sam J. Frankino                   16,147,539                  -                       -                      -
William J. Dodero                 16,147,539                  -                       -                      -
</TABLE>

           The stockholders also ratified the selection of Grant Thornton LLP,
Cleveland, as the Company's independent auditors for the fiscal year ending
January 31, 2000. Below are the results of the vote:
<TABLE>
<CAPTION>

                                   Votes For            Votes Against            Abstentions
                                   ---------            -------------            -----------
<S>                               <C>                       <C>                    <C>
   Independent Auditors           27,797,226                61,697                 18,097
</TABLE>


           As of November 12, 1999, following the denial by the Court of
Chancery of the State of Delaware of the Company's application for a stay of the
Court's judgment in favor of Sam Frankino, the Directors of the Board of
Directors of the Company consisted of the following individuals:
<TABLE>
          <S>                       <C>                               <C>
           Richard Cohen            David Huber                        Allen  Rice
           Lorraine Dodero          Donald Jasensky                    Phillip Sauder
           William Dodero           William Maund                      Terry Sweitzer
           Sam  Frankino            James  McNamara                    Henry Toh
                                                                       Peter Zacharoff
</TABLE>

           The Company announced on November 12, 1999 that Allen Rice had
resigned from his employment as President of the Company.

           At a meeting of the newly expanded Board of Directors of the Company
held on November 22, 1999, David L. Huber was elected Chairman of the Board and
Chief Executive Officer of the Company, replacing the incumbent. In addition, at
this meeting, the Board of Directors rescinded authority from any Board
committees over the management of the business and affairs of the Company
(without affecting the Special Committee's investigative authority relating to
Deloitte & Touche LLP's resignation); resolved that certain expenditures of
Company funds over $10,000 shall require the approval of the full Board of
Directors; reduced the remuneration of Directors to $1,000 per meeting and
eliminated any remuneration for attendance at committee meetings; resolved to
discontinue the Company's participation as a party-appellant in the appeal
pending the Supreme Court of the State of Delaware captioned Frankino v.
Gleason, et. al., No. 534, 1999; and resolved to commence a search for a
financial consultant for the purpose of identifying and



                                       20
<PAGE>   23



evaluating potential corporate transactions which would enhance stockholder
value including, without limitation, the sale of all or part of the Company.

           Messrs. Cohen and Rice resigned from the Board effective December 7,
1999 although Mr. Cohen will continue as Interim Chief Financial Officer through
the earlier of December 31, 1999 or until the Company's Forms 10-Q are completed
for the second and third quarters of fiscal 2000. Mr. Rice has agreed to act as
a Company consultant until July 15, 2000.


ITEM  6.      EXHIBITS AND REPORTS ON FORM 8-K

              a)     Exhibits
                     --------

                     27      Financial Data Schedule

              b)     Reports on Form 8-K
                     --------------------

                     On May 25, 1999, a Form 8-K was filed regarding the
                     appointment of Allen D. Rice as the new President, the
                     Company's Amended and Restated By-Laws and the Company's
                     Stock Option Agreement and Proxy with Ernest C. Garcia II.









                                       21
<PAGE>   24



                                   SIGNATURES
                                   ----------


         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.


                                      NATIONAL AUTO CREDIT, INC.

Date:   December 15, 1999             By:  /s/ David L. Huber
      ----------------------               ---------------------------
                                           David L. Huber
                                           Chairman of the Board and
                                           Chief Executive Officer


                                      By:  /s/ Richard M. Cohen
                                           ---------------------------
                                           Richard M. Cohen
                                           Interim Chief Financial
                                           Officer (Principal
                                           Financial and Accounting Officer)




                                       22