<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      October 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  X  No
                                              ---    ---

         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



<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                           ----

       PART I.         FINANCIAL INFORMATION

<S>                    <C>                                                                   <C>
       Item 1.         Financial Statements                                                  1

                       Report of Independent Certified Public Accountants                    1

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

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

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

                       Notes to Condensed Consolidated Financial Statements                  5


       Item 2.         Management's Discussion and Analysis of
                       Financial Condition and Results of Operations                        12


       Item 3.         Quantitative and Qualitative Disclosures about
                       Market Risk                                                          20


       PART II.        OTHER INFORMATION


       Item 1.         Legal Proceedings                                                    20


       Item 4.         Submission of Matters to a Vote of Security Holders                  21


       Item 5.         Other Information                                                    22


       Item 6.         Exhibits and Reports on Form 8-K                                     22


       Signatures                                                                           23
</TABLE>


<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 October 31, 1999, and
the related statements of operations for each of the three and nine month
periods ended October 31, 1999 and 1998, and cash flows for each of the
nine-month periods ended October 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
December 15, 1999



                                       1
<PAGE>   4



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


<TABLE>
<CAPTION>
                                                                                      October 31,       January 31,
                                                                                          1999              1999
                                                                                      -------------     -------------

<S>                                                                                       <C>               <C>
ASSETS
Cash and cash equivalents                                                                 $ 52,027          $ 32,109
Installment loans, net (Note B)                                                             36,304            70,401
Property and equipment, net of accumulated depreciation
  of $5,845, and $5,262, respectively                                                        8,673             8,558
Affordable housing investments                                                              10,384            10,270
Income taxes refundable                                                                      3,236             3,295
Other assets                                                                                 1,858             2,659
                                                                                      -------------     -------------

TOTAL ASSETS                                                                              $112,482          $127,292
                                                                                      =============     =============




LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Self-insurance claims                                                                     $  3,727          $  4,880
Accrued income taxes                                                                         6,449             6,510
Other liabilities                                                                           12,840            16,126
                                                                                      -------------     -------------
                                                                                            23,016            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 29,963,301 and
  29,982,512 shares, respectively                                                            1,498             1,500
Additional paid-in capital                                                                 166,139           166,168
Retained deficit                                                                           (65,792)          (55,789)
Option for repurchase of shares                                                               (276)                -
Treasury stock, at cost, 1,345,968 shares                                                  (12,103)          (12,103)
                                                                                      -------------     -------------
                                                                                            89,466            99,776
                                                                                      -------------     -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                $112,482          $127,292
                                                                                      =============     =============
</TABLE>



See notes to condensed consolidated financial statements.


                                       2
<PAGE>   5



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


<TABLE>
<CAPTION>
                                                    Three Months Ended                 Nine Months Ended
                                                        October 31,                       October 31,
                                                 -------------------------         -------------------------
                                                   1999             1998             1999             1998
                                                 --------         --------         --------         --------

<S>                                              <C>              <C>              <C>              <C>
REVENUE
     Interest income                             $  1,530         $  3,278         $  5,316         $ 12,711
     Fees and other income                             42              291              129              750
                                                 --------         --------         --------         --------
          Total                                     1,572            3,569            5,445           13,461

COSTS AND EXPENSES
     Provision  for credit losses                  (3,000)             796           (3,186)           2,195
     Operating                                      2,621            2,865            8,347            8,334
     General and administrative                     1,309            1,308            3,902            3,757
     Litigation and non-recurring charges           1,657            3,260            5,642            6,588
     Cost related to purchase of shares               724                -            2,224                -
     Interest (income) expense                       (576)             969           (1,481)           3,956
                                                 --------         --------         --------         --------
          Total                                     2,735            9,198           15,448           24,830
                                                 --------         --------         --------         --------

LOSS BEFORE INCOME TAXES                           (1,163)          (5,629)         (10,003)         (11,369)

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

NET LOSS                                         $ (1,163)        $ (5,629)        $(10,003)        $(11,369)
                                                 ========         ========         ========         ========


BASIC AND DILUTED LOSS PER SHARE                 $   (.04)        $   (.20)        $   (.35)        $   (.40)
                                                 ========         ========         ========         ========

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (000'S)
     Basic and Diluted                             28,630           28,650           28,634           28,648
                                                 ========         ========         ========         ========
</TABLE>




See notes to condensed consolidated financial statements.


                                       3
<PAGE>   6


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

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                    October 31,
                                                             -------------------------
                                                               1999             1998
                                                             --------         --------
<S>                                                          <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                     $(10,003)        $(11,369)
Adjustments to reconcile net loss to net cash used in
  operating activities:
    Depreciation and amortization                               1,033            1,053
    Provision for credit losses                                (3,186)           2,195
    Changes in operating assets and liabilities:
      Accrued income tax refundable                                (2)           5,056
      Other liabilities                                        (3,182)             200
      Self-insurance claims                                    (1,153)          (3,125)
      Other operating assets and liabilities, net               1,046            4,889
                                                             --------         --------

       Net cash used in operating activities                  (15,447)          (1,101)
                                                             --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Principal collected on gross finance receivable           50,877           81,889
     Purchase of loans                                        (13,241)         (19,560)
     Purchase of other property and equipment                    (947)            (372)
     Purchase of affordable housing investments                (1,017)          (1,220)
                                                             --------         --------

       Net cash provided by investing activities               35,672           60,737
                                                             --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net payments on notes payable                                  -          (47,154)
     Purchase of option to repurchase shares                     (276)               -
     Stock issued under benefit plans                             (31)             108
                                                             --------         --------

       Net cash used in financing activities                     (307)         (47,046)
                                                             --------         --------

Increase in cash and cash equivalents                          19,918           12,590
Cash and cash equivalents at beginning of period               32,109            4,682
                                                             --------         --------
Cash and cash equivalents at end of period                   $ 52,027         $ 17,272
                                                             ========         ========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Interest paid                                           $     50         $  5,503
                                                             ========         ========
     Income taxes refunded                                   $     (2)        $  5,013
                                                             ========         ========
</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 $2,581,000 at
October 31, 1999 relating to an Option Agreement (see Note C) and $300,000 held
in a "Rabbi Trust" pursuant to the Company's employment agreement with Allen
Rice.

         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 nine months ended October 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, July 31, 1999                       $ 85,557         $(5,526)      $ (23,603)      $ (11,777)        $44,651
Purchases                                       3,075            (310)         (1,081)              -           1,684
Cash collected                                (14,561)              -               -               -         (14,561)
Charge-offs                                    (5,671)              -           3,799           1,872               -
Provision for credit losses                         -               -               -           3,000           3,000
Interest income                                     -           1,530               -               -           1,530
Reclassification                                    -               -               -               -               -
Dealer fees charged                                 -               -               -               -               -
                                         -------------   -------------   -------------   -------------   -------------

Balance, October 31, 1999                    $ 68,400         $(4,306)      $ (20,885)       $ (6,905)        $36,304
                                         =============   =============   =============   =============   =============
</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                                    25,963         (1,857)        (10,714)              -          13,392
Cash collected                              (55,991)             -               -               -         (55,991)
Charge-offs                                 (17,045)             -          10,306           6,739               -
Provision for credit losses                       -              -               -           3,186           3,186
Interest income                                   -          5,316               -               -           5,316
Reclassification                                  -           (713)            713               -               -
Dealer fees charged                               -              -               -               -               -
                                       -------------   ------------    ------------   -------------   -------------

Balance, October 31, 1999                  $ 68,400       $ (4,306)      $ (20,885)       $ (6,905)        $36,304
                                       =============   ============    ============   =============   =============
</TABLE>



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

<S>                                       <C>            <C>             <C>            <C>               <C>
Balance, July 31, 1998                    $ 177,097      $ (11,586)      $ (26,241)     $ (36,415)        $102,855
Purchases                                    10,913           (653)         (4,303)             -            5,957
Cash collected                              (26,092)             -               -              -          (26,092)
Charge-offs                                 (15,072)             -           6,426          8,646                -
Provision for credit losses                       -              -               -           (796)            (796)
Interest income                                   -          3,278               -              -            3,278
Reclassification                                  -              -               -              -                -
Dealer fees charged                               -              -               -             14               14
                                       -------------   ------------   -------------   ------------   --------------

Balance, October 31, 1998                 $ 146,846       $ (8,961)      $ (24,118)     $ (28,551)        $ 85,216
                                       =============   ============   =============   ============   ==============
</TABLE>


                                       6
<PAGE>   9



                   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, 1998                 $ 269,690        $(20,534)       $(34,920)       $(61,789)     $ 152,447
Purchases                                    30,899          (1,138)         (9,694)              -         20,067
Cash collected                              (97,148)              -               -               -        (97,148)
Charge-offs                                 (56,595)              -          20,496          36,099              -
Provision for credit losses                       -               -               -          (2,195)        (2,195)
Interest income                                   -          12,711               -               -         12,711
Reclassification                                  -               -               -               -              -
Dealer fees charged                               -               -               -            (666)          (666)
                                       -------------   -------------   -------------   -------------   ------------

Balance, October 31, 1998                 $ 146,846        $ (8,961)       $(24,118)       $(28,551)      $ 85,216
                                       =============   =============   =============   =============   ============
</TABLE>


         The balances at October 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         Losses           Net
                                       ------------    ------------   -------------   -------------   -------------

<S>                                       <C>             <C>             <C>               <C>           <C>
Balance, October 31, 1999
Whole loans                               $ 32,520        $ (1,778)       $(15,055)       $   (108)       $ 15,579
Loan interests                              35,880          (2,528)         (5,830)         (6,797)         20,725
                                       ------------    ------------   -------------   -------------   -------------
Total                                     $ 68,400        $ (4,306)       $(20,885)       $ (6,905)       $ 36,304
                                       ============    ============   =============   =============   =============

Balance, October 31, 1998
Whole loans                               $  9,977        $   (608)       $ (5,867)       $      -        $  3,502
Loan interests                             136,869          (8,353)        (18,251)        (28,551)         81,714
                                       ------------    ------------   -------------   -------------   -------------
Total                                     $146,846        $ (8,961)       $(24,118)       $(28,551)       $ 85,216
                                       ============    ============   =============   =============   =============
</TABLE>


         The whole loans and the loans underlying the loan interests outstanding
at October 31, 1999, generally have initial terms ranging from 24 to 48 months,
with average initial terms and amounts of 39 months and $10,200, respectively.
At October 31, 1999 and 1998 the average remaining term was 18 and 21 months,
respectively, and the percentage of loans which were greater than 120 days past
due was 6.3% and 17.6%, respectively. The decrease in the percentage of loans
greater than 120 days past due was primarily due to the change in accelerating
the charge-off policy implemented in the fourth quarter of fiscal 1999.

NOTE C - Stockholders' 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 of its option. On June 24, 1999, the Company exercised its right under
the Option Agreement to extend the period of the option ("the First Extension")
for 45 days, until August 8, 1999, by paying the stockholder an additional


                                       7
<PAGE>   10


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

NOTE C - Stockholders' Equity (cont.)
         --------------------

$500,000, of which $250,000 will be credited towards the aggregate exercise
price payable upon any exercise of the option. On August 8, 1999, the Company
and the unaffiliated stockholder agreed to an additional extension ("the Second
Extension") of the option, for 120 days, for which the Company paid the
stockholder an additional $1,000,000, of which $750,000 will be credited towards
the aggregate exercise price payable upon any exercise of the option.

        The Company accounted for the initial option purchase, and the extension
payments, by initially determining the fair value of the option or option
extension to be de minimis. In determining the fair value of the option or
extension, the Company considered the period over which the option or extension
was exercisable, the option exercise price, the market price of the Company's
stock and the portion of the payments creditable to the payment due upon any
exercise of the option. The excess of the option or extension payments over the
market value of the underlying common stock was charged to expense. An aggregate
of $1,500,000 was charged to expense in the second quarter of fiscal 2000, which
represented the total of the $1,000,000 payment made to obtain the initial
option and the $500,000 payment made to obtain the First Extension. For the
three months ended October 31, 1999 the Company charged to expense $724,000 of
the $1,000,000 paid to obtain the Second Extension, and deferred, as a reduction
of stockholders' equity, the remaining $276,000, which represents a portion of
the purchase price attributable to the value of the stock that the Company
ultimately repurchased, as described below.

        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. The Company recorded the 2,849,630
repurchased shares at a price of $.895 per share, representing the market price
of the common stock at the date the Second Extension was agreed to, or an
aggregate of approximately $2,550,000, comprised of (i) the $276,000 deferred at
October 31, 1999, and (ii) the exercise payment made on December 2, 1999.


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 court's 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


                                       8
<PAGE>   11


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


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

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 nine months
ended October 31, 1999 and 1998, respectively, are the following costs (in
thousands):

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                               October 31,
                                                                                       ----------------------------
                                                                                          1999            1998
                                                                                       ------------   -------------

<S>                                                                                        <C>             <C>
Crisis management consulting                                                               $ 2,362         $ 2,501
Legal fees relating to defending litigation                                                  2,115           1,550
Costs of special investigation                                                                 268             614
Fees for special independent audits                                                            523             597
Financing, loan waiver and prepayment fees                                                     371           1,315
Other                                                                                            3              11
                                                                                       ------------   -------------
  Total                                                                                    $ 5,642         $ 6,588
                                                                                       ============   =============
</TABLE>




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

         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 prohibiting 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



                                       9
<PAGE>   12


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

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

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-appellant. On December 6, 1999, Messrs. Cohen and Rice agreed to dismiss
their participation in the appeal. 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 nine 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, including
commitments. 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 $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.

         Additionally, the Company has announced that it is seeking to engage an
investment banking firm or other advisors for the purpose of identifying and
evaluating potential corporate transactions including, without limitation, the
sale of all or part of the Company. There can be no assurance that an advisor
will be engaged or that any transaction will be proposed, accepted or
consummated.

         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


                                       10
<PAGE>   13


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

NOTE E - Going Concern (cont.)
         -------------

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.



                                       11
<PAGE>   14


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 October 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 nine month period ended October 31, 1999, the Company incurred
a net loss of $10,003,000, primarily as the result of a 59.5% decline in
revenues to $5,445,000, and the incurrence of costs of $7,866,000 associated
with certain litigation, non-recurring charges and cost related to the 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 October 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


                                       12
<PAGE>   15


successor special committee, and Grant Thornton LLP's reaudit of the fiscal 1997
financial statements, the 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.

         Additionally, the Company has announced that it is seeking to engage an
investment banking firm or other advisors for the purpose of identifying and
evaluating potential corporate transactions including, without limitation, the
sale of all or part of the Company. There can be no assurance that an advisor
will be engaged or that any transaction will be proposed, accepted or
consummated.



                                       13
<PAGE>   16


         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 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:


                                       14
<PAGE>   17


<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 Periods
---------------------     -----------     -----------     -----------     ------------    -----------     --------------

<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
October 31, 1998              $ 85.2         $ 176.1          31,300              600        $ 9,200              4,400
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
October 31, 1999              $ 36.3          $ 69.1          15,100              600        $ 9,000              2,900
</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 $1,530,000 and $5,316,000 for the three and
nine month periods ended October 31, 1999, from $3,278,000 and $12,711,000 for
the same periods in fiscal 1999, representing a decline of approximately 53.3%
and 58.2%, respectively. The decline is principally attributable to a 57.4%
decrease in the average size of the Company's total net loan investments from
October 31, 1998 to October 31, 1999 (i.e., the gross finance receivables less
the unearned income, credit loss discount and allowance for credit losses). The
Company's effective yield on its loans, calculated as interest income as a
percentage of the total net investments in loans, increased to 15.1% for the
three months ended October 31, 1999, from 13.9% for the same period in fiscal
1999, representing an increase of 1.2%. The effective yield increased during the
period as a result of an increase in expected cash flows over original estimates
for certain loan pools. The effective yield decreased to 13.3% for the nine
months ended October 31, 1999, from 14.3% for the same period in fiscal 1999.
The effective yield declined for the nine months ended October 31, 1999 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 October 31, 1999,
the Company's total net loan investment of $36,304,000 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


                                       15
<PAGE>   18


the previous estimate, the Company first reverses into income any previously
recorded 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 provisions for credit losses for the three and nine months ended
October 31, 1999 reflect negative provisions, or reductions in the allowance for
credit losses, of $3,000,000 and $3,186,000, respectively. The reductions in the
allowances for credit losses recorded in these periods are principally the
result of cash flows from loan collections during these periods which exceeded
the amounts projected, for such periods, that were used in establishing the
allowance for credit losses at October 31, 1998 and January 31, 1999. The higher
than estimated collections came principally from certain of the Company's older,
larger loan pools, and reflect both improvements in the Company's collection
procedures and the effect of the revisions to the future collection estimates
made in fiscal 1999. In determining the allowance for credit losses, the Company
uses weighted average estimates of the future cash flows from its loans,
expressed as a percentage of the contractual amounts receivable. Although the
fiscal 2000 excess collections resulted in reductions in the allowance for
credit losses, the Company did not significantly change its estimates of
remaining cash flows from the collection of loan pools, and as a result, the
negative credit loss provisions reflect principally the actual cash collections
in excess of estimated amounts. The weighted average estimates of future cash
flows from loans, expressed as a percentage of the contractual amounts
receivable, were 57.1% at October 31, 1998 as compared to 57.8% at October 31,
1999. 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 the previously recorded provision for credit losses.

         At October 31, 1999, the allowance for credit losses was 16.0 % of the
Company's net investment in loans, before the allowance, as compared to 25.1% at
October 31, 1998. The allowance for credit losses as a percentage of the net
investment in the loans before the allowance declined from October 31, 1998 to
October 31, 1999 as the result of the change in the Company's charge-off policy,
as well as the above described downward adjustments to the allowances for credit
losses resulting from the excess collections. 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 nine month period ended
October 31, 1999.

         OPERATING EXPENSES: Operating expenses include sales and marketing
costs, collection costs and other operating costs. Operating expenses decreased
to $2,621,000 for the three months ended October 31, 1999 from $2,865,000 for
the same period of fiscal 1999. Operating expenses increased by $13,000 to
$8,347,000 for the nine months ended October 31, 1999 as compared to $8,334,000
for the corresponding period of the prior year. As a percentage of revenues,
operating expenses increased to 166.7% and 153.3% for the three and nine month
periods of fiscal 2000 ending October 31, 1999, from 80.3% and 61.9% 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. For the
three months ended October 31, 1999 operating expenses decreased principally as
the result of lower personnel, collection, sales and marketing and other
operating costs offset by an increase in costs due to expenses the Company is
incurring to develop a more automated, technology-based business model. The
minimal change in operating expenses for the nine months ended October 31, 1999,
as compared to the same period for fiscal 1999, reflected the offsetting effects
of decreases in personnel and collections costs and increases in expenses
associated with the installation and development of upgraded


                                       16
<PAGE>   19


computer and information systems. Management believes operating expenses will
continue to decrease as the effect of personnel reductions, increased
efficiencies and other reductions in operating expenses are initiated.

         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
$1,309,000 and $3,902,000 for the three and nine months ended October 31, 1999,
from $1,308,000 and $3,757,000 for the same periods in fiscal 1999. As a
percentage of revenues, general and administrative expenses increased to 83.3%
and 71.7% for the three and nine months ended October 31, 1999, from 36.6% and
27.9% for the same periods in 1998 due principally to the decline in revenues.

         The increase in general and administrative costs for the nine months
ended October 31, 1999, as compared to the corresponding period of 1998, was 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 nine months
ended October 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              Nine Months Ended
                                                                October 31,                    October 31,
                                                        ----------------------------   ----------------------------
                                                           1999            1998           1999            1998
                                                        ------------   -------------   ------------   -------------

<S>                                                         <C>             <C>            <C>             <C>
Crisis management consulting                                  $ 731         $ 1,063        $ 2,362         $ 2,501
Legal fees relating to defending litigation                     797             477          2,115           1,550
Costs of special investigation                                   13              78            268             614
Fees for special independent audits                               -             327            523             597
Financing, loan waiver and prepayment fees                      113           1,315            371           1,315
Other                                                             3               -              3              11
                                                        ------------   -------------   ------------   -------------
   Total                                                    $ 1,657         $ 3,260        $ 5,642         $ 6,588
                                                        ============   =============   ============   =============
</TABLE>




         As of October 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. On
June 24, 1999 the Company exercised its right under the Option Agreement to
extend the period of the option ("the First Extension") for 45 days, until
August 8, 1999, by paying the stockholder an additional $500,000, of which
$250,000 will be credited towards the aggregate exercise price payable upon any
exercise of the option. On August 8, 1999, the Company and the unaffiliated
stockholder agreed to an additional extension ("the Second Extension") of the
option, for 120 days, for which the Company paid the stockholder an additional
$1,000,000, of which $750,000 will be credited towards the aggregate exercise
price payable upon any exercise of the option.

        The Company accounted for the initial option purchase, and the extension
payments, by initially determining the fair value of the option or option
extension to be de minimis. In determining the fair value of the option or
extension, the Company considered the period over which the option or extension
was exercisable, the option exercise price, the market price of the Company's
stock and the portion of the payments creditable to the payment due upon any
exercise of the option. The excess of the option or



                                       17
<PAGE>   20


extension payments over the market value of the underlying common stock was
charged to expense. An aggregate of $1,500,000 was charged to expense in the
second quarter of fiscal 2000, which represented the total of the $1,000,000
payment made to obtain the initial option and the $500,000 payment made to
obtain the First Extension. For the three months ended October 31, 1999 the
Company charged to expense $724,000 of the $1,000,000 paid to obtain the Second
Extension, and deferred, as a reduction of stockholders' equity, the remaining
$276,000, which represents a portion of the purchase price attributable to the
value of the stock that the Company ultimately repurchased, as described below.

         On December 2, 1999, the Company exercised the 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. The Company recorded the 2,849,630
repurchased shares at a price of $.895 per share, representing the market price
of the common stock at the date the Second Extension was agreed to, or an
aggregate of approximately $2,550,000, comprised of (i) $276,000 deferred at
October 31, 1999, and (ii) the exercise payment made on December 2, 1999.

         INTEREST (INCOME) EXPENSE: Interest expense decreased to zero for the
three and nine months ended October 31, 1999, from $969,000 and $3,956,000 for
the same periods in fiscal 1999, as a result of the Company's level of
outstanding debt, which went from an average of $42,920,000 and $59,477,000 for
three and nine month periods, respectively, in fiscal 1999 to zero in fiscal
2000. During the three and nine month periods ended October 31, 1999, the
Company invested its cash balances in short-term marketable securities to
generate income of $576,000 and $1,481,000, respectively, 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 nine month periods ended October 31, 1999 and October 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 nine months ended October 31, 1999, the Company's operations
used $15,447,000 of cash flows as the Company's payments for operating, general
and administrative and litigation and non-recurring expenses continued to exceed
interest income from the declining portfolio balance. The Company generated
$35,672,000 in cash flows from investing activities principally as the result of
$37,636,000 of cash flows 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 $52,027,000 at
October 31, 1999.

         During the nine months ended October 31, 1998 the Company's operations
used $1,101,000 in cash flows resulting from the Company's payments for
litigation and non-recurring charges increasing over interest income, which had
decreased due to the decline in the size of the loan portfolio, and the cash
inflow from a net refund of $5,013,000 of previously paid income taxes generated
by the carryback of the Company's 1998 losses. The Company generated $62,329,000
of cash flows from the reduction in the size of its loan portfolio that was used
to pay back $47,154,000 of its outstanding debt.

         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.


                                       18
<PAGE>   21


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.

         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 from any future results discussed in any
forward-looking comments contained herein.



                                       19
<PAGE>   22


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 October 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.


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.


                                       20
<PAGE>   23


           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 prohibiting 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-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 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           On September 15, 1999, the Company held its annual stockholders
meeting. Two director positions, namely those previously held by Messrs. John A.
Gleason and William S. Marshall, had run their term. At the meeting, Sam J.
Frankino and William J. Dodero were elected to fill those two positions on the
Board of Directors. The Director positions then-held by Messrs. McNamara, Toh,
Rice and Cohen have not yet run their term. Consequently, those directorships
were unaffected by the election. 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>



                                       21
<PAGE>   24


ITEM 5.        OTHER INFORMATION

           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:

           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

           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 in 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 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. Mr. Rice has agreed to act as a Company consultant until July 15, 2000. As
of the date of this filing the vacancies left by their resignations have not
been filled.


ITEM  6.       EXHIBITS AND REPORTS ON FORM 8-K

               a) Exhibits
                  --------

                  27   Financial Data Schedule

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

                  On August 19, 1999, a Form 8-K was filed regarding the
                  exercise made by the Company relating to a stock option
                  agreement.

                  On September 3, 1999, a Form 8-K was filed regarding an
                  amendment to the By-Laws.



                                       22
<PAGE>   25


                                   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 30, 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)


                                       23