<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, 2000
                                           --------------------------

                                       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, 2000 there were 13,732,071 shares of Common Stock,
$.05 par value, outstanding.


<PAGE>   2


                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----

PART I.   FINANCIAL INFORMATION


Item 1.   Financial Statements                                                1

          Report of Independent Certified Public Accountants                  1

          Condensed Consolidated Balance Sheets as of
          October 31, 2000 and January 31, 2000                               2

          Condensed Consolidated Statements of Operations for the
          Three Months and Nine Months Ended October 31, 2000 and 1999        3

          Condensed Consolidated Statements of Stockholders' Equity and
          Comprehensive Income for the Nine Months Ended October 31, 2000     4

          Condensed Consolidated Statements of Cash Flows for
          the Nine Months Ended October 31, 2000 and 1999                     5

          Notes to Condensed Consolidated Financial Statements                6


Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations                      13


Item 3.   Quantitative and Qualitative Disclosures about
          Market Risk                                                        21


PART II.  OTHER INFORMATION


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


Signatures                                                                   23



<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
and stockholders' equity and comprehensive income of National Auto Credit, Inc.
and its subsidiaries as of October 31, 2000, and the related condensed
consolidated statements of operations for each of the three and nine month
periods ended October 31, 2000 and 1999, and cash flows for each of the
nine-month periods ended October 31, 2000 and 1999. The financial statements are
the responsibility of the Company's management.

         We conducted our reviews 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 accounting standards generally accepted in the United States of
America, 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 reviews, 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 accounting principles generally accepted in the United
States of America.

         We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the consolidated balance
sheet as of January 31, 2000, 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 April 28, 2000, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of January 31, 2000, 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 11, 2000


                                       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,
                                                                         2000          2000
                                                                       ---------    ---------

<S>                                                                    <C>          <C>
ASSETS
Cash and cash equivalents                                              $  74,599    $  54,333
Marketable securities (Note B)                                             8,295            -
Installment loans, net (Note C)                                                -       29,306
Investment in AFC (Note D)                                                 9,985            -
Property and equipment, net of accumulated depreciation
  of $1,775, and $5,219, respectively (Note E)                               895        7,677
Assets held for sale (Note F)                                              6,138        6,861
Income taxes refundable                                                    3,663        3,664
Other assets                                                               1,217        2,121
                                                                       ---------    ---------
TOTAL ASSETS                                                           $ 104,792    $ 103,962
                                                                       =========    =========



LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Self-insurance claims                                                  $   1,678    $   4,089
Accrued income taxes                                                       2,298        2,926
Other liabilities                                                         12,774       13,068
                                                                       ---------    ---------
                                                                          16,750       20,083

COMMITMENTS AND CONTINGENCIES (Note G)                                         -            -


STOCKHOLDERS' EQUITY
Preferred stock - $.05 par value,
  authorized 2,000,000 shares, issued 100 and 0 shares, respectively           -            -
Common stock - $.05 par value
  authorized 40,000,000 shares, issued 36,710,907 and
  29,963,301 shares, respectively                                          1,836        1,498
Additional paid-in capital                                               173,073      166,139
Retained deficit                                                         (79,972)     (69,104)
Accumulated other comprehensive income                                       (57)           -
Treasury stock, at cost, 1,957,945 and 4,195,598
   shares, respectively                                                   (6,838)     (14,654)
                                                                       ---------    ---------
                                                                          88,042       83,879
                                                                       ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $ 104,792    $ 103,962
                                                                       =========    =========
</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,
                                                   --------------------    --------------------
                                                     2000        1999        2000        1999
                                                   --------    --------    --------    --------

<S>                                                  <C>         <C>         <C>         <C>
REVENUE
     Interest income from loans                    $      -    $  1,530    $    404    $  5,316
     Interest income from investments                 1,234         576       3,518       1,481
     Income from AFC investment                         173           -         233           -
     Other income                                         -          42         123         129
                                                   --------    --------    --------    --------
          Total                                       1,407       2,148       4,278       6,926

COSTS AND EXPENSES
     Provision for credit losses                       (161)     (3,000)     (1,183)     (3,186)
     Loss on sale of loans                                -           -       1,709           -
     Operating                                          138       2,621       1,577       8,347
     General and administrative                       1,410       1,309       3,904       3,902
     Litigation and non-recurring charges             2,875       1,657       6,290       5,642
     Gain on sale of property (Note E)               (2,868)          -      (2,868)          -
     Cost related to purchase of shares                   -         724           -       2,224
     Write-down of assets held for sale (Note F)          -           -         874           -
     Write-off of option (Note D)                         -           -         500           -
                                                   --------    --------    --------    --------
          Total                                       1,394       3,311      10,803      16,929
                                                   --------    --------    --------    --------

INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE INCOME TAXES                                  13      (1,163)     (6,525)    (10,003)

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

 INCOME (LOSS) FROM CONTINUING OPERATIONS                13      (1,163)     (6,525)    (10,003)

DISCONTINUED OPERATIONS, NET OF TAX                     383           -       1,059           -

                                                   --------    --------    --------    --------
NET INCOME (LOSS)                                  $    396    $ (1,163)   $ (5,466)   $(10,003)
                                                   ========    ========    ========    ========

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
     Continuing operations                         $      -    $   (.04)   $   (.20)   $   (.35)
     Discontinued operations                            .01           -         .03           -
                                                   --------    --------    --------    --------
          Net earnings (loss) per share            $    .01    $   (.04)   $   (.17)   $   (.35)
                                                   ========    ========    ========    ========

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
     Basic and diluted                               34,754      28,630      32,623      28,634
                                                   ========    ========    ========    ========
</TABLE>





See notes to condensed consolidated financial statements.



                                       3
<PAGE>   6

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                       NINE MONTHS ENDED OCTOBER 31, 2000
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                    Preferred Stock              Common Stock
                                ------------------------   -------------------------   Additional
                                                Par                         Par          Paid-In       Retained     Treasury
                                  Shares       Value          Shares       Value         Capital       Deficit       Stock
                                ------------ -----------   ------------- -----------  --------------  ----------- -------------


<S>                                 <C>         <C>          <C>            <C>           <C>          <C>            <C>
BALANCE,
JANUARY 31, 2000                          -     $     -      29,963,301     $ 1,498       $ 166,139    $ (69,104)     $ (14,654)

Net loss                                                                                                  (5,466)
Stock cancelled under
   benefit plans                                                (14,641)          -             (20)
Investment in AFC                       100           -       6,762,247         338           6,954       (5,402)         7,816
Other comprehensive
   income-unrealized loss
   on marketable securities                           -
                                ------------ -----------   ------------- -----------  --------------  ----------- -------------

Comprehensive income (loss)



BALANCE,
October 31, 2000                        100     $     -      36,710,907     $ 1,836       $ 173,073    $ (79,972)      $ (6,838)
                                ============ ===========   ============= ===========  ==============  =========== =============


<CAPTION>



                                 Accumulated
                                     Other                  Comprehensive
                                 Comprehensive                  Income
                                     Income      Total          (Loss)
                                ------------ -----------   -------------


<S>                                 <C>          <C>
BALANCE,
JANUARY 31, 2000                   $      -     $83,879

Net loss                                         (5,466)       $ (5,466)
Stock cancelled under
   benefit plans                                    (20)
Investment in AFC                                 9,706
Other comprehensive
   income-unrealized loss
   on marketable securities             (57)        (57)            (57)
                                ------------ -----------   -------------
Comprehensive income (loss)                                    $ (5,523)
                                                           =============
BALANCE,
October 31, 2000                   $    (57)    $88,042
                                ============ ===========
</TABLE>


See notes to condensed consolidated financial statements.



                                       4
<PAGE>   7


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

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                  October 31,
                                                            -----------------------
                                                              2000           1999
                                                            --------       --------
<S>                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net Loss                                                   $ (5,466)      $(10,003)
 Adjustments to reconcile net loss to net cash used in
   operating activities:
   Depreciation and amortization                                 753          1,033
   Income from AFC investment                                   (233)             -
   Provision for credit losses                                (1,183)        (3,186)
   Loss on sale of loans                                       1,709              -
   Gain on sale of property                                   (2,868)             -
   Write-down of assets held for sale                            874              -
 Changes in operating assets and liabilities:
   Accrued income tax paid                                      (627)            (2)
   Other liabilities                                            (208)        (3,182)
   Self-insurance claims                                      (2,411)        (1,153)
   Other operating assets and liabilities, net                 1,300          1,046
                                                            --------       --------

    Net cash used in operating activities                     (8,360)       (15,447)
                                                            --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
 Principal collected on loans                                  5,548         50,877
 Proceeds from sale of loans                                  24,187              -
 Proceeds from sale of property                                8,606              -
 Purchase of loans                                                 -        (13,241)
 Investment in AFC                                              (872)             -
 Proceeds from AFC distribution                                  459              -
 Purchase of marketable securities                           (25,092)             -
 Proceeds from sale of marketable securities                  16,625              -
 Purchase of other property and equipment                        (71)          (947)
 Purchase of affordable housing investments                     (744)        (1,017)
                                                            --------       --------

    Net cash provided by investing activities                 28,646         35,672
                                                            --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES
 Purchase of option to repurchase shares                           -           (276)
 Stock cancelled under benefit plans                             (20)           (31)
                                                            --------       --------

    Net cash used in financing activities                        (20)          (307)
                                                            --------       --------

 Increase in cash and cash equivalents                        20,266         19,918
 Cash and cash equivalents at beginning of period             54,333         32,109
                                                            --------       --------
 Cash and cash equivalents at end of period                 $ 74,599       $ 52,027
                                                            ========       ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 Interest paid                                              $      -       $     50
                                                            ========       ========
 Income taxes paid                                          $    627       $      2
                                                            ========       ========
</TABLE>

  See notes to condensed consolidated financial statements.



                                       5
<PAGE>   8



                   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"). 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, stockholders' equity and
comprehensive income, 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, 2000.

         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.

         Certain fiscal 2000 amounts have been reclassified to conform with
fiscal 2001 presentations.

         Cash and cash equivalents include restricted cash of $6,500,000 that
was held in an escrow account pursuant to the Company's agreement in principle
to settle the class action securities litigation. See Note G. Additionally,
$300,000 is held in a "Rabbi Trust" pursuant to the Company's employment
agreement with Allen Rice, its former President and Director.

         Marketable securities consist of U.S. Government Agency mortgage-backed
obligations, mortgage-backed securities and mutual funds. The Company accounts
for its marketable securities under Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS No. 115"), which requires that marketable debt and equity securities be
adjusted to market value at the end of each accounting period, except in the
case of debt securities which a holder has the positive intent and ability to
hold to maturity, in which case the debt securities are carried at amortized
cost. For marketable debt and equity securities carried at market value,
unrealized market value gains and losses are included directly in net income if
the securities are actively traded for short-term profit, or otherwise are
charged or credited to a separate component of stockholders' equity
("accumulated other comprehensive income").

         The Company determines the proper classification of its marketable debt
and equity securities at the time of purchase and reevaluates such designations
as of each balance sheet date. At October 31, 2000, all marketable debt and
equity securities were designated as available for sale. Accordingly, these
securities are stated at market value, with unrealized gains and losses reported
in a separate component of stockholders' equity ("accumulated other
comprehensive income"). Realized gains and losses on sale of securities, as
determined on a specific identification basis, are included in net income.


                                       6
<PAGE>   9

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


NOTE A - BASIS OF PRESENTATION (cont.)

         In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, which addresses certain
revenue recognition issues. The guidance in SAB No. 101 must, for the Company,
be applied in the quarter ending January 31, 2001. The Company does not believe
that the application of the guidance in SAB No. 101 will have a material affect
on its financial statements.


NOTE B - MARKETABLE SECURITIES

         Marketable securities at October 31, 2000 are summarized as follows (in
thousands):

                                                   Gross Unrealized
                                                   ----------------
                                          Cost     Gains     Losses  Fair Value
                                         ------    ------    ------  ----------

Debt securities
   U.S. Government Agency mortgage-
     backed obligations                  $4,992       $ -    $    6    $4,986
   Mortgage-backed securities             2,233        12         -     2,245
Equity securities - mutual funds          1,127         -        63     1,064
                                         ------    ------    ------    ------
     Total                               $8,352    $   12    $   69    $8,295
                                         ======    ======    ======    ======

         All marketable securities were classified as available for sale. All
debt securities mature after 2010, however, actual maturities may differ from
contractual maturities because some borrowers have the right to call or prepay
obligations.

         Proceeds from the sale of the marketable securities were $16,625,000
for the nine months ended October 31, 2000. Gross realized gains and losses for
the three and nine month periods ended October 31, 2000 were not material.


NOTE C - INSTALLMENT LOANS, NET

         During the first six months of fiscal 2001, the Company sold its active
loan portfolio and the majority of its charged-off portfolio for aggregate cash
proceeds of $24,187,000. The Company also received $5,952,000 in actual cash
collections on the loans during the nine months ended October 31, 2000. The
sales of the loans resulted in an aggregate loss of $1,709,000. The loss
includes the write-off of deferred loan origination assets and liabilities,
computer equipment directly associated with the management of the loan
portfolio, and the accrual for the potential repurchase of certain loans for
breach of any representation or warranty made by the Company.







                                       7
<PAGE>   10

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


NOTE D - INVESTMENT IN AFC

         On April 5, 2000, the Company purchased a 50% membership interest in
Angelika Film Center, LLC ("AFC"). AFC is the owner and operator of the Angelika
Film Center, which is a multiplex cinema and cafe complex in the Soho District
of Manhattan in New York City. The 50% membership interest was purchased from
Reading Entertainment, Inc. ("Reading") for 8,999,900 shares of the Company's
common stock (which included 2,237,653 shares issued from treasury stock) and
100 shares of Series A Preferred Stock. The Company repurchased the 100 Shares
Series A Preferred Stock back from Reading on November 3, 2000. See Note H.

         AFC is currently owned 50% by the Company, 33.34% by Reading and 16.66%
by Citadel Cinemas, Inc. (wholly-owned subsidiary of Citadel Holding
Corporation). The articles and bylaws of AFC provide that for all matters
subject to a vote of the members, a majority is required, except that in the
event of a tie vote, the Chairman of Reading shall cast the deciding vote.

         The Company also purchased from Reading two separate and independent
options to acquire additional cinema assets owned by Reading in the United
States. In the quarter ended July 31, 2000, the options lapsed without being
exercised by the Company and the $500,000 paid to acquire them was charged to
expense.

         The Company's initial investment of $11,078,000 was comprised of (i)
the 9,000,000 shares issued, valued at $1.08 per share on the basis of the
average price quoted by the OTC Bulletin Board for the period immediately
preceding April 5, 2000, (ii) transaction costs, and (iii) the $500,000 paid for
one of the options. The investment exceeds the Company's share of the net assets
of AFC by approximately $5,600,000, which is being treated as goodwill and will
be amortized on the straight-line method over 20 years. The Company uses the
equity method to account for its investment in AFC. AFC uses a December 31
year-end for financial reporting purposes. The Company reports on a January 31
year-end, and for its fiscal quarters ending April 30, July 31, October 31 and
January 31 records its pro-rata share of AFC's earnings on the basis of AFC's
fiscal quarters ending March 31, June 30, September 30, and December 31,
respectively. For the three and nine months ended October 31, 2000, the Company
recorded income of $173,000 and $233,000 representing its share of AFC's net
income for the three and six months ended September 30, 2000, respectively.

NOTE E - PROPERTY AND EQUIPMENT

         The Company, through its wholly-owned subsidiary, ARAC, Inc., owned
certain real property which consisted of two four-story, 55,000 square foot
office buildings and approximately ten and one-half acres of land located in
Solon, Ohio (the "Solon Real Property"). On June 28, 2000, the Company received
an indication of interest from PVF Capital Corp., an Ohio Corporation ("PVF") to
purchase the Solon Real Property. On August 23, 2000, an Agreement of Purchase
and Sale was entered into between PVF and ARAC, Inc. for the sale of the Solon
Real Property to PVF at a gross sales price of $8,700,000 cash at closing (less
brokers' fees, pro-rated real estate taxes, adjustments attributable to tenant
leases, and cost and fees of closing), and the sale was closed on September 1,
2000. The transaction resulted in a gain of $2,868,000. Concurrent with the
closing the Company entered into a lease agreement for office space located
within the Solon Real Property. The lease agreement provides the Company office
space on a rent-free basis for the period September 1, 2000 through December 31,
2000 and at a monthly rental of $17,300 for the period January 1, 2001 through
December 31, 2001. The Company may terminate the lease agreement at any time
upon thirty days prior written notice to PVF.


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


NOTE F - ASSETS HELD FOR SALE

           Assets held for sale are as follows (in thousands):


                                                       October 31,  January 31,
                                                          2000         2000
                                                         ------       ------

Affordable housing investments                           $5,003       $5,605
Developed real estate                                       585          616
Undeveloped real estate subject to a ground lease           550          640
                                                         ------       ------
     Total                                               $6,138       $6,861
                                                         ======       ======


            The limited partner investments in affordable housing projects were,
until the fourth quarter of fiscal 2000, held for the generation of benefits in
the form of tax credits as well as the receipts of cash distributions from the
operation of the projects. During the fourth quarter of fiscal 2000, the Company
committed to a plan to sell the investments. As a result, the Company recorded,
in that quarter, a write-down of $4,666,000 to reduce the carrying amount of the
investments to their fair value less estimated costs to sell. During the quarter
ended July 31, 2000, the Company reduced its original estimate of the fair value
of the investments to $5,003,000, primarily due to the expiration of certain tax
credits, and as a result recorded an additional write-down of $602,000. As a
limited partner in the affordable housing projects, the Company is required as
of October 31, 2000 to make future contributions of $1,046,000, plus interest at
an average rate of 8.9% per annum, in varying amounts during the fiscal years
ended January 31, 2002 and 2003 of $614,000 and $432,000, respectively.

           During the fourth quarter of fiscal 2000, the Company also committed
to plans to sell certain real estate investments. During the quarter ended July
31, 2000, the Company revised its original estimate of the fair value, less
estimated costs to sell, of the real estate and as a result recorded a
write-down of $121,000.


NOTE G - COMMITMENTS AND CONTINGENCIES

              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.

         The Company and certain of its former officers and directors were named
as defendants in eleven purported class action lawsuits which were filed in the
United States District Court for the Northern District of Ohio (Eastern
Division) subsequent to the January 1998 resignation of the Company's former
independent auditors, Deloitte & Touche, LLP ("Deloitte & Touche"). The actions,
which were consolidated as Case Number 1:98:CV0264, allege fraud and other
violations of the federal securities laws and sought 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.

             In April 2000, the Company and the class action plaintiff's
representatives reached an agreement in principle to settle the class action
securities litigation. Under the terms agreed upon, the Company would pay to



                                       9
<PAGE>   12

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


NOTE G - COMMITMENTS AND CONTINGENCIES (cont.)

the plaintiff's class $6,500,000 in consideration for, among other things, the
release of all defendants from liability. The settlement is not an admission of
liability by any party. In the fourth quarter of fiscal 2000, the Company
accrued the $6,500,000 settlement amount together with an estimate of the legal
fees that would be incurred in completing the settlement. Pursuant to the
agreement in principle, on June 8, 2000 the Company transferred $6,500,000 to an
interest-bearing escrow account. On August 15, 2000, the United States District
Court for the Northern District of Ohio (Eastern Division) provided, by way of a
Notice Order, preliminary approval of the proposed settlement and set a
Settlement Hearing to be held in November 2000. On November 28, 2000, the
District Court considered the fairness of the settlement and provided, by way of
a Final Judgment and Order, final approval of the settlement. As a result of the
Final Judgment and Order dated November 28, 2000, the escrow funds, consisting
of $6,500,000 and accrued interest, were relinquished to a third party claims
administrator who is responsible for ultimate distribution of the funds (less
court approved expenses of $159,000 and plaintiff's attorneys fees of
$1,975,000) to the members of the class.

         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. The Company is cooperating fully with the investigations. The ultimate
outcome of these investigations on the Company cannot presently be predicted and
the Company has not recorded any provision for any monetary penalties that may
result from civil or criminal proceedings that might be commenced at the
conclusion of such investigations. 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.

         Certain disputes and differences between Samuel J. Frankino ("Mr.
Frankino") and the Company resulted in litigation styled National Auto Credit,
Inc. v. Sam J. Frankino, C.A. No. 17973 and Sam J. Frankino v. David L. Huber,
et al., C.A. No. 17984 in the Court of Chancery of the State of Delaware (the
"Actions"). The pendency of the Actions was previously disclosed.

         On November 3, 2000, the Company entered into a Settlement Agreement
and Release (Including Agreement for Sale of Shares) with Mr. Frankino and
certain related parties ("Frankino Parties") and certain directors of the
Company (the "Settlement Agreement") which among other things settled all of the
Actions and resulted in the repurchase by the Company of all of the Company
securities held by the Frankino Parties and certain directors. In conjunction
with the settlement of the above-referenced litigation, the parties to the
Actions, as well as William Dodero, Lorraine Dodero, William Maund and Robert
Upton (the "Former Directors"), exchanged general releases.

         Under the terms of the Settlement Agreement, the Company (i)
repurchased an aggregate of 15,743,012 shares of common stock of the Company
owned by the Frankino Parties for a total purchase price of $35,340,000, or
$2.245 per share of common stock, (ii) agreed to repurchase an aggregate of
120,348 shares of common stock of the Company owned by certain Former Directors
for a total purchase price of $181,000 (such repurchase of the 120,348 shares
has not closed as of December 11, 2000), or $1.50 per share of common stock,
(iii) reimbursed certain legal fees previously incurred by Mr. Frankino in the
amount of $2,012,000 and (iv) the Frankino Parties and the Former Directors
agreed to certain standstill and related restrictions regarding their future
involvement with the Company.




                                       10
<PAGE>   13
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE G - COMMITMENTS AND CONTINGENCIES (cont.)

         In accordance with the terms of the Settlement Agreement, Mr. Frankino,
Lorraine Dodero, William Maund, William Dodero and Robert Upton resigned
positions as directors of the Company on November 3, 2000, immediately following
the execution of the Settlement Agreement.

         As a result of the Settlement Agreement, On November 3, 2000, the
Actions were dismissed and the Status Quo Order was lifted. Messrs. Gleason and
Marshall reclaimed positions as directors of the Company.

         As a result of the repurchases of shares of common stock under the
Settlement Agreement, the Company will charge to expense in the fourth quarter
of fiscal 2001 approximately $25,000,000, representing the excess of the amount
paid under the Settlement Agreement over the market value of the shares
repurchased.

         In fiscal 1998, following the resignation of Deloitte & Touche, the
Company instituted investigations of its previous financial reporting and
underwent changes in management. The Company accrued initial estimates of
certain resulting costs, and additional costs in excess of those initial
estimates are being expensed as incurred or as such estimates are revised. In
the first quarter of fiscal 2001, the Company accrued an initial estimate of the
costs to be incurred in the litigation with Mr. Frankino that commenced in April
2000, and additional costs in excess of that initial estimate were expensed as
incurred or as such estimate was revised. At October 31, 2000, the Company has
accrued an aggregate of $9,688,000, representing (i) the accrual of costs of the
settlement of the class action litigation, as discussed above, (ii) an estimate
of the legal costs to be incurred in responding to the investigations described
above, and (iii) an estimate of the costs to be incurred in completing the
settlement with the Frankino Parties. Included in the results of operations for
the nine months ended October 31, 2000 and 1999, respectively, are the following
costs (in thousands):

                                               Nine Months Ended October 31,
                                               -----------------------------
                                                2000                   1999
                                               ------                 ------

Legal costs relating to litigation matters     $5,799                 $2,115
Crisis management consulting                      116                  2,362
Fees for special independent audits                 -                    523
Financing fees                                      -                    371
Costs of special investigations                     -                    268
Other                                             375                      3
                                               ------                 ------
     Total                                     $6,290                 $5,642
                                               ======                 ======




NOTE H - SUBSEQUENT EVENT

          As discussed in Note G, on November 3, 2000, the Company and the
Frankino Parties entered into a Settlement Agreement pursuant to which, among
other things, the Company repurchased or agreed to repurchase an aggregate of
15,863,360 shares of common stock, the Frankino Parties and the Company
exchanged certain releases and the Frankino Parties and the Former Directors
agreed to certain standstill and related restrictions regarding their future
involvement with the Company.



                                       11
<PAGE>   14

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


NOTE H - SUBSEQUENT EVENT (cont.)

         Simultaneously with the execution and closing of the Settlement
Agreement, the Company executed and closed a Stock Purchase and Standstill
Agreement (the "Reading Agreement") with Reading Entertainment, Inc., a Nevada
corporation ("Reading"), FA, Inc., a Nevada corporation and a wholly-owned
subsidiary of Reading ("FA"), Citadel Holding Corporation, a Nevada corporation
("Citadel"), and Craig Corporation, a Nevada corporation ("Craig" and,
collectively with Reading, FA and Citadel, the "Reading Stockholders"). Prior to
the execution of the Reading Agreement, the Reading Stockholders collectively
owned an aggregate of 10,055,000 shares of Company common stock and 100 shares
of Series A Convertible Preferred Stock, par value $.05 per share.

         Under the terms of the Reading Agreement (i) the Company repurchased
from FA 5,277,879 shares of common stock of the Company and all 100 of Series A
Convertible Preferred Stock for an aggregate purchase price of $7,917,000, or
$1.50 per share, plus $552,000 representing interest accruing from April 5, 2000
to the date of the consummation of the transaction contemplated by the Reading
Agreement at the simple annual rate of twelve percent (12%), (ii) the Company
and the Reading Stockholders agreed to certain standstill restrictions, voting
arrangements, corporate governance and related matters, and (iii) the Reading
Stockholders may nominate two designees for the election to the Board of
Directors of the Company. Pursuant to the terms of the Reading Agreement,
Messrs. James J. Cotter and Scott A. Braly were so elected to the Company's
Board of Directors at a special meeting of the Board held on November 3, 2000.
As a result of this repurchase, the repurchase under the Settlement Agreement
and upon the repurchase of the remaining 120,348 shares from certain Former
Directors of the Company, as contemplated by the Settlement Agreement, the
Reading Stockholders will own an aggregate of thirty-three percent (33%) of the
issued and outstanding shares of the Company's common stock, on a fully diluted
basis.

         As a result of the repurchases of shares of common stock under the
Reading Agreement, the Company will charge to expense in the fourth quarter of
fiscal 2001 approximately $5,000,000, representing the excess of the amount paid
for the shares repurchased under the Reading Agreement over their market value.

         The repurchases under the Settlement Agreement and Reading Agreement
result in a "change in control" for the purposes of the Internal Revenue Code.
As a result, the use of the Company's net operating loss carryforwards to offset
any future taxable income and tax credit carryforwards to offset any future
income taxes will become subject to an annual limitation. The Company has not
yet computed the limitation amount, but estimates that the limitation will
significantly reduce the Company's ability to offset any future taxable income
or income taxes with such carryforwards.

         As a result of these two transactions, there will be 13,611,723 Company
common shares outstanding.


                                       12
<PAGE>   15

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, invested in sub-prime used automobile consumer loans, which took the
form of installment loans collateralized by the related vehicle. The Company
purchased such loans, or interests in pools of such loans, from used car
dealerships that participated in the Company's loan purchase program through
March 2000. The Company performed the underwriting and collection functions for
all loans it purchased in whole, and also performed such functions where the
member dealer had sold to the Company, and retained for itself, interests in a
pool of loans.

         During the first six months of fiscal 2001, the Company sold its active
loan portfolio and the majority of its charged-off portfolio for aggregate cash
proceeds of $24,187,000. The Company also received $5,952,000 in actual cash
collections on the loans for the nine months ended October 31, 2000. The sales
of the loans resulted in an aggregate loss of $1,709,000. The loss includes the
write-off of deferred loan origination assets and liabilities, computer
equipment directly associated with the management of the loan portfolio, and the
accrual for the potential repurchase of certain loans for breach of any
representation or warranty made by the Company. In each of the sale
transactions, the buyer was an independent party that did not have a material
relationship with the Company, any affiliate of the Company, any director or
officer of the Company or any associate of any officer or director of the
Company. In each case, the selling price was determined based upon arm's length
negotiations between the parties and was paid in cash at closing.

         Following its disposition of these automobile installment loans, the
Company's assets consisted principally of money market funds, commercial paper,
government securities and other short-term, highly liquid investments.

         On April 5, 2000, the Company purchased a 50% membership interest in
Angelika Film Center, LLC ("AFC"). AFC is the owner and operator of the Angelika
Film Center, which is a multiplex cinema and cafe complex in the Soho District
of Manhattan in New York City. The 50% membership interest was purchased from
Reading for 8,999,900 shares of the Company's common stock (which included
2,237,653 shares issued from treasury stock) and 100 shares of Series A
Preferred Stock (representing 100% of the Class of Series A Convertible
Preferred Stock outstanding). The Company repurchased the 100 Shares of Series A
Preferred Stock back from Reading on November 3, 2000. See Note H of Notes to
Condensed Consolidated Financial Statements.

         AFC is currently owned 50% by the Company, 33.34% by Reading and
16.66% by Citadel Cinemas, Inc. (wholly-owned subsidiary of Citadel Holding
Corporation). The articles and bylaws of AFC provide that for all matters
subject to a vote of the members, a majority is required, except that in the
event of a tie vote, the Chairman of Reading shall cast the deciding vote.

         The Company also purchased from Reading two separate and independent
options to acquire additional cinema assets owned by Reading in the United
States. In the quarter ended July 31, 2000, the options lapsed without being
exercised by the Company and the $500,000 paid to acquire them was charged to
expense.

         The Company uses the equity method to account for its investment in
AFC. AFC uses a December 31 year-end for financial reporting purposes. The
Company reports on a January 31 year-end, and for its fiscal quarters ending
April 30, July 31, October 31 and January 31 records its pro-rata share of AFC's
earnings on the basis of AFC's fiscal quarters ending March 31, June 30,
September 30 and December 31, respectively. For the nine months ended October
31, 2000, the Company recorded income of $233,000 representing its share of
AFC's net income for the six months ended September 30, 2000.


                                       13
<PAGE>   16


         The Company, through its wholly-owned subsidiary, ARAC, Inc., owned
certain real property which consisted of two four-story, 55,000 square foot
office buildings and approximately ten and one-half acres of land located in
Solon, Ohio (the "Solon Real Property"). On June 28, 2000, the Company received
an indication of interest from PVF Capital Corp., an Ohio corporation ("PVF") to
purchase the Solon Real Property. On August 23, 2000, an Agreement of Purchase
and Sale was entered into between PVF and ARAC, Inc. for the sale of the Solon
Real Property to PVF at a gross sales price of $8,700,000 cash at closing (less
brokers' fees, pro-rated real estate taxes, adjustments attributable to tenant
leases, and costs and fees of closing), and the sale was closed on September 1,
2000. The transaction resulted in a gain of $2,868,000. Concurrent with the
close, the Company entered into a lease agreement for office space located
within the Solon Real Property. The lease agreement provides the Company office
space on a rent-free basis for the period September 1, 2000 through December 31,
2000 and at a monthly rental of $17,300 for the period January 1, 2001 through
December 31, 2001. The Company may terminate the lease agreement at any time
upon thirty days prior written notice to PVF.

         During fiscal 2000 the Company reduced its staffing levels from
approximately 250 employees at January 31, 1999 to approximately 100 employees
at January 31, 2000. In fiscal 2001, the Company has undertaken further
personnel reductions, principally as the result of the sale of its loans and the
cessation of its loan underwriting, processing and collection operations, and as
of October 31, 2000 has reduced its staff level to approximately 30 employees.
The Company estimates that at this staffing level its recurring payroll,
benefit, occupancy and other general and administrative costs are approximately
$350,000 per month. The Company plans to fund these expenses from the interest
earned on its money market, commercial paper and government securities
investments, which currently are invested at a weighted average yield of
approximately 7.0 %. The estimated costs excludes costs the Company may incur as
a result of the Company's Board of Directors pursuing various strategic business
alternatives, including but not limited to the purchase of one or more existing
operating businesses or the entry into one or more businesses.

         For the nine months ended October 31, 2000, the Company incurred a net
loss of $5,466,000, primarily as the result of a 38.2% decline in revenues to
$4,278,000, losses on the sale of loans of $1,709,000 and the incurrence of
costs of $6,290,000 associated with certain litigation and non-recurring
charges, as discussed below. For the three months ended October 31, 2000, the
Company had net income of $396,000, principally as the result of a gain of
$2,868,000 on the sale of property offset by expenses of $2,875,000 for
litigation and non-recurring charges and a 34.5% decline in revenues from
$2,148,000 to $1,407,000. For both the three and nine months ended October 31,
2000, the declines in revenues reflected the decline in interest income from
loans, as the result of the decline in the size of the Company's loan portfolio
and the eventual sale of substantially all of the loan portfolio in the first
and second quarters of fiscal 2001, offset by increases in interest earned from
the investment of the cash proceeds from the sale of the loans.

         The Company and certain of its former officers and directors were named
as defendants in eleven purported class action lawsuits which were filed in the
United States District Court for the Northern District of Ohio (Eastern
Division) subsequent to the January 1998 resignation of the Company's former
independent auditors, Deloitte & Touche, LLP ("Deloitte & Touche"). The actions,
which were consolidated as Case Number 1:98:CV0264, allege fraud and other
violations of the federal securities laws and sought 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.

         In April 2000, the Company and the class action plaintiff's
representatives reached an agreement in principle to settle the class action
securities litigation. Under the terms agreed upon, the Company would pay to the
plaintiff's class $6,500,000 in consideration for, among other things, the
release of all defendants from liability. The settlement is not an admission of
liability by any party. In the fourth quarter of fiscal 2000, the Company
accrued the $6,500,000 settlement amount together with an estimate of the legal
fees that would be incurred in completing the settlement. Pursuant to the
agreement in principle, on June 8, 2000 the Company transferred $6,500,000 to an
interest-bearing escrow account. On August 15, 2000, the United States District
Court for the Northern District of Ohio (Eastern Division) provided, by way of a
Notice Order,


                                       14
<PAGE>   17

preliminary approval of the proposed settlement and set a Settlement Hearing to
be held in November 2000. On November 28, 2000, the District Court considered
the fairness of the settlement and provided, by way of a Final Judgment and
Order, final approval of the settlement. As a result of the Final Judgment and
Order dated November 28, 2000, the escrow funds, consisting of $6,500,000 and
accrued interest, were relinquished to a third party claims administrator who is
responsible for ultimate distribution of the funds (less court approved expenses
of $159,000 and plaintiff's attorneys fees of $1,975,000) to the members of the
class.

         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. The Company is cooperating fully with the investigations. The ultimate
outcome of these investigations on the Company cannot presently be predicted and
the Company has not recorded any provision for any monetary penalties that may
result from civil or criminal proceedings that might be commenced at the
conclusion of such investigations. 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.

         Certain disputes and differences between Samuel J. Frankino ("Mr.
Frankino") and the Company resulted in litigation styled National Auto Credit,
Inc. v. Sam J. Frankino, C.A. No. 17973 and Sam J. Frankino v. David L. Huber,
et al., C.A. No. 17984 in the Court of Chancery of the State of Delaware (the
"Actions"). The pendency of the Actions was previously disclosed.

         On November 3, 2000, the Company entered into a Settlement Agreement
and Release (Including Agreement for Sale of Shares) with Mr. Frankino and
certain related parties ("Frankino Parties") and certain directors of the
Company (the "Settlement Agreement") which among other things settled all of the
Actions and resulted in the repurchase by the Company of all of the Company
securities held by the Frankino Parties and certain Directors. In conjunction
with the settlement of the above-referenced litigation, the parties to the
Actions, as well as William Dodero, Lorraine Dodero, William Maund and Robert
Upton (the "Former Directors"), exchanged general releases.

         Under the terms of the Settlement Agreement, the Company (i)
repurchased an aggregate of 15,743,012 shares of common stock of the Company
owned by the Frankino Parties for a total purchase price of $35,340,000, or
$2.245 per share of common stock, (ii) agreed to repurchase an aggregate of
120,348 shares of common stock of the Company owned by certain Former Directors
for a total purchase price of $181,000 (such repurchase of the 120,348 shares
has not closed as of December 11, 2000 ), or $1.50 per share of common stock,
(iii) reimbursed certain legal fees previously incurred by Mr. Frankino in the
amount of $2,012,000 and (iv) the Frankino Parties and the Former Directors
agreed to certain standstill and related restrictions regarding their future
involvement with the Company.

         As a result of the repurchases of shares of common stock under the
Settlement Agreement, the Company will charge to expense in the fourth quarter
of fiscal 2001 approximately $25,000,000 representing the excess of the amount
paid under the Settlement Agreement over the market value of the shares
repurchased.

         Simultaneously with the execution and closing of the Settlement
Agreement, the Company executed and closed a Stock Purchase and Standstill
Agreement (the "Reading Agreement") with Reading Entertainment, Inc., a Nevada
corporation ("Reading"), FA, Inc., a Nevada corporation and a wholly-owned
subsidiary of Reading ("FA"), Citadel Holding Corporation, a Nevada corporation
("Citadel"), and Craig Corporation, a Nevada corporation ("Craig" and,
collectively with Reading, FA and Citadel, the "Reading Stockholders"). Prior to
the execution of the Reading Agreement, the Reading Stockholders collectively
owned an aggregate of 10,055,000 shares of Company common stock and 100 shares
of Series A Convertible Preferred Stock, par value $.05 per share.


                                       15
<PAGE>   18

         Under the terms of the Reading Agreement, (i) the Company repurchased
from FA 5,277,879 shares of common stock of the Company and all 100 of Series A
Convertible Preferred Stock for an aggregate purchase price of $7,917,000 or
$1.50 per share, plus $552,000 representing interest accruing from April 5, 2000
to the date of the consummation of the transaction contemplated by the Reading
Agreement at the simple annual rate of twelve percent (12%), (ii) the Company
and the Reading Stockholders agreed to certain standstill restrictions, voting
arrangements, corporate governance and related matters, and (iii) Reading
Stockholders may nominate two designees for the election to the Board of
Directors of the Company. Pursuant to the terms of the Reading Agreement,
Messrs. James J. Cotter and Scott A. Braly were so elected to the Company's
Board of Directors at a special meeting of the Board held on November 3, 2000.
As a result of this repurchase, the repurchase under the Settlement Agreement
and upon the repurchase of the remaining 120,348 shares from the Former
Directors of the Company, as contemplated by the Settlement Agreement, the
Reading Stockholders will own an aggregate of thirty-three percent (33%) of the
issued and outstanding shares of the Company's common stock, on a fully diluted
basis.

         As a result of the repurchases of shares of common stock under the
Reading Agreement, the Company will charge to expense in the fourth quarter of
fiscal 2001 approximately $5,000,000, representing the excess of the amount paid
for the shares repurchased under the Reading Agreement over their market value.

         The repurchases under the Settlement Agreement and Reading Agreement
result in a "change in control" for the purposes of the Internal Revenue Code.
As a result, the use of the Company's net operating loss carryforwards to offset
any future taxable income and tax credit carryforwards to offset any future
income taxes will become subject to annual limitations. The Company has not yet
computed the limitation amounts, but estimates that the limitations will
significantly reduce the Company's ability to offset any future taxable income
or income taxes with such carryforwards.

         As a result of these two transactions, there will be 13,611,723 Company
common shares outstanding.

         The Company's Board of Directors is considering various additional
strategic business alternatives, including but not limited to, the purchase of
one or more existing operating businesses or the entry into one or more
businesses. However, throughout the first nine months of fiscal 2001 and as of
October 31, 2000, the Company had no external source of financing, and has
operated on the cash balances created by the excess of collections on
installment loans over the investment in new loans, the cash proceeds received
from the sale of loans and the proceeds from the sale of property. The Company
plans to pursue new debt, or equity financing, together with the cash
equivalents and marketable securities themselves, for use in funding its
strategic business alternatives, to pay operating expenses and existing
liabilities. The Company's pending regulatory investigation and other factors
may make obtaining such financing difficult so there can be no assurance that
capital will be obtained from these sources. In the interim, the Company has
cash equivalents and marketable securities of approximately $30,000,000 at
November 30, 2000, and it believes that such cash equivalents and marketable
securities and the investment income therefrom will be sufficient to pay
operating expenses and existing liabilities.


RESULTS OF OPERATIONS

         INTEREST INCOME FROM LOANS: The Company's loan investments resulted
from purchases of installment loans at discounts from the face or contractual
amount. Those discounts reflected both (i) an element of interest income that
the Company sought 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
purchased were impaired in that the loans would not be repaid in accordance with
their contractual terms.

         At the time of purchase, the Company grouped loans into loan pools that
it believed would have common future cash flow characteristics, on the basis of
possessing similar contractual and risk characteristics. Loans were 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 was recorded
by establishing as the "gross finance receivable" the contractual cash flows
(including contractual interest) to which the Company was entitled, which was
offset by the difference between the gross finance receivable and the net
initial investment, which was segregated into two components: (i) unearned
income, which represented 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 represented the difference
between the


                                       16
<PAGE>   19

Company's estimate of the future cash flows from the gross finance receivable
and its contractual cash flows.

         Unearned income was recognized as income over the life of the loans on
the interest method, using for each pool of loans the interest rate that
reflected 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 included its net
initial investment, any interest income recognized but not yet collected,
reduced by collections and any previously recorded allowance for credit losses.

         Interest income from loans declined to $404,000 for the nine months
ended October 31, 2000 from $5,316,000 for the same period of fiscal 2000,
representing a decline of 92.4%. The decline was due to the sale of
substantially all of the Company's loans in March 2000. All loans which were
accruing interest income were sold in the first quarter of fiscal 2001, as a
result of which the Company had no interest income from loans for the three
months ended October 31, 2000.

         INTEREST INCOME FROM INVESTMENTS: Interest income from investments
included in this line item is principally the interest earned on the Company's
investments in marketable securities, commercial paper and money market
accounts. Interest income from these investments increased to $1,234,000 and
$3,518,000 for the three and nine months ended October 31, 2000 as compared to
$576,000 and $1,481,000 for the same periods of fiscal 2000. The increases were
due to an increase in the weighted average investment balances to $72,504,000
and $69,919,000, for the three and nine month periods ended October 31, 2000
from $44,065,000 and $38,887,000 for the same periods of fiscal 2000, as well as
an increase in the average interest rate being earned to 6.7% compared to 5.2%
for the three and nine month periods ended October 31, 2000 and October 31,
1999, respectively. The Company's investments in marketable securities increased
in fiscal 2001 as the result of the investment of the proceeds from the sale of
its loans.

         PROVISION FOR CREDIT LOSSES: The Company's methodology for determining
the allowance for credit losses was 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 reviewed its estimates of future cash flows for its loan pools. Such
estimates were revised to reflect changes in historical collection rates,
charge-off rates, loan delinquencies and other economic indicators that served
as the basis for predicting future loan performance. The Company's net
investment in each loan pool was compared to the present value of the revised
estimate of future cash flows, discounted using the rate at which the Company
was recognizing interest income on that pool of loans. Where the estimated cash
flows had been revised downward and, as a result, such a comparison reflected an
excess of the investment over the present value of the future cash flows, the
Company recorded an allowance for credit losses by a charge to expense, and also
reduced unearned income by a reclassification to the credit loss discount so
that future interest income would reflect the same original annual interest rate
on the net investment in the loan pool. In those instances where a revised
estimate of future cash flows indicates an increase in estimated cash flows over
the previous estimate, the Company first reversed into income any previously
recorded provision for credit losses, and then increased the rate at which
future interest income is recognized by a reclassification from the credit loss
discount to unearned income.

         The Company recorded a reversal into income of previously recorded
credit losses of $1,183,000 for the nine months ended October 31, 2000 as
compared to $3,186,000 for the nine months ended October 31, 1999. In
determining the allowance for credit losses, the Company used weighted average
estimates of future cash flows from its loans expressed as a percentage of the
contractual amounts receivable, which was approximately 58% at February 29, 2000
(prior to the sales of the loans as described above) and 57.8% at October 31,
1999. The Company recorded a reversal into income of previously recorded credit
losses of $161,000 for the three months ended October 31, 2000 as a result of
cash receipts from loans previously charged-off.


                                       17
<PAGE>   20

         LOSS ON SALE OF LOANS: During the first six months of fiscal 2001, the
Company sold its active loan portfolio and the majority of its charged-off
portfolio for aggregate cash proceeds of $24,187,000. The Company also received
$5,952,000 in actual cash collections on the loans during the nine months ended
October 31, 2000. The sales of the loans resulted in an aggregate loss of
$1,709,000. The loss includes the write-off of deferred loan origination assets
and liabilities, computer equipment directly associated with the management of
the loan portfolio, and the accrual for the potential repurchase of certain
loans for breach of any representation or warranty made by the Company.

         The Company is pursuing the sale of the remaining charged-off portfolio
and anticipates completing the sale by the end of the period ending April 30,
2001.

         OPERATING EXPENSES: Operating expenses include sales and marketing
costs, collection costs and other operating costs related to the Company's loan
operations. Operating expenses decreased to $138,000 and $1,577,000 for the
three and nine month periods ended October 31, 2000 from $2,621,000 and
$8,347,000 for the same periods of fiscal 2000.

         Operating expenses decreased as a result of a reduction in personnel
costs and the cessation of loan underwriting, processing and collection
operations upon the Company's sales of its loans. Additionally, certain
personnel and occupancy costs historically associated with the loans operations,
but which the Company continues to incur, have since April 2000 been classified
as general and administrative expenses.

         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.
General and administrative expenses increased slightly to $3,904,000 for the
nine months ended October 31, 2000, from $3,902,000 for the same period of
fiscal 2000. For the three months ended October 31, 2000 general and
administrative expenses increased to $1,410,000 from $1,309,000 for the third
quarter of fiscal 2000. The expense levels remained substantially unchanged as
the result of the effects of (i) personnel reductions and (ii) reduction in
expenses for professional services, offset by the effects of (iii) the
previously discussed change in the classification (from operating expense to
general and administrative expenses) of certain costs and (iv) the reduction of
the fiscal 2000 expenses (with no similar reduction in fiscal 2001) from a
credit recorded when the Company was able to settle certain state tax
liabilities at amounts less than initially estimated.

                  LITIGATION AND NON-RECURRING CHARGES: In fiscal 1998,
following the resignation of Deloitte & Touche LLP, the Company instituted
investigations of its previous financial reporting, and underwent changes in
management. The Company accrued initial estimates of certain resulting costs,
and additional costs in excess of those initial estimates are being expensed as
incurred or as such estimates are revised. In the first quarter of fiscal 2001,
the Company accrued an initial estimate of the costs to be incurred in the
litigation with Mr. Frankino that commenced in April 2000, and additional costs
in excess of that initial estimate were expensed as incurred or as such estimate
was revised. At October 31, 2000, the Company has accrued an aggregate of
$9,688,000, representing (i) the accrual of the costs of the settlement of the
class action litigation, as discussed above, (ii) an estimate of the legal costs
to be incurred in responding to the investigations described above, and (iii) an
estimate of the costs to be incurred in completing the Settlement Agreement with
the Frankino Parties.


                                       18
<PAGE>   21


Included in the results of operations for the three and nine months ended
October 31, 2000 and 1999, respectively, are the following costs (in thousands):

<TABLE>
<CAPTION>
                                             Three Months Ended   Nine Months Ended
                                                 October 31,         October 31,
                                              ----------------    ----------------
                                               2000      1999      2000      1999
                                              ------    ------    ------    ------

<S>                                           <C>       <C>       <C>       <C>
Legal costs relating to litigation matters    $2,500    $  797    $5,799    $2,115
Crisis management consulting                       -       731       116     2,362
Fees for special independent audits                -         -         -       523
Financing fees                                     -       113         -       371
Costs of special investigations                    -        13         -       268
Other                                            375         3       375         3
                                              ------    ------    ------    ------
   Total                                      $2,875    $1,657    $6,290    $5,642
                                              ======    ======    ======    ======
</TABLE>

         WRITE-DOWN OF ASSETS HELD FOR SALE: The Company has certain investments
in affordable housing projects which previously the Company had been holding for
realization through the receipt of distributions from the operations of the
projects and the use of the tax credits generated by the investments. In the
fourth quarter of fiscal 2000, the Company committed to a plan to sell the
investments and recorded, in that quarter, a write-down of $4,666,000 to reduce
the carrying amount of the investments to their fair value less estimated costs
to sell. During the quarter ended July 31, 2000 the Company reduced its original
estimate of the fair value of the investments to $5,003,000, primarily due to
the expiration of certain tax credits, and as a result recorded an additional
write-down of $602,000. The Company expects to complete the sale by the end of
the first quarter of fiscal 2002 and future operating results could be affected
by revisions of the estimates of the fair value or selling cost for the
investments, which changes could be material due to the uncertainties inherent
in the estimation process.

         During the fourth quarter of fiscal 2000, the Company also committed to
plans to sell certain real estate investments. During the quarter ended July 31,
2000, the Company revised its original estimate of the fair value, less
estimated costs to sell, of the real estate and as a result recorded a
write-down of $121,000.

         DISCONTINUED OPERATIONS: Prior to fiscal 1997 the Company was also
engaged in the automobile rental business, including the subsequent sale of cars
when retired from its rental fleet. The automobile rental operations, conducted
under the names Agency Rent-A-Car, Altra Auto Rental and Automate Auto Rental,
rented vehicles principally on a short-term basis to the insurance replacement
market. The Company disposed of its rental fleet and this operation in fiscal
1996 through the sale of certain assets and through certain leases to a national
car rental company. All liabilities related to the discontinued rental business,
principally self-insurance claims, were retained by the Company. National Motors
was a company owned dealership which sold vehicles retired from the rental
fleet. The Company discontinued the operations of National Motors in fiscal
1997.

         The fiscal 2001 income of $1,059,000 represents the reversal of
previously recorded expense relating to the self-insurance claims liabilities
due to the favorable settlement of certain claims. The Company's aggregated
self-insurance claims liability of $1,678,000 as of October 31, 2000 is subject
to further revision as new information is available, and such revisions may be
material due to the uncertainties inherent in the estimation process.

         INCOME TAXES: Due to net operating losses and the availability of net
operating loss carryforwards, the Company's effective income tax rate was 0% for
the three and nine month periods ended October 31, 2000 and October 31, 1999.
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.


                                       19
<PAGE>   22

LIQUIDITY AND CAPITAL RESOURCES

         During the first nine months of fiscal year 2001, the Company used
$8,360,000 from operating activities as the Company's payments for operating,
general and administrative and litigation and non-recurring expenses continue to
exceed revenues from operations. The Company generated $28,646,000 in cash flows
from investing activities principally as the result of $24,187,000 of cash flows
from the sales of loans, $5,548,000 from principal collected on loans and
$8,606,000 generated from the sale of property, offset by the net investment in
marketable securities of $8,467,000. The cash flows generated by these sources
were used to finance the negative operating cash flows and retain a cash balance
of $74,599,000 at October 31, 2000.

         During the nine months ended October 31, 1999, the Company used
$15,447,000 from operating activities as the Company's payments for operating,
general and administrative and litigation and non-recurring expenses continue to
exceed interest income from the declining portfolio balance. The Company
generated $35,672,000 in cash flows from investing activities principally as the
result of $37,636,000 of cash flows generated from the net reduction in the size
of its loan portfolio. The cash flows generated by these sources were used to
finance the negative operating cash flows and retain a cash balance of
$52,027,000 at October 31, 1999.

         The Company believes that the cash and cash equivalents and marketable
securities of approximately $30,000,000 at November 30, 2000, and the investment
income therefrom will be sufficient to pay operating expenses, existing
liabilities, including costs associated with pending civil litigation and
investigations, and fund its activities through January 31, 2001. However, as
previously discussed, the Company's lack of external financing sources may limit
its ability to pursue strategic business alternatives being considered by the
Company's Board of Directors. Such limitations may have an adverse impact on the
Company's financial position, results of operations and liquidity.


NEW ACCOUNTING PRONOUNCEMENTS

         In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, which addresses certain
revenue recognition issues. The guidance in SAB No. 101 must, for the Company,
be applied in the quarter ending January 31, 2001. The Company does not believe
that the application of the guidance in SAB No. 101 will have a material affect
on its financial statements.




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.




                                       20
<PAGE>   23

FORWARD-LOOKING STATEMENTS

         Various statements made in this Item 2 concerning the manner in which
the Company intends to conduct its future operations, and potential trends that
may impact its future results of operations, are forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. The
Company may be unable to realize its plan and objectives due to various
important factors, including, but not limited to, the failure of the Board of
Directors to promptly determine what strategic business plan the Company should
pursue, the failure of the Company to implement any such plan due to its
inability to identify suitable acquisition candidates or its inability to obtain
the financing necessary to complete any desired acquisitions or any adverse
action taken by the Securities and Exchange Commission that impedes the ability
of the Company to pursue any desired plan of action.


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 was 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 were not subject to market risk.

         As of October 31, 2000 the Company has mutual fund investments with a
market value of $1,064,000. Those mutual funds generally invest in equity
securities, and as a result such investments are subject to equity price risk.

         As of October 31, 2000, the Company has certain investments in
marketable debt securities. Those marketable debt securities are subject to
interest rate risk. The table below provides, for those marketable debt
securities, principal cash flows and related weighted average interest rates by
expected maturity dates (dollars in thousands):


                                            Expected Maturity Date
                                    2000 through 2005      After 2005
                                    -----------------   -----------------

Fixed rate debt securities

  U.S. Government Agency
     mortgage-backed obligations              $ -             $5,000
  Average interest rate                                         8.00%

  Mortgage-backed securities                  $ -             $2,233
  Average interest rate                                         8.25%



         As of October 31, 2000 the Company has no interest bearing debt, and
accordingly no market risk associated with increases in interest costs resulting
from changes in market rates.



                                       21
<PAGE>   24


PART II.       OTHER  INFORMATION

ITEM  6.       EXHIBITS AND REPORTS ON FORM 8-K

               a)  Exhibits
                   --------

               27  Financial Data Schedule

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

                   On November 17, 2000, a form 8-K was filed regarding the
         Settlement Agreement and Release with Samuel J. Frankino and a Stock
         Purchase and Standstill Agreement with the Reading Stockholders.





                                       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 14, 2000     By: /s/ James J. McNamara
      ------------------        ---------------------
                            James J. McNamara
                            Chairman of the Board and Chief Executive Officer
                            (Principal Financial Officer)

                            By: /s/ Sean P. Maroney
                                ---------------------
                            Sean P. Maroney
                            Director of Financial Reporting








                                       23