<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

              ----------------------------------------------------
                                    FORM 10-Q

(Mark One)

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

            For the quarterly period ended           July 31, 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 August 31, 2000 there were 34,754,374 shares of Common Stock,
$.05 par value, outstanding.


<PAGE>   2

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>                                                                                         <C>
       PART I.        FINANCIAL INFORMATION

       Item 1.        Financial Statements                                                    1

                      Report of Independent Certified Public Accountants                      1

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

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

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

                      Condensed Consolidated Statements of Cash Flows for
                      the Six Months Ended July 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                                                            20


       PART II.       OTHER INFORMATION


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


       Signatures                                                                            22

</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
and stockholders' equity and comprehensive income of National Auto Credit, Inc.
and its subsidiaries as of July 31, 2000, and the related statements of
operations for each of the three and six month periods ended July 31, 2000 and
1999, and cash flows for each of the six-month periods ended July 31, 2000 and
1999. 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 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 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 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
September 8, 2000



                                       1
<PAGE>   4



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

                                                                           July 31,      January 31,
                                                                             2000            2000
                                                                          ---------       ----------
<S>                                                                       <C>             <C>
ASSETS
Cash and cash equivalents                                                 $  55,351       $  54,333
Marketable securities (Note B)                                               19,804               -
Installment loans, net (Note C)                                                   -          29,306
Investment in AFC (Note D)                                                   10,567               -
Property and equipment, net of accumulated depreciation
  of $5,130, and $5,219, respectively                                         6,824           7,677
Assets held for sale (Note E)                                                 6,138           6,861
Income taxes refundable                                                       3,663           3,664
Other assets                                                                  2,138           2,121
                                                                          ---------       ---------
TOTAL ASSETS                                                              $ 104,485       $ 103,962
                                                                          =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Self-insurance claims                                                     $   2,425       $   4,089
Accrued income taxes                                                          2,306           2,926
Other liabilities                                                            12,234          13,068
                                                                          ---------       ---------
                                                                             16,965          20,083

COMMITMENTS AND CONTINGENCIES (Note F)                                            -               -


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 36,712,319 and
  29,963,301 shares, respectively                                             1,836           1,498
Additional paid-in capital                                                  173,075         166,139
Retained deficit                                                            (80,368)        (69,104)
Accumulated other comprehensive income                                         (185)              -
Treasury stock, at cost, 1,957,945 and 4,195,598
   shares, respectively                                                      (6,838)        (14,654)
                                                                          ---------       ---------
                                                                             87,520          83,879
                                                                          ---------       ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $ 104,485       $ 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                Six Months Ended
                                                                       July 31,                         July 31,
                                                             -----------------------------    -----------------------------
                                                                2000             1999            2000             1999
                                                             ------------    -------------    ------------     ------------
<S>                                                          <C>              <C>               <C>            <C>
REVENUE
     Interest income from loans                                  $     -         $  1,684        $    404         $  3,786
     Interest income from investments                              1,304              480           2,284              905
     Income from AFC investment                                       60                -              60                -
     Other income                                                     15               42             123               87
                                                             ------------    -------------    ------------     ------------
          Total                                                    1,379            2,206           2,871            4,778

COSTS AND EXPENSES
     Provision for credit losses                                    (166)            (368)         (1,022)            (186)
     (Gain)loss on sale of loans                                    (695)               -           1,709                -
     Operating                                                       156            2,653           1,439            5,726
     General and administrative                                    1,269            1,087           2,494            2,593
     Litigation and non-recurring charges                            407            2,031           3,415            3,985
     Cost related to purchase of shares                                -            1,500               -            1,500
     Write-down of assets held for sale (Note E)                     723                -             874                -
     Write-off of option (Note D)                                    500                -             500                -
                                                             ------------    -------------    ------------     ------------
          Total                                                    2,194            6,903           9,409           13,618
                                                             ------------    -------------    ------------     ------------

LOSS FROM CONTINUING OPERATIONS
    BEFORE INCOME TAXES                                             (815)          (4,697)         (6,538)          (8,840)

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

LOSS FROM CONTINUING OPERATIONS                                     (815)          (4,697)         (6,538)          (8,840)

DISCONTINUED OPERATIONS, NET OF TAX                                  676                -             676                -

                                                             ------------    -------------    ------------     ------------
NET LOSS                                                         $  (139)        $ (4,697)       $ (5,862)        $ (8,840)
                                                             ============    =============    ============     ============

BASIC AND DILUTED (LOSS) EARNINGS PER SHARE
     Continuing operations                                       $  (.02)        $   (.16)       $   (.21)        $   (.31)
     Discontinued operations                                         .02                -             .02                -
                                                             ------------    -------------    ------------     ------------
          Net earnings (loss) per share                          $     -         $   (.16)       $   (.19)        $   (.31)
                                                             ============    =============    ============     ============

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
     Basic and diluted                                            34,757           28,641          31,546           28,636
                                                             ============    =============    ============     ============
</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
                         SIX MONTHS ENDED JULY 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                                                                                                  (5,862)
Stock cancelled under
   benefit plans                                                (13,229)          -             (18)
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,
JULY 31, 2000                           100         $ -      36,712,319     $ 1,836       $ 173,075    $ (80,368)     $ (6,838)
                                ============ ===========   ============= ===========  ==============  =========== =============
</TABLE>





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                         SIX MONTHS ENDED JULY 31, 2000
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>



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

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

Net loss                                             (5,862)         $ (5,862)
Stock cancelled under
   benefit plans                                        (18)
Investment in AFC                                     9,706
Other comprehensive
   income-unrealized loss
   on marketable securities               (185)        (185)             (185)
                                 --------------  -----------     -------------

Comprehensive income (loss)                                          $ (6,047)
                                                                 =============

BALANCE,
JULY 31, 2000                           $ (185)     $87,520
                                 ==============  ===========
</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>

                                                                                            Six Months Ended
                                                                                                July 31,
                                                                                      -----------------------------
                                                                                          2000            1999
                                                                                      -------------    ------------
<S>                                                                                    <C>             <C>
    CASH FLOWS FROM OPERATING ACTIVITIES
    Net Loss                                                                              $ (5,862)       $ (8,840)
    Adjustments to reconcile net loss to net cash used in
      operating activities:
         Depreciation and amortization                                                         537             676
         Income from AFC investment                                                            (60)              -
         Provision for credit losses                                                        (1,022)           (186)
         Loss on sale of loans                                                               1,709               -
         Write-down of assets held for sale                                                    874               -
    Changes in operating assets and liabilities:
         Accrued income tax paid                                                              (619)              -
         Other liabilities                                                                    (733)         (2,192)
         Self-insurance claims                                                              (1,664)         (1,146)
         Other operating assets and liabilities, net                                            39             865
                                                                                      -------------    ------------
            Net cash used in operating activities                                           (6,801)        (10,823)
                                                                                      -------------    ------------
    CASH FLOWS FROM INVESTING ACTIVITIES
    Principal collected on loans                                                             5,387          37,796
    Proceeds from sale of loans                                                             24,187               -
    Purchase of loans                                                                            -         (11,763)
    Investment in AFC                                                                         (872)              -
    Purchase of marketable securities                                                      (25,092)              -
    Proceeds from sale of marketable securities                                              4,985               -
    Purchase of other property and equipment                                                   (14)           (559)
    Purchase of affordable housing investments                                                (744)         (1,017)
                                                                                      -------------    ------------
            Net cash provided by investing activities                                        7,837          24,457
                                                                                      -------------    ------------
    CASH FLOWS FROM FINANCING ACTIVITIES
    Stock (cancelled) issued under benefit plans                                               (18)              7
                                                                                      -------------    ------------
            Net cash (used in) provided by financing activities                                (18)              7
                                                                                      -------------    ------------
    Increase in cash and cash equivalents                                                    1,018          13,641
    Cash and cash equivalents at beginning of period                                        54,333          32,109
                                                                                      -------------    ------------
    Cash and cash equivalents at end of period                                            $ 55,351        $ 45,750
                                                                                      =============    ============


     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Interest paid                                                                        $      -        $     24
                                                                                      =============    ============
     Income taxes paid                                                                    $    619        $      -
                                                                                      =============    ============
</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 is held in an escrow account pursuant to the Company's agreement
in principle to settle the class action securities litigation. See Note F.
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 July 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 July 31, 2000 are summarized as follows (in
thousands):

<TABLE>
<CAPTION>

                                                                         Gross Unrealized
                                                                  -------------------------------
                                                    Cost             Gains             Losses          Fair Value
                                                -------------     -------------     -------------     -------------
<S>                                              <C>                    <C>             <C>            <C>
Debt securities
   U.S. Government Agency mortgage-
     backed obligations                             $ 16,629              $  -             $ 175          $ 16,454
   Mortgage-backed securities                          2,233                11                 -             2,244
Equity securities - mutual funds                       1,127                 -                21             1,106
                                                -------------     -------------     -------------     -------------
     Total                                          $ 19,989              $ 11             $ 196          $ 19,804
                                                =============     =============     =============     =============
</TABLE>


         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 $4,985,000 for
the six months ended July 31, 2000. Gross realized gains and losses for the six
month period ended July 31, 2000 were not material. On August 18, 2000,
$11,640,000 of U.S. Government Agency mortgage-backed obligations were called at
par value.

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 $5,791,000 in actual cash
collections on the loans during the six months ended July 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 (representing 100% of the Class of Series
A Convertible Preferred Stock outstanding).

         As a result of the transfer, AFC is now owned 50% by the Company,
33.34% by Reading and 16.66% by Sutton Hill Associates. The Angelika Film Center
will continue to be managed by Sutton Hill Associates as part of its City
Cinemas Chain. 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 Series A Convertible Preferred Stock is convertible into shares of
the Company's common stock on a one for one basis, subject to traditional
antidilution adjustment; it votes share for share with the Common Stock as a
single class, provided that as a class the Series A Preferred must separately
approve any amendments to the Company's charter, any amendments to the Company's
bylaws made by the stockholders, or, to the extent permitted by law, the removal
of any director from the Company's Board of Directors; it has a liquidation
value of $1.50 per share; and is entitled to a dividend preference equal to any
dividends declared on the Company's common stock (determined on a per share
basis).

         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 months ended July 31, 2000 the Company recorded
income of $60,000 representing its share of AFC's net income for the three
months ended June 30, 2000.

           As discussed in Note F, Sam J. Frankino, in a counterclaim to a suit
brought against him by the Company, seeks to set aside the Company's purchase of
the interest in AFC.



                                       8
<PAGE>   11

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


NOTE E - ASSETS HELD FOR SALE

           Assets held for sale are as follows (in thousands):
<TABLE>
<CAPTION>

                                                        July 31,             January 31,
                                                          2000                  2000
                                                      --------------        --------------

<S>                                                     <C>                   <C>
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
                                                      ==============        ==============
</TABLE>

            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 July 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 F - 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 and current 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 subsequent to the January 1998 resignation of the Company's
former independent auditors, Deloitte & Touche, LLP ("Deloitte & Touche"). The
actions, which were consolidated, allege fraud and other violations of the
federal securities laws and 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.

         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 will pay to



                                       9
<PAGE>   12

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


NOTE F - COMMITMENTS AND CONTINGENCIES (cont.)

the plaintiffs' 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. The settlement is subject to preparation and execution
of final documentation and court approval. The Company believes that the
proposed settlement is fair, reasonable and adequate and accordingly should be
approved by the court, and as a result believes it is probable that the
settlement will be approved by the court and completed on the terms agreed to in
principle. On August 15, 2000, the United States District Court provided, by way
of a Notice Order, preliminary approval of the proposed settlement and set a
Settlement Hearing to be held on November 14, 2000. Accordingly 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 will be incurred in completing
the settlement. However, there can be no assurance that the settlement will be
approved and completed. In the event the settlement is not completed, the
Company intends to vigorously defend itself; however, absent such settlement,
the Company cannot currently predict the ultimate outcome of this matter, and an
unfavorable resolution of these actions could have a material adverse effect on
the Company's financial position, results of operations and liquidity. Pursuant
to the agreement in principle, on June 8, 2000 the Company transferred
$6,500,000 to an escrow account.

         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.

         On April 6, 2000, the Company filed a complaint in the Delaware Court
of Chancery captioned National Auto Credit, Inc. v. Sam J. Frankino, Civil
Action No. 17973-NC (the "NAC Action"). The complaint, as amended on May 3,
2000, seeks injunctive and monetary relief against defendant Frankino for
alleged breaches of fiduciary duty in his capacity as a director of the
Company.

         On April 12, 2000, Sam J. Frankino filed an action entitled Frankino v.
Huber et al, Civil Action No. 17894 - NC (the "Frankino Action") against the
Company and certain of its directors, namely, David L. Huber, Donald Jasensky,
James J. McNamara, Philip A. Sauder, Henry Y.L. Toh, Peter T. Zackaroff, John A.
Gleason and William S. Marshall. The complaint in the Frankino Action, as
amended, seeks a declaratory judgment (i) validating a written consent delivered
by Mr. Frankino to the Company on April 7, 2000 which, among other things,
purported to remove the individual defendants as directors of the Company and to
revoke certain bylaws adopted by the Board of Directors on April 5, 2000 and
(ii) declaring void the Series A Preferred Stock and common stock issued in
connection with the Company's purchase of the interest in AFC. On May 3, 2000,
the Company and the individual defendants filed an answer denying the material
allegations of the complaint and asserting affirmative defenses. By Order dated
April 13, 2000, the Court entered in the Frankino Action an Order maintaining
Status Quo which provides that, pending the resolution of the Frankino Action,
(i) the Company's Board of Directors shall take no actions which are outside the
routine day-to-day operations of the Company in the ordinary course of business,
(ii) Mr. Frankino is required to give the Company five days notice prior to
acquiring, directly or indirectly, any additional stock of the Company,
soliciting proxies or written consents from stockholders of the Company, or
attempting to take action by consent without a meeting of stockholders, and
(iii) Ms. Dodero and Messrs. Dodero, Frankino, Huber, Jasensky, Maund,
McNamara, Sauder, Toh, Upton and Zackaroff shall constitute the Board of
Directors of the Company.



                                       10
<PAGE>   13


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


NOTE F - COMMITMENTS AND CONTINGENCIES (cont.)

         On May 17, 2000, the Court consolidated the NAC Action with the
Frankino Action. Both actions tentatively have been scheduled for trial
beginning the week of December 4, 2000. On June 2, 2000, Mr. Frankino filed his
Answer, Counterclaim and Third-Party Complaint in the NAC Action, naming Messrs.
Huber, Jasensky, McNamara, Sauder, Toh, Zackaroff, Gleason and Marshall, along
with FA, Inc., Slusser Associates, Inc. and Reading Entertainment, Inc. as
third-party defendants (the "Counterclaim"). Pursuant to the Counterclaim,
Frankino, seeks among other things, to set aside the Company's purchase of an
interest in AFC and the related options, and the changes to the Company's bylaws
adopted by the Board of Directors on April 5, 2000.

         On April 12, 2000, Sam J. Frankino filed a complaint in the Delaware
Court of Chancery captioned Sam J. Frankino v. National Auto Credit, Inc., Civil
Action No. 17985-NC. The complaint seeks an order directing the Company to
permit the inspection and copying of certain of its books and records. The
Company has made the books and records available. On or about August 8, 2000, a
stipulation of dismissal was filed.

         Following the resignation of Deloitte & Touche, the Company instituted
investigations of its previous financial reporting and underwent changes in
management. In fiscal 1998, 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 will be expensed as
incurred or as such estimate is revised. At July 31, 2000, the Company has
accrued an aggregate of $8,944,000, 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 the
litigation with Mr. Frankino. Included in the results of operations for the six
months ended July 31, 2000 and 1999 respectively, are the following costs (in
thousands):

                                                     Six Months Ended July 31,
                                                 -------------------------------
                                                     2000              1999
                                                 -------------    --------------

Legal costs relating to litigation matters             $ 3,299          $ 1,318
Crisis management consulting                               116            1,631
Fees for special independent audits                          -              523
Financing fees                                               -              258
Costs of special investigations                              -              255
                                                 --------------    -------------
     Total                                             $ 3,415          $ 3,985
                                                 ==============    =============


NOTE G - SUBSEQUENT EVENT

         The Company, through its wholly-owned subsidiary, ARAC, Inc., owns
certain real property which consists 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



                                       11
<PAGE>   14

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


NOTE G - SUBSEQUENT EVENT (cont.)

closing), and the sale was closed on September 1, 2000. The transaction resulted
in a gain of approximately $2,800,000, which the Company will report in the
quarter ending October 31, 2000. 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.



                                       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 $5,791,000 in actual cash
collections on the loans for the six months ended July 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). As a result of the transfer, AFC is now owned 50%
by the Company, 33.34% by Reading and 16.66% by Sutton Hill Associates. The
Angelika Film Center will continue to be managed by Sutton Hill Associates as a
part of its City Cinemas Chain. 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 Series A Convertible Preferred Stock is convertible into shares
of the Company's common stock on a one for one basis, subject to traditional
antidilution adjustment; it votes share for share with the Common Stock as a
single class, provided that as a class the Series A Preferred must separately
approve any amendments to the Company's charter, any amendments to the Company's
bylaws made by the stockholders, or, to the extent permitted by law, the removal
of any director from the Company's Board of Directors; it has a liquidation
value of $1.50 per share; and is entitled to a dividend preference equal to any
dividends declared on the Company's common stock (determined on a per share
basis).

         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.



                                       13
<PAGE>   16

         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 months ended July 31,
2000, the Company recorded income of $60,000 representing its share of AFC's net
income for the three months ended June 30, 2000.

         Sam J. Frankino, in a counterclaim to a suit brought against him by the
Company, seeks to set aside the Company's purchase of the interest in AFC. See
Note F of Notes to Condensed Consolidated Financial Statements.

         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 July 31, 2000 has reduced its staff level to approximately 40 employees. The
Company estimates that at this staffing level its recurring payroll, benefit,
occupancy and other general and administrative costs are approximately $400,000
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 6.8%.

         For the six months ended July 31, 2000, the Company incurred a net loss
of $5,862,000, primarily as the result of a 39.9% decline in revenues to
$2,871,000, losses on the sales of loans of $1,709,000 and the incurrence of
costs of $3,415,000 associated with certain litigation and non-recurring
charges, as discussed below. For the three months ended July 31, 2000, the
Company had net loss of $139,000, principally as the result of a 37.5% decline
in revenues to $1,379,000 and charges of $500,000 for the expiration of the
option to acquire certain assets from Reading and $723,000 as the result of the
revisions to the estimated fair values of certain assets held for sale,
partially offset by gains on the sale of the loans and favorable settlements of
certain self-insured claims from the Company's discontinued automobile rental
operations. For both the three and six months ended July 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 2000, offset by increases in interest earned from the
investment of the cash proceeds from the sale of the loans.

         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 fully cooperating with the investigations. Although the
Company has accrued certain costs it expects to incur in responding to the
investigations, the ultimate outcome of these investigations 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. The Company's liquidity will
be adversely affected as it incurs costs to respond to the 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.

         In addition, the Company and certain of its former and current 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 subsequent to the January 1998 resignation of the Company's
former independent auditors, Deloitte & Touche. The actions, which were
consolidated, allege fraud and other violations of the federal securities laws
and seeks monetary 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



                                       14
<PAGE>   17

upon, the Company will pay to the plaintiffs' 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. The settlement is
subject to preparation and execution of final documentation and court approval.
The Company believes that the proposed settlement is fair, reasonable and
adequate and accordingly should be approved by the court, and as a result
believes it is probable that the settlement will be approved by the court and
completed on the terms agreed to in principle. On August 15, 2000, the United
States District Court provided, by way of a Notice Order, preliminary approval
of the proposed settlement and set a Settlement Hearing to be held on November
14, 2000. Accordingly 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 will be incurred in completing the settlement. However, there can be no
assurance that the settlement will be approved and completed. In the event the
settlement is not completed, the Company intends to vigorously defend itself;
however, absent such settlement, the Company cannot currently predict the
ultimate outcome of this matter, and an unfavorable resolution of these actions
could have a material adverse effect on the Company's financial position,
results of operations and liquidity.

         Throughout the first six months of fiscal 2001 and as of July 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 and the cash proceeds received from the sale of loans.
The Company's pending litigation and regulatory investigations may limit its
ability to obtain external financing.

         The Company, through its wholly-owned subsidiary, ARAC, Inc., owns
certain real property which consists 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 approximately $2,800,000, which the
Company will report in the quarter ending October 31, 2000. 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.

         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, the Board presently may not consummate any such transaction
due to an Order Maintaining Status Quo entered by the Delaware Chancery Court in
connection with the litigation Mr. Frankino filed in April 2000 unless the
parties to the status quo agree, or if the Court, upon motion, approves the
transaction. See Note F of Notes to Condensed Consolidated Financial Statements.
In addition, the Company's current lack of external financing sources may limit
its ability to pursue such alternatives. In the interim, the Company will use
the income from the investment of its cash, together with the cash equivalents
and marketable securities themselves, to pay operating expenses and existing
liabilities. The Company has cash equivalents and marketable securities
(excluding restricted cash of approximately $6,800,000) of approximately
$76,500,000 at September 1, 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.



                                       15
<PAGE>   18

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 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 six months
ended July 31, 2000 from $3,786,000 for the same period of fiscal 2000,
representing a decline of 89.3%. 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 July 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 $1,304,000 and
$2,284,000 for the three and six months ended July 31, 2000 as compared to
$480,000 and $905,000 for the same periods of fiscal 2000. The increases were
due to an increase in the weighted average investment balances to $72,592,000
and $68,309,000, for the three and six month periods ended July 31, 2000 from
$38,216,000 and $36,113,000 for the same periods of fiscal 2000, as well as an
increase in the average interest rate to 7.1% and 6.7% compared to 5.1% and 5.2%
for the three and six month periods ended July 31, 2000 and July 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



                                       16
<PAGE>   19

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 $1,022,000 for the six months ended July 31, 2000 as compared
to $186,000 for the six months ended July 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 57.7% at July 31, 1999. The Company
recorded a reversal with income of previously recorded credit losses of $166,000
for the three months ended July 31, 2000 as a result of cash receipts from loans
previously charged-off.

         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
$5,791,000 in actual cash collections on the loans during the six months ended
July 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 fiscal year ending January
31, 2001.

         OPERATING EXPENSES: Operating expenses include sales and marketing
costs, collection costs and other operating costs. Operating expenses decreased
to $156,000 and $1,439,000 for the three and six month periods ended July 31,
2000 from $2,653,000 and $5,726,000 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 decreased to $2,494,000 for the six months
ended July 31, 2000, from $2,593,000 for the same period of fiscal 2000. For the
three months ended July 31, 2000 general and administrative expenses increased
to $1,269,000 from $1,087,000 for the second quarter of fiscal 2000. The expense
levels remained substantially unchanged as the result of the offsetting effects
of (i) personnel reductions (ii) reduction in expenses for professional
services (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: Following the resignation of
Deloitte & Touche LLP, the Company instituted investigations of its previous
financial reporting, and underwent changes in management. In fiscal 1998, 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.



                                       17
<PAGE>   20

Frankino that commenced in April 2000, and additional costs in excess of that
initial estimate will be expensed as incurred or as such estimate is revised. At
July 31, 2000 the Company has accrued an aggregate of $8,944,000, 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 the litigation with Mr. Frankino. Included in the
results of operations for the three and six months ended July 31, 2000 and 1999,
respectively, are the following costs (in thousands):

<TABLE>
<CAPTION>

                                                Three Months Ended                    Six Months Ended
                                                      July 31,                             July 31,
                                           -----------------------------        -----------------------------
                                              2000              1999               2000             1999
                                           -----------       -----------        -----------      ------------

<S>                                          <C>               <C>              <C>               <C>
Legal costs relating to litigation matters      $ 350             $ 583            $ 3,299           $ 1,318
Crisis management consulting                       57             1,081                116             1,631
Fees for special independent audits                 -               182                  -               523
Financing fees                                      -               (17)                 -               258
Costs of special investigations                     -               202                  -               255
                                           -----------       -----------        -----------      ------------
   Total                                        $ 407           $ 2,031            $ 3,415           $ 3,985
                                           ===========       ===========        ===========      ============
</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 third quarter of fiscal 2001 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 $676,000 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 $2,425,000 as of July 31, 2000 is subject to



                                       18
<PAGE>   21

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 six month periods ended July 31, 2000 and July 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.

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

         During the first six months of fiscal year 2001, the Company used
$6,801,000 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 $7,837,000 in cash flows
from investing activities principally as the result of $24,187,000 of cash flows
from the sales of loans and $5,387,000 from principal collected on loans offset
by the net investment in marketable securities of $20,107,000. The cash flows
generated by these sources were used to finance the negative operating cash
flows and retain a cash balance of $55,351,000 at July 31, 2000.

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

         The Company believes that the cash equivalents (excluding restricted
cash of approximately $6,800,000) and marketable securities of approximately
$76,500,000 at September 1, 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 and the Order Maintaining Status
Quo may limit its ability to pursue strategic business alternatives being
considered by 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.



                                       19
<PAGE>   22

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 court to
approve the class action settlement proposed to be entered into by the Company,
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, the uncertainties created by the ongoing litigation with Sam J.
Frankino that limit the Board's ability to make decisions, 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 July 31, 2000 the Company has mutual fund investments with a
market value of $1,106,000. Those mutual funds generally invest in equity
securities, and as a result such investments are subject to equity price risk.

         As of July 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        $           -                 $ 16,640
  Average interest rate                                                  8.35%

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


         As of July 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.



                                       20
<PAGE>   23


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 April 3, 2000, a Form 8-K was filed regarding the sale of
                    substantially all of the automobile retail installment
                    contracts remaining in the Company's active portfolio. Such
                    Form 8-K was amended by the filing of a Form 8-K/A on May
                    16, 2000.



                                       21
<PAGE>   24

                                   SIGNATURES
                                   ----------

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

                                        NATIONAL AUTO CREDIT, INC.

Date:     September 13, 2000                 By:   /s/ David L. Huber
      -------------------------                  -------------------------------
                                             David L. Huber
                                             Chairman of the Board and Chief
                                             Executive Officer
                                             (Principal Financial Officer)

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



                                       22