Policy No.:  50609-N                    Date of Issuance:  July 23, 1997






            ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY



FINANCIAL SECURITY                        350 Park Avenue
ASSURANCE INC.                            New York, New York  10022


OBLIGOR:          NATIONAL AUTO FINANCE 1997-1 TRUST

OBLIGATIONS:      $66,891,200 6.35% Automobile Receivables-Backed Notes

Policy No.:       50609-N
Date of Issuance: July 23, 1997


     1. Definitions.  For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below.  Capitalized terms used
herein and not otherwise  defined herein shall have the meanings provided in the
Indenture unless the context shall otherwise require.

     "Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking  institutions  in New York,  New York,  Chicago,  Illinois,
Wilmington,  Delaware or any other location of any successor Servicer, successor
Owner Trustee,  successor  Indenture Trustee or successor Trust Collateral Agent
are authorized or obligated by law,  executive order or government  decree to be
closed.

     "Financial  Security" means Financial  Security  Assurance Inc., a New York
stock insurance company.

     "Indenture"  means  the  Indenture,  dated  as of June  29,  1997,  between
National  Auto  Finance  1997-1  Trust and Harris  Trust and  Savings  Bank,  as
Indenture  Trustee and Trust  Collateral  Agent, as amended from time to time in
accordance with its terms.

     "Policy" means this Financial  Guaranty  Insurance Policy and includes each
endorsement thereto.



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Policy No.:  50609-N                    Date of Issuance:  July 23, 1997


     "Receipt" and "Received" mean actual delivery to Financial  Security and to
its Fiscal Agent (as defined below),  if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day, or
after 12:00 noon,  New York City time,  shall be deemed to be  "Receipt"  on the
next  succeeding  Business Day. If any notice or certificate  given hereunder by
the Trust Collateral  Agent is not in proper form or is not properly  completed,
executed  or  delivered,  it shall be  deemed  not to have  been  Received,  and
Financial  Security  or its  Fiscal  Agent  shall  promptly  so advise the Trust
Collateral Agent and the Trust Collateral Agent may submit an amended notice.

     "Sale and  Servicing  Agreement"  means the Sale and  Servicing  Agreement,
dated as of June 29, 1997,  among National Auto Finance  1997-1 Trust,  National
Financial Auto Funding Trust, as Seller, National Auto Finance Company, Inc., as
Servicer,  and Harris  Trust and Savings  Bank,  as Trust  Collateral  Agent and
Back-up Servicer, as amended from time to time in accordance with its terms.

     "Scheduled Payments" means, with respect to (i) each Distribution Date, the
Noteholders= Monthly Interest  Distributable Amount payable on such Distribution
Date,  and (ii) the Final  Scheduled  Distribution  Date,  any  principal of the
Obligations remaining unpaid on such Final Scheduled  Distribution Date, in each
case in accordance  with the original terms of the  Obligations  when issued and
without  regard  to  any  amendment  or  modification  of the  Obligations,  the
Indenture  or  the  Sale  and   Servicing   Agreement,   except   amendments  or
modifications  to which Financial  Security has given its prior written consent;
provided, however, Scheduled Payments do not include payments that become due on
an  accelerated  basis as a  result  of (a) a  default  by the  Obligor,  (b) an
election  by the  Obligor to pay  principal  on an  accelerated  basis,  (c) the
occurrence  of an Event of Default  under the  Indenture or (d) any other cause,
unless Financial Security elects, in its sole discretion,  to pay in whole or in
part such principal due upon acceleration, together with any accrued interest to
the date of  acceleration.  Scheduled  Payments  shall  not  include,  nor shall
coverage  be  provided  under this  Policy in respect of, (x) any portion of the
Noteholders=  Monthly Interest  Distributable  Amount due to Noteholders because
the appropriate notice and certificate for payment in proper form was not timely
Received by  Financial  Security,  (y) any portion of the  Noteholders=  Monthly
Interest  Distributable Amount due to Noteholders  representing  interest on any
Noteholders=  Interest Carryover  Shortfall or (z) any Note Prepayment  Amounts,
unless, in each case, Financial Security elects, in its sole discretion,  to pay
such amounts in whole or in part.  Scheduled  Payments  shall not  include,  nor
shall  coverage be  provided  under the Policy in respect of, any amounts due in
respect of the  Obligations  attributable  to any  increase  in  interest  rate,
penalty or other sum payable by the Obligor by reason of any default or event of
default in respect of the Obligations,  or by reason of any deterioration of the
creditworthiness of the Obligor, nor shall Scheduled Payments include, nor shall
coverage be provided  under the Policy in respect of, any taxes,  withholding or
other charge imposed by any  governmental  authority due in connection  with the
payment of any Scheduled Payment to a Holder.


                                    2



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Policy No.:  50609-N                    Date of Issuance:  July 23, 1997


     "Term Of This  Policy"  means the  period  from and  including  the Date of
Issuance to and  including  the latest of the date on which (i) the  outstanding
principal   amount  of  the  Obligations  has  been  reduced  to  zero  and  all
distributions of the Noteholders=  Monthly Interest  Distributable Amount (other
than any  portion of the  Noteholders=  Monthly  Interest  Distributable  Amount
constituting  interest on any Noteholders=  Interest  Carryover  Shortfall) have
been paid on the  Obligations,  (ii) any period  during which any payment on the
Obligations could have been avoided in whole or in part as a preference  payment
under  applicable  bankruptcy,  insolvency,  receivership  or  similar  law  has
expired,  and (iii) if any  proceedings  requisite  to avoidance as a preference
payment have been commenced prior to the occurrence of (i) and (ii), a final and
nonappealable order in resolution of each such proceeding has been entered.

     "Trust  Collateral  Agent" means Harris Trust and Savings Bank, an Illinois
banking  corporation,  in its capacity as Trust  Collateral Agent under the Sale
and Servicing Agreement and any successor in such capacity.

     2.  Notices and  Conditions  to Payment in Respect of  Scheduled  Payments.
Following  Receipt by Financial  Security of a notice and  certificate  from the
Trust  Collateral  Agent in the form attached as Exhibit A to this  Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial  Security on the later
to occur of (a) 12:00  noon,  New York City  time,  on the  third  Business  Day
following  such  Receipt;  and (b)  12:00  noon,  New  York  City  time,  on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of  Scheduled  Payments  will be  disbursed  by  wire  transfer  of  immediately
available funds to the Trust Collateral Agent.

     Financial Security shall be entitled to pay any amount hereunder in respect
of  Scheduled  Payments  on the  Obligations,  including  any  amount due on the
Obligations on an accelerated  basis,  whether or not any notice and certificate
shall have been  Received by  Financial  Security as provided  above.  Financial
Security shall be entitled to pay hereunder any amount due on the Obligations on
an  accelerated  basis  at any time or from  time to time,  in whole or in part,
prior to the  scheduled  date of payment  thereof;  Scheduled  Payments  insured
hereunder shall not include interest,  in respect of principal paid hereunder on
an  accelerated  basis,  accruing  from and  after the date of such  payment  of
principal.  Financial Security's  obligations  hereunder in respect of Scheduled
Payments  shall be  discharged  to the extent  funds are  disbursed by Financial
Security as provided  herein  whether or not such funds are properly  applied by
the Trust Collateral Agent.

     3.  Notices  and  Conditions  to Payment in Respect of  Scheduled  Payments
Avoided  as  Preference  Payments.  If any  Scheduled  Payment  is  avoided as a
preference  payment under  applicable  bankruptcy,  insolvency,  receivership or
similar  law,  Financial  Security  will pay  such  amount  out of the  funds of
Financial  Security on the later of (a) the date when due to be paid pursuant to
the  Order  (as  defined  below)  or (b) the  first to  occur of (i) the  fourth
Business Day following  Receipt by Financial  Security from the Trust Collateral
Agent of (A) a certified copy of the order (the "Order") of the court or

                                    3



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Policy No.:  50609-N                    Date of Issuance:  July 23, 1997


other  governmental  body which  exercised  jurisdiction  to the effect that the
Noteholder is required to return the amount of any Scheduled Payment distributed
with  respect to the  Obligations  during the Term Of This Policy  because  such
distributions were avoidable as preference payments under applicable  bankruptcy
law, (B) a certificate of the Noteholder  that the Order has been entered and is
not subject to any stay and (C) an assignment duly executed and delivered by the
Noteholder,  in such form as is  reasonably  required by Financial  Security and
provided to the  Noteholder  by  Financial  Security,  irrevocably  assigning to
Financial  Security  all  rights  and claims of the  Noteholder  relating  to or
arising  under the  Obligations  against the debtor  which made such  preference
payment or otherwise with respect to such preference  payment,  or (ii) the date
of Receipt by Financial  Security from the Trust  Collateral  Agent of the items
referred to in clauses  (A), (B) and (C) above if, at least four  Business  Days
prior to such date of Receipt,  Financial  Security shall have Received  written
notice from the Trust  Collateral  Agent that such items were to be delivered on
such date and such date was  specified  in such notice.  Such  payment  shall be
disbursed  to the  receiver,  conservator,  debtor-in-possession  or  trustee in
bankruptcy  named in the  Order  and not to the  Trust  Collateral  Agent or any
Noteholder  directly (unless a Noteholder has previously paid such amount to the
receiver,  conservator,  debtor-in-possession  or trustee in bankruptcy named in
the Order, in which case such payment shall be disbursed to the Trust Collateral
Agent for distribution to such Noteholder upon proof of such payment  reasonably
satisfactory to Financial Security). In connection with the foregoing, Financial
Security  shall  have the rights  provided  pursuant  to the Sale and  Servicing
Agreement and the Indenture.

     4.  Governing  Law.  This  Policy  shall be governed  by and  construed  in
accordance with the laws of the State of New York,  without giving effect to the
conflict of laws principles thereof.

     5.  Fiscal  Agent.  At any time during the Term Of This  Policy,  Financial
Security may appoint a fiscal  agent (the  "Fiscal  Agent") for purposes of this
Policy by written  notice to the Trust  Collateral  Agent at the notice  address
specified in the Sale and  Servicing  Agreement  specifying  the name and notice
address of the Fiscal  Agent.  From and after the date of receipt of such notice
by the Trust Collateral Agent, (i) copies of all notices and documents  required
to be  delivered  to  Financial  Security  pursuant  to  this  Policy  shall  be
simultaneously delivered to the Fiscal Agent and to Financial Security and shall
not be deemed Received until Received by both and (ii) all payments  required to
be made by  Financial  Security  under  this  Policy  may be  made  directly  by
Financial Security or by the Fiscal Agent on behalf of Financial  Security.  The
Fiscal Agent is the agent of Financial  Security only and the Fiscal Agent shall
in no event be liable to any  Noteholder for any acts of the Fiscal Agent or any
failure of Financial Security to deposit,  or cause to be deposited,  sufficient
funds to make payments due under this Policy.

     6. Waiver of Defenses.  To the fullest extent  permitted by applicable law,
Financial  Security agrees not to assert,  and hereby waives, for the benefit of
each Noteholder,  all rights (whether by counterclaim,  setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation,

                                    4



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Policy No.:  50609-N                    Date of Issuance:  July 23, 1997


assignment  or  otherwise,  to the extent that such rights and  defenses  may be
available to Financial  Security to avoid payment of its obligations  under this
Policy in accordance with the express provisions of this Policy.

     7. Notices.  All notices to be given  hereunder shall be in writing (except
as otherwise  specifically  provided  herein) and shall be mailed by  registered
mail or personally delivered or telecopied to Financial Security as follows:

            Financial Security Assurance Inc.
            350 Park Avenue
            New York, NY  10022
            Attention:  Senior Vice President - Surveillance
            Re:  National Auto Finance 1997-1 Trust, 6.35% Automobile
                 Receivables-Backed Notes
            Telecopy No.:  (212) 339-3518
            Confirmation:  (212) 826-0100

Financial  Security  may specify a  different  address or  addresses  by writing
mailed or delivered to the Trust Collateral Agent.

     8.  Priorities.  In the  event  any term or  provision  of the face of this
Policy is inconsistent with the provisions of this  Endorsement,  the provisions
of this Endorsement shall take precedence and shall be binding.

     9. Exclusions From Insurance  Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association  created under Part II of Chapter 631 of the Florida Insurance Code.
In the event  Financial  Security were to become  insolvent,  any claims arising
under  this  Policy are  excluded  from  coverage  by the  California  Insurance
Guaranty Association,  established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.

     10.  Surrender  of  Policy.  The  Holder  shall  surrender  this  Policy to
Financial Security for cancellation upon expiration of the Term Of This Policy.

     IN WITNESS  WHEREOF,  FINANCIAL  SECURITY  ASSURANCE  INC.  has caused this
Endorsement No. 1 to be executed by its Authorized Officer.

                              FINANCIAL SECURITY ASSURANCE INC.



                              By
                                 Authorized Officer

                                    5


<PAGE>


Policy No.:  50609-N                    Date of Issuance:  July 23, 1997




                         Exhibit A To Endorsement No. 1



                         NOTICE OF CLAIM AND CERTIFICATE
                     [Letterhead of Trust Collateral Agent]


Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022

    Re:  National Auto Finance 1997-1 Trust
         $66,891,200 6.35% Automobile Receivables-Backed Notes

     The undersigned, a duly authorized officer of Harris Trust and Savings Bank
(the "Trust Collateral Agent"), hereby certifies to Financial Security Assurance
Inc.  ("Financial  Security"),  with reference to Financial  Guaranty  Insurance
Policy  No.  50609-N  dated July 23,  1997 (the  "Policy")  issued by  Financial
Security in respect of the National Auto Finance 1997-1 Trust,  6.35% Automobile
Receivables-Backed Notes (the "Obligations"), that:

          (i) The Trust Collateral Agent is the Trust Collateral Agent under the
     Sale and Servicing Agreement and the Indenture for the Noteholders.

          (ii) The sum of all amounts on deposit (or scheduled to be on deposit)
     in  the  Collection  Account,   the  Distribution   Account  and  the  Note
     Distribution Account and available for distribution to the Holders pursuant
     to the Sale and Servicing  Agreement will be $      (the  "Shortfall") less
     than the Scheduled Payments with respect to the Distribution Date occurring
                 , 19 .

          (iii) The Trust  Collateral  Agent is making a claim  under the Policy
     for the Shortfall to be applied to distributions of Scheduled Payments with
     respect to the Obligations.

          (iv) The Trust  Collateral  Agent  agrees that,  following  receipt of
     funds from Financial Security,  it shall (a) hold such amounts in trust and
     apply  the same  directly  to the  payment  of  Scheduled  Payments  on the
     Obligations  when due; (b) not apply such funds for any other purpose;  (c)
     not  commingle  such funds with  other  funds held by the Trust  Collateral
     Agent; and (d) maintain an accurate record of such payments with respect to
     each  Obligation  and the  corresponding  claim on the Policy and  proceeds
     thereof and, if the  Obligation is required to be  surrendered or presented
     for such payment,  shall stamp on each such Obligation the legend "$[insert
     applicable

                                    A-1



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Policy No.:  50609-N                    Date of Issuance:  July 23, 1997


     amount] paid by Financial Security and the balance hereof has been canceled
     and reissued" and then shall deliver such Obligation to Financial Security.

          (v) The Trust  Collateral  Agent,  on behalf  of the  Holders,  hereby
     assigns to Financial Security the rights of the Holders with respect to the
     Obligations  to the extent of any  payments  under the  Policy,  including,
     without limitation, any amounts due to the Holders in respect of securities
     law  violations  arising  from the offer and sale of the  Obligations.  The
     foregoing assignment is in addition to, and not in limitation of, rights of
     subrogation  otherwise  available to Financial  Security in respect of such
     payments.  The Trust  Collateral  Agent  shall take such action and deliver
     such  instruments  as may be reasonably  requested or required by Financial
     Security to effectuate the purpose or provisions of this clause (v).

          (vi) The Trust  Collateral  Agent,  on its behalf and on behalf of the
     Holders,  hereby appoints Financial Security as agent and  attorney-in-fact
     for the Trust Collateral Agent and each such Holder in any legal proceeding
     with respect to the  Obligations.  The Trust Collateral Agent hereby agrees
     that  Financial  Security  may at any time during the  continuation  of any
     proceeding  by or against  any debtor  with  respect to which a  Preference
     Claim (as defined below) or other claim with respect to the  Obligations is
     asserted under the United States  Bankruptcy  Code or any other  applicable
     bankruptcy,  insolvency,  receivership,  rehabilitation  or similar law (an
     "Insolvency  Proceeding")  direct all matters  relating to such  Insolvency
     Proceeding,  including without limitation,  (A) all matters relating to any
     claim in connection with an Insolvency  Proceeding seeking the avoidance as
     a preferential transfer of any payment made with respect to the Obligations
     (a  "Preference  Claim"),  (B) the  direction  of any  appeal  of any order
     relating to any Preference  Claim at the expense of Financial  Security but
     subject to reimbursement as provided in the Insurance Agreement and (C) the
     posting of any surety,  supersedeas  or  performance  bond pending any such
     appeal.  In  addition,  the  Trust  Collateral  Agent  hereby  agrees  that
     Financial  Security shall be subrogated to, and the Trust  Collateral Agent
     on its behalf and on behalf of each Holder,  hereby  delegates and assigns,
     to the fullest extent  permitted by law, the rights of the Trust Collateral
     Agent  and  each  Holder  in  the  conduct  of any  Insolvency  Proceeding,
     including,  without  limitation,  all  rights of any party to an  adversary
     proceeding  or action with respect to any court order issued in  connection
     with any such Insolvency Proceeding.

          (vii)  Payment  should be made by wire  transfer  directed to [Specify
     Account].

     Unless  the  context  otherwise  requires,  capitalized  terms used in this
Notice of Claim and  Certificate  and not defined herein shall have the meanings
provided in the Policy.

                                    A-2


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Policy No.:  50609-N                    Date of Issuance:  July 23, 1997

     IN WITNESS  WHEREOF,  the Trust Collateral Agent has executed and delivered
this Notice of Claim and Certificate as of the       day of         ,      .



HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely
as Trust Collateral Agent



By
Title:


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


For Financial Security or Fiscal Agent Use Only

Wire transfer sent on              by

Confirmation Number



                                    A-3


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