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

                                    FORM 10-K

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

         For the fiscal year ended December 31, 1999

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

         For the period from __________ to __________

                         Commission File Number: 0-22067

                       National Auto Finance Company, Inc.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<CAPTION>
<S>                                                                 <C>
                         Delaware                                       65-0688619
-----------------------------------------------------------         ------------------
               (State or Other Jurisdiction of                       (I.R.S. Employer
               Incorporation or Organization)                       Identification No.)

10302 Deerwood Park Blvd. Suite 100   Jacksonville, Florida               32256
-----------------------------------------------------------         ----------------
          (Address of Principal Executive Offices)                      (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (904) 996-2500

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [ ]

The aggregate market value on April 12, 2000 (based on the $ .38 closing price
on the OTC Bulletin Board on that date) of the common equity held by
non-affiliates of the registrant was $1,048,500. The number of shares of the
registrant's Common Stock outstanding on April 21, 2000 was 17,280,762.


<PAGE>   2

                           FORWARD-LOOKING STATEMENTS

      When used in this Annual Report on Form 10-K or future filings by the
Company with the Securities and Exchange Commission (the "Commission"), in the
Company's press releases or other public or stockholder communications, or in
oral statements made with the approval of an authorized executive officer, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company wishes to caution readers
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made, and to advise readers that various factors, including
regional and national economic conditions, substantial changes in levels of
market interest rates, credit and other risks of lending and investment
activities, and competitive and regulatory factors could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from those anticipated by any forward-looking
statement.

      The Company does not undertake and specifically disclaims any obligation
to update any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.

PART I

ITEM 1.  BUSINESS.

      CURRENT

      National Auto Finance Company, Inc. ("NAFI" or the "Company") is a
specialty consumer finance company that has, since February 2000, focused its
business strategy on performing a wide range of loan portfolio services for
third parties in the non-prime auto loan financing industry including, but not
limited to, loan product marketing, loan underwriting, collections, customer
service, asset remarketing, and litigation handling, in return for both
origination and servicing fees.

      In furtherance of such strategy, on February 4, 2000, the Company entered
into a Contract Sale Agreement and a Servicing Agreement with Nuvell Credit
Corporation ("Nuvell") (collectively, the "Nuvell Agreements" or the Nuvell Flow
Program"), whereby the Company, in return for origination fees, has agreed to
originate non-prime retail motor vehicle installment sale loans exclusively for
the account of Nuvell. The Company retains servicing of all such loans in return
for servicing fees, for the term of the Nuvell Agreements and any extension
thereof. The Company originates and services loans under the Nuvell Flow Program
in the same manner as it has historically conducted its business operations.

      The Nuvell Agreements, initially scheduled to expire on May 31, 2000, were
renewed and extended through December 31, 2000, by the mutual consent of both
the Company and Nuvell. During the course of negotiating the Nuvell Agreements,
the Company and Nuvell had, and continue to have very preliminary and limited
discussions regarding the potential acquisition by Nuvell of the operational
assets of the Company and its personnel including, in particular, the assets and
personnel comprising the Company's loan origination and servicing capabilities,
but there can be no assurance that such discussions will continue or if they do
continue, that they will lead to a transaction. In the event that the Nuvell
Agreements are not extended beyond December 31, 2000 or that no other
transaction arises between Nuvell and the Company, the Company will immediately
seek to enter into relationships similar to those represented by the Nuvell Flow
Program with other third-party auto finance companies.

      Under the Contract Sale Agreement with Nuvell, NAFI markets its loan
financing products to its auto dealer network through its team of sales
representatives, underwrites and documents loans through its credit underwriting
and loan contracting departments and submits such contracted loans to Nuvell for
final approval before funding with Nuvell's funds. Loans are originated by the
Company under the Nuvell Flow Program "without recourse" (i.e., the Company does
not assume or retain the credit risk with respect to any loan it originates and
assigns to Nuvell) except to the extent specifically provided for in the Nuvell
Agreements which include standard representations, warranties, covenants and
indemnification provisions normally associated with such programs, including for
example, representation and warranties relating to compliance with applicable
laws and regulations, perfection of security interests in collateral and absence
of fraud in the loan origination process. Under the Servicing Agreement, funded
loans are then boarded onto NAFI's servicing system for servicing and
collections for the benefit of Nuvell.

      Under the Nuvell Flow Program, the Company currently originates loans on
automobiles up to five model years old with fewer than 75,000 odometer miles and
depending on model year, finances loans having maximum terms of 72 months, with
a shorter loan term for older model-year automobiles.


                                     - 2 -
<PAGE>   3


      Experienced management and field sales employees, who are located in key
geographic regions, lead the Company's direct marketing strategy. Direct
marketing to Dealers is conducted by Dealer Relations Managers who seek to train
and educate Dealers about the credit profile of the Non-Prime Consumer who meets
Nuvell's underwriting criteria, familiarize Dealers with the Company's existing
products and services, solicit feedback from Dealers regarding new products and
services that would enhance a Dealer's ability to sell automobiles to Non-Prime
Consumers, and generally provide Dealers with ongoing service and support. The
Company believes that a Dealer's decision to finance the automobile purchase
through the Company, rather than with other financing sources, is based upon the
Company's relationship with the Dealer, the Dealer's analysis of the discounted
purchase price offered by the Company for the loan, any incentives offered to
the Dealer, the timeliness, consistency and predictability of the Company's
response, and the Company's ability to fund loan purchases typically within 24
hours of receipt of all required documentation.

      The loans originated and serviced under the Nuvell Flow Program are
supported by NAFI's Consumer Loan Asset Backed Security System ("CLASS"), a
consumer finance software system owned by NAFI composed of separate modules
integrating loan origination, loan servicing, operational accounting, portfolio
performance analysis and loan securitization. The Company's computer systems
provide the Company with the ability to track all Loan details and identify
trends among customers. This information provides risk management analysis
capabilities, thereby refining the credit underwriting process and thereby
reducing future defaults.

      The Company historically funded its purchases of loans primarily through a
two-step asset securitization program consisting of (i) the securitized
warehousing of all of its loans through daily sales to a bankruptcy-remote
master trust (the "Master Trust") financed by purchases of "B Certificate"
interests in such trust by First Union National Bank ("First Union") (the
"Master Trust Securitization Credit Facility"), followed by (ii) the transfer of
such warehoused loans from time to time by the Master Trust to a discrete trust
("Permanent Securitization"), thereby creating renewed availability of capital
from the Master Trust Securitization Credit Facility.

      Specifically, using the Master Trust Securitization Credit Facility, the
Company sold loans on a daily basis to National Financial Auto Funding Trust II
("Funding Trust II"), a special-purpose subsidiary, which then sold the loans to
the Master Trust in exchange for cash and certain residual interests in future
excess cash flows from the Master Trust. The Master Trust had issued two classes
of investor certificates: "Class B Certificates," which were variable funding
(i.e., revolving) certificates bearing interest at floating rates, and "Class C
Certificates," representing a portion of the residual interest of the Company's
special-purpose subsidiary in future excess cash flows from the Master Trust
after required payments to the holders of the Class B certificates, deposits of
funds to a restricted cash account as a reserve for future loan losses, which
provided additional credit enhancement for the holders of the Class B
Certificates, and payment of certain other expenses and obligations of the
Master Trust. First Union owned 100% of the outstanding Class B Certificates in
connection with its role as lender under the Master Trust Securitization Credit
Facility. Collectively, the restricted cash account and the Class C Certificate
portion of loan principal that collateralized were the Master Trust were
components of the Company's cash spread accounts ("Cash Spread Accounts"),
over-Collateralization accounts ("Over-Collateralization Accounts") and excess
spread receivables ("Excess Spread Receivables" or "ESRs") reflected
cumulatively on the Company's balance sheet as Retained Interest in
Securitizations. See Note 13 of Notes to Financial Statements - Related Party
Transactions, for a discussion of relationships with First Union, and Note 14 of
Notes to Financial Statements for a discussion of Subsequent Events.

      On February 22, 2000, Funding Trust II defaulted on its obligation to
deposit approximately $5 million in cash collateral to the Master Trust
Over-Collateralization Account, as required under the Master Trust
Securitization Credit Facility, thereby giving rise to First Union's decision to
terminate future funding availability under the facility and to commence
amortizing the outstanding amounts owed to First Union under the facility.

      In conjunction with such default, First Union agreed to waive until April
21, 2000 certain rights to liquidate the portfolio of approximately $58.9
million of auto loans that secure its loans to Funding Trust II, thereby
permitting the Company time to pursue various strategic options, including a
sale of such portfolio. On April 5, 2000, Funding Trust II, as Seller, the
Company, as Guarantor, and Nuvell entered into a Sale and Purchase Agreement
(the "Sale Agreement") whereby a substantial number of the loans previously sold
to the Master Trust under the Master Trust Securitization Credit Facility in the
approximate amount of $47 million were sold by Funding Trust II to Nuvell after
such loans had been acquired by Funding Trust II from the Master Trust by an
Assignment Agreement dated as of April 5, 2000. The Company, as Guarantor under
the Sale Agreement, agreed to guarantee Funding Trust II's prompt and
unconditional performance of every obligation to be performed by Funding Trust
II under such agreement including the granting by Funding Trust II and the
Company to Nuvell of representations, warranties and covenants customarily
included in like and similar agreements, and in the case of approximately 400
loans of 3,502 loans sold by Funding Trust II to Nuvell, the obligation to
repurchase any loan involving an obligor who has failed to pay at least the
first three scheduled monthly payments, prior to the time such loan becomes 45
or more days delinquent. The Company, pursuant to the Sale Agreement, will
retain servicing of substantially all of such loans under the terms and
provisions of the Servicing Agreement. Approximately $43.9 million of proceeds
from the sale of such loans were then used to pay in full the Class B


                                     - 3 -
<PAGE>   4

Certificates held by First Union. (See Note 4) The Company anticipates to
receive additional cash from the transaction and release of funds previously
required to be held in reserve of approximately $6.0 million, which will be used
for general corporate purposes, including the possible payment of certain debt
of the Company. In related developments, First Union terminated its commitment
to purchase up to $20 million of subordinated asset-backed debt securities in
connection with the Company's future Permanent Securitizations and converted to
a 48 month term loan (requiring equal monthly principal payments) $2.5 million
outstanding at March 21, 2000 under a revolving working capital facility secured
by the Company's ESRs.

HISTORICAL

      NAFI has historically been in the business of originating, financing and
servicing non-prime auto loans through a network of manufacturer-franchised auto
dealers ("Dealers") in the sale of new and used autos. Through its loan
financing activities, the Company has provided indirect financing to non-prime
and sub-prime consumers ("Non-Prime Consumers"), i.e. consumers with limited
financial resources and/or past credit problems who, because of such credit
histories, are generally unable to finance their auto purchases through more
traditional sources such as banks and credit unions.

      During fiscal 1999 and up to the execution of the Nuvell Agreements, the
Company's primary business strategy was to increase its loan volume by: (i)
marketing its products and services to an increasing number of Dealers
throughout the United States through its regional salespersons ("Dealer
Relations Managers") located in strategic geographic areas and (ii) continuing
to implement its existing, and developing new, strategic referral and marketing
alliances ("Strategic Alliances"). Early in Fiscal 1999, the Company
discontinued purchasing Non-Prime Consumer loans from third-party originators,
such as consumer finance companies and other financial institutions. The Company
ceased originating loans for its own account on February 23, 2000. See Note 14
of Notes to Financial Statements - Subsequent Events.

DEALER RELATIONSHIPS

      As of December 31, 1999, the Company had active contractual relationships
with over 1,200 Dealers located in 35 states. The Company focuses on developing
relationships with well-established Dealers. The vast majority of the Company's
contractual relationships are with manufacturer-franchised Dealers, rather than
independent Dealers.

      Each Dealer doing business with the Company enters into a written
agreement with the Company that governs origination of loans from the Dealer (a
"Dealer Agreement"). Although these agreements do not obligate a Dealer to sell
or NAFI to finance any particular loan, the Dealer Agreement sets forth the
terms upon which approved loans will be financed by the Company. Additionally,
these agreements contain representations and warranties given by the Dealer to
be made with respect to each loan financed by the Company, each automobile that
serves as collateral for the loan (e.g., that it is properly registered and
designates the Company, as agent for Nuvell as first lienholder), and each
loan's compliance with certain laws and regulations. Dealer Agreements generally
provide that the loans are assigned to the Company without recourse unless the
Dealer has materially breached certain representations and warranties in the
Dealer Agreement. The Company carefully monitors its Dealer network and will
terminate its agreement with any particular Dealer if the Company discovers
material misrepresentations with respect to any loan, unusual repossession
experience or other factors that might indicate fraudulent conduct.

      Historically, Dealers prefer financing sources that: (i) provide
value-added products and services designed to increase sales; (ii) maintain
regular contact with Dealer finance departments; (iii) communicate credit
decisions in a timely manner; (iv) have consistent underwriting standards; (v)
fund loan originations quickly; and (vi) offer a competitive price to originate
the loan. The Company seeks to meet these needs while taking efforts to ensure
that the delinquency and loss experience of the loans it finances remain at
acceptable levels.

PRODUCTS AND SERVICES

      In an effort to create and maintain a strong Dealer network, the Company
provides an array of products and services. The Company's products offered to
Dealers generally consist of loan programs. For example, under the Nuvell Flow
Program, the Company currently originates loans on automobiles that are up to
five model years old with fewer than 75,000 odometer miles and, depending on the
model year, finances loans having a maximum term of 72 months, with a shorter
loan term for older model-year automobiles. The perceived credit risk of the
borrower will affect the annual percentage rate charged for a particular loan
and will also affect the discount from the face amount of a loan at which the
Company is willing to acquire the loan from the Dealer (the "Dealer Discount").


                                     - 4 -
<PAGE>   5


      The Company seeks to provide value-added services to Dealers to enhance
their financing of Non-Prime Consumer loans by: (i) reviewing Dealer inventories
to determine adequate inventory levels based on trends the Company observes in
Non-Prime Consumer automobile purchasing; (ii) training Dealer sales people to
identify Non-Prime Consumers who meet Nuvell's underwriting criteria; and (iii)
working with Dealers to establish separate finance desks that specifically
service Non-Prime Consumers. The Company also has developed specific services
for Dealers that are designed to attract customers by offering flexible
financing. For example, Credit Clinic(TM) is a service pursuant to which the
Dealer advertises a sale for the "credit challenged" and the Company provides an
on-site credit counselor who advises the Non-Prime Consumer on choosing a
vehicle with a monthly payment he or she can manage. The Company believes that
this service enhances a Dealer's sales of automobiles because it encourages
Non-Prime Consumers, who might otherwise be apprehensive about their personal
credit histories, to seek financing for their auto purchases.

      The Company regularly reviews its products and services in order to
respond to changing market conditions in the Non-Prime Consumer market.

MARKETING STRATEGY

General

      The Company's current strategy to grow profitable volume includes
marketing the Company's products and services to an increasing number of Dealers
throughout specific geographic regions in the United States through its Dealer
Relations Managers; and maximizing its existing, and developing new, Strategic
Alliances.

Direct Dealer Marketing

      Experienced management and field sales employees, who are located in key
geographic regions, lead the Company's direct marketing strategy. Direct
marketing to Dealers is conducted by Dealer Relations Managers who seek to train
and educate Dealers about the credit profile of the Non-Prime Consumer who meets
Nuvell's underwriting criteria, familiarize Dealers with the Company's existing
products and services, solicit feedback from Dealers regarding new products and
services that would enhance a Dealer's ability to sell automobiles to Non-Prime
Consumers, and generally provide Dealers with ongoing service and support. The
Company's marketing department also designs sales incentives to motivate Dealers
to submit loan applications to the Company. The marketing department works
closely with the Dealer Relations Managers to design appealing incentives for
the Company's Dealers. The Company believes that the intensive on-site Dealer
service provided by Dealer Relations Managers and the Company's marketing
programs enhance the effectiveness of the products and services offered by the
Company, strengthen existing Dealer relationships and foster new business. The
Company derived approximately 54.7% of its loan volume for the year ended
December 31, 1999 from Direct Dealer originations, which excludes Strategic
Alliance originations.

Strategic Alliance Marketing

      The Company historically used Strategic Alliances to increase the number
of loans it originated by (i) using the sales force of the financial
institutions and Dealer groups with which the Company establishes such alliances
to market the Company's Non-Prime Consumer products and services and (ii)
obtaining the right to review and purchase Non-Prime Consumer loans that do not
meet a financial institution's or Dealer group's underwriting criteria. Through
these alliances, the Company offered these financial institutions and Dealer
groups the opportunity to expand their product offerings and to earn fees based
on the number of loans that were originated by the Company as a result of the
alliance.

      During Fiscal 1999 and prior to implementation of the Nuvell Flow Program,
senior management of the Company sought to identify prospective financial
institutions or Dealer groups suitable for Strategic Alliances and negotiate the
terms of such alliances. The Company's Dealer Relations Managers provided
operating services and support, including training and education with respect to
both the Non-Prime Consumer market and the Company's products and services. Upon
consummation of a Strategic Alliance, the Company expected the financial
institution's or Dealer group's sales personnel to support or supplement the
Company's direct marketing efforts.

      In April 1996, the Company entered into its first Strategic Alliance with
First Union, the Company's first Strategic Alliance. The First Union Strategic
Alliance provided for (i) joint marketing of the Company's products and services
by both the Company's sales force and the sales personnel of the automobile
finance division of First Union ("First Union Auto Finance") to the
approximately 3,400 Dealers throughout twelve states and the District of
Columbia with which First Union Auto Finance had an existing relationship, and
(ii) exclusive referral by First Union Auto Finance to the Company of all
applications for loans received from Dealers that fell below certain established
credit guidelines. In consideration for these services, First Union received a
fee on each loan financed by the Company as a result of the First Union
Strategic Alliance.


                                     - 5 -
<PAGE>   6

Pursuant to the referral agreement executed in conjunction with such alliance,
funded loan referrals were without recourse to First Union. The First Union
Strategic Alliance significantly enhanced the Company's ability to further its
market penetration and increase the size of its Dealer base. For the year ended
December 31, 1999, approximately 43.5% of the loans the Company purchased were
attributable to Direct Dealer originations established as a result of the First
Union Strategic Alliance. Another 1.3% of the loans the Company purchased was
attributable to an alliance relationship with another financial institution.

      In March 1999, First Union announced publicly that it was exiting the
indirect auto finance business due to realigned business strategies. As a
result, the Company's Strategic Alliance with First Union was terminated. The
Company, nonetheless, continued the relationships it established with, and
continues to actively service the First Union-related Dealers. The Company,
however, is no longer obligated to pay to First Union referral fees related to
future business obtained through those Dealers.

Portfolio Acquisition Program

      To enhance the Company's growth and as a natural extension of its lines of
business, the Company purchased from time to time Non-Prime Consumer loans
meeting the Company's portfolio acquisition underwriting guidelines from
Third-Party Originators. Purchasing selected loans from Third-Party Originators
enabled the Company to acquire loans at a lower cost than comparable quality
Dealer-originated loans due to decreased origination expense. In many cases, the
Company had the opportunity to acquire loans with six-month or longer payment
histories, reducing the Company's exposure to early loan defaults. Although the
purchase of loans from Third-Party Originators was a significant component of
the Company's overall business strategy in Fiscal 1998, the Company effectively
discontinued the Portfolio Acquisition Program in April 1999 as such purchases
aggregated $1.0 million in 1999.

Client Services

      The Company has established an experienced portfolio servicing management
team and invested substantial resources in an advanced servicing system software
and hardware system for use in servicing its Servicing Portfolio. Having refined
its processes over the past year, the Company has been marketing a wide range of
portfolio services for third parties in the non-prime auto loan financing
industry including, but not limited to, loan product marketing, loan
underwriting, collections, customer service, asset remarketing and litigation
handling. The Company's marketing team plans to target financial institutions
seeking a stronger, cost-effective servicing solution for improved portfolio
performance. In October 1999, the Company entered into a servicing agreement
with Atlantic Coast Federal Credit Union ("Atlantic") whereby the Company agreed
to perform certain servicing and collection support services for certain credit
categories of Atlantic's automobile loan portfolio.

THE LOAN PURCHASE PROCESS FROM DEALERS

      The Company originates loans directly from Dealers and has never made
loans directly to purchasers of automobiles. To be eligible for purchase by the
Company, a loan must have been originated by a Dealer that entered into a Dealer
Agreement. When a retail automobile buyer elects to obtain financing from a
Dealer, the Dealer takes loan application from such buyer for submission to its
financing sources. Typically, a Dealer will submit the buyer's credit
application to more than one financing source for review. The Company believes
that a Dealer's decision to finance the automobile purchase with the Company,
rather than with other financing sources, is based upon the Company's
relationship with the Dealer, the Dealer's analysis of the discounted purchase
price offered by the Company for the loan, any incentives offered to the Dealer,
the timeliness, consistency and predictability of the Company's response, and
the Company's ability to fund loans typically within 24 hours of receipt of all
required documentation.

      Upon receipt of a credit application from a Dealer, the Company orders a
credit report on the borrower from one or more of the three major national
credit bureaus, "scores" the borrower's credit status using a scoring model and
verifies the borrower's employment, residence and automobile insurance history.
If a Company loan officer determines that the credit application meets Nuvell's
underwriting criteria subject to further information or with modifications to
the originally proposed loan terms, the Company may request and review further
information and supporting documentation before it decides to finance a loan.
When presented with a credit application, the Company typically notifies the
Dealer within 75 minutes whether or not it intends to finance the loan. The
discounted price the Company will offer to pay the Dealer for a particular loan
generally varies based on the perceived credit-risk of the potential borrower as
determined through the credit underwriting process.

      Typically, once an application is approved by Nuvell or, if approved
conditionally, upon fulfillment and receipt of required stipulations, Nuvell
funds the loan. The Dealer then assigns the loan to the Company, and the Company
finances the loan and then records its lien on the vehicle as agent for Nuvell.
The Company then commences servicing the loan. Under the Nuvell Flow Program,
the Company immediately assigns the loan to Nuvell without recourse.


                                     - 6 -
<PAGE>   7

CREDIT UNDERWRITING AND ADMINISTRATION

Target Market and Consumer Profile

      The Company seeks to identify customers with stable and predictable
incomes, whose payments will be made in a timely and consistent manner and who
fall into the "B-", "C+" and "C" credit borrower categories. A description of
the credit rating categories for loans originated by the Company, including
pursuant to the Nuvell Flow Program, is set forth below:

Category

"A"           A consumer who has a long credit history with no defaults, has
              been in the same job for at least 18 months and can easily finance
              a new automobile purchase through a bank or captive finance
              subsidiary of an automobile manufacturer.

"B"           A Non-Prime Consumer who may have had some minor credit problems
              in his or her past, or may not have been employed at his or her
              current job for 18 months. To finance a new or late-model used
              automobile, the "B" credit borrower may not qualify for a loan
              from a bank, but may have success borrowing from a captive finance
              subsidiary of an auto manufacturer and can access credit through
              an independent finance company.

"C"           A Non-Prime Consumer who may have an inconsistent employment
              record or more significant or unresolved problems with credit in
              the past such as a personal bankruptcy. To finance a late-model or
              older used automobile purchase, this borrower will generally not
              qualify for a loan from a captive finance subsidiary or a bank and
              must use an independent finance company.

"D"           A consumer who has unfavorable employment history and serious
              credit problems, such as multiple personal bankruptcies. This
              borrower's only choice is to finance his or her used automobile
              purchase, which is often from an independent as opposed to a
              franchise dealer, through an independent finance company that is
              active in this market segment.

      The Company targets Non-Prime Consumers who previously established good
credit records but who have subsequently experienced non-repetitive credit
problems such as a personal bankruptcy due to illness, loss of employment or
poor cash management. The Company's target customer is generally anxious to
re-establish his or her credit and obtain transportation for employment.

Credit Evaluation Procedures

      The Company has historically applied, and under the Nuvell Flow Program,
continues to apply uniform underwriting standards to originating loans. These
standards have been developed and refined over the course of management's years
of experience in the non-prime auto finance industry. The two most important
criteria the Company uses in evaluating a loan are the applicant's
creditworthiness and the automobile's collateral value. Dealers submit all
customer credit applications to the Company's headquarters in Jacksonville,
Florida, for consideration. The Company utilizes a Fair Issacs credit scoring
system to assist it in assessing a customer's creditworthiness. Among the
factors taken into account in this scoring system are an applicant's credit
bureau score (assigned by one of the major credit reporting bureaus to all
persons with credit histories), job and residential stability, the automobile
payment as a percentage of income, the year, make and model of automobile, a
positive payment history on other loans, an acceptable level of derogatory
credit and the amount of a customer's downpayment, which must be at least 10% of
the purchase price of the automobile. The Company's senior underwriting
management regularly reviews credit decisions made by the Company's loan buyers
to ensure uniformity in underwriting standards and compliance with applicable
provisions of the Nuvell Agreements.

      In addition to the applicant's credit score, the Company considers
relevant information about the automobile to be purchased. The Company does not
finance automobiles that are more than five model years old or that have in
excess of 75,000 odometer miles. The maximum term of any loan purchased by the
Company other than under the Nuvell Flow Program was 60 months, and for loans
originated under such Program is 72 months; a shorter maximum term may be
applied based on the year and mileage of the automobile. These criteria are
subject to change from time to time, as circumstances warrant and in the case of
loans originated under the Nuvell Flow Program, with Nuvell's prior written
consent. Each loan must be secured by a first priority lien on the automobile.
In addition, each loan requires the borrower to maintain physical damage
insurance covering the financed automobile. The Company may, nonetheless, suffer
a loss upon theft of or physical damage to any financed automobile if the
borrower fails to maintain insurance as required by the loan and is unable to
pay for repairs to or replacement of the automobile or is otherwise unable to
fulfill his obligations under the loan. Historically, the Company has
continually reviewed and enhanced its underwriting criteria in order to evaluate
effectively the creditworthiness of Non-Prime


                                     - 7 -
<PAGE>   8


Consumers and the adequacy of the financed automobile as security for a loan.
Under the Nuvell Flow Program, the Company assigns loans to Nuvell without
recourse. See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Loan Loss and Delinquency Experience" for a
numerical analysis of the Company's loan loss and delinquency experience.

Approval and Funding Statistics

      During the year ended December 31, 1999, the Company reviewed 69,945 loan
applications, of which 29.6% were approved or conditionally approved and 6.55%
were funded. Conditionally approved applications were applications by Non-Prime
Consumers whose underlying credit were generally acceptable to the Company but
with respect to which the Company required a modification of terms (typically
monthly payment levels) prior to final credit approval.

Portfolio Acquisition Underwriting

      The Company's Portfolio Acquisition Program sought to establish on-going
relationships with Third-Party Originators from which the Company may have
purchased select portions of their loan portfolio. The Company considered the
most important factor in establishing such a relationship to be the Third-Party
Originator's underwriting criteria. The Company focused on purchasing loans from
a Third-Party Originator whose credit scoring and other underwriting guidelines
produced borrowers whose credit characteristics matched those of the Company's
Dealer-originated borrowers as closely as possible.

      Management valued each prospective loan portfolio based on a pricing
model, which estimated the value of the loans in the portfolio given certain
assumptions (e.g., the discount to the face value of the loan). The Company
normally acquired portfolios at a discount, although in some instances, because
of the high quality of the portfolio, it paid face value for a portfolio.
Management did not generally pay the Third-Party Originator a premium for a
portfolio, although after costs such as brokerage fees, the Company's total
acquisition cost may have slightly exceeded the face value of the purchased
loans. The Company's expenses necessary to generate Portfolio Acquisition
Program loans, however, were generally lower than those incurred to generate
loans through Direct Dealer Originations or Strategic Alliances.

      The Company has not pursued Portfolio Acquisitions since April 1999, and
does not intend to do so in the foreseeable future.

Contract Servicing and Administration

      Prior to July 1997, the Company contracted with an outside servicer to
perform all of the servicing functions relating to its Servicing Portfolio,
including collection, customer service and management information systems
("MIS") functions. In July 1997, the Company began a staged transition of the
daily management of its Servicing Portfolio from the outside servicer to its
in-house servicing and collection department.

    On June 19, 1998, the Company converted its Servicing Portfolio computer
data from its outside servicer's computer systems to the CLASS System. As a
result, the Company is now performing all collection functions with respect to
its Servicing Portfolio.

Management Information Systems

      As referred to above, the Company has installed CLASS. CLASS is consumer
finance software system composed of separate modules integrating loan
origination, loan servicing, operational accounting, portfolio performance
analysis and loan securitization. The Company's computer systems provide the
Company with the ability to track all loan details and identify trends among
customers. This information provides risk management analysis capabilities,
thereby refining the credit underwriting process and mitigating the risk of
loans purchased from unacceptably higher risk customers.



                                     - 8 -
<PAGE>   9


SERVICING PORTFOLIO PROFILE

Loan Statistical Profile

      The table below sets forth an analysis of loans purchased by the Company
from inception through the dates specified.

<TABLE>
<CAPTION>
                         1996                    1997                                  1998
                        -------  -----------------------------------   ------------------------------------
As of                     Dec.     Mar.     June      Sep.      Dec.     Mar.     June      Sep.     Dec.
<S>                     <C>      <C>      <C>       <C>       <C>      <C>       <C>      <C>       <C>
Cumulative
    number of
    loans
    purchased.........   10,675   13,553   17,382    21,589    26,078   30,165    32,741   33,054    33,466
Cumulative
    average loan
    amount
    funded (in
    thousands)........  $11,999  $12,026  $11,826   $11,842   $11,925  $11,882   $11,974  $11,986   $11,996
Weighted
    average initial
    annual
    percentage
    rate..............    18.67%   18.80%   18.97%    19.04%    19.01%   19.05%    19.01%   19.09%    19.09%
Weighted
    average initial
    term
    (months)..........     51.7     53.6     53.3      53.3      53.4     53.4      54.1     54.7      54.8

Cumulative
    average initial
    yield.............    21.80%   21.51%   21.25%    21.06%    20.87%   20.77%    20.77%   20.79%    20.81%

<CAPTION>

                                         1999
                         ------------------------------------
As of                      Mar.     June      Sep.      Dec.
<S>                      <C>       <C>       <C>       <C>
Cumulative
    number of
    loans
    purchased.........    34,483    35,545   36,893    38,145
Cumulative
    average loan
    amount
    funded (in
    thousands)........   $12,037   $12,074  $12,146   $12,218
Weighted
    average initial
    annual
    percentage
    rate..............     19.11%    19.02%   18.94%    18.88%
Weighted
    average initial
    term
    (months)..........      55.1      55.5     56.1
                                                        56.71
Cumulative
    average initial
    yield.............     20.78%    20.74%   20.71%    20.69%
</TABLE>


      The change in weighted average initial annual percentage rate over the
periods shown are due to changes in the product mix offered by the Company and
the states where such products are offered. Consumer finance laws of certain
states allow for varying percentage rates. The cumulative average initial yield
has decreased over the periods shown relative to changes in the product mix
offered by the Company. Certain of the Company's products have historically
carried varying degrees of dealer discount, which has impacted the yield as
shown. The increase in weighted average initial term is due to longer term
products being made available by the Company.

Geographic Distribution of Loans

      As of December 31, 1999, the Company purchased loans originated from
Dealers in 44 states and the aggregate loan balance of the six states having the
largest concentrations of business of the Company totaled 79% of the Servicing
Portfolio compared to 76% of the Servicing Portfolio as of December 31, 1998. In
1999, the Company focused primarily on increasing its volume of business in the
states in which it then operated.

      The list below indicates the geographic distribution of loans outstanding
as of December 31, 1999 based upon the location of the Dealer originating the
loan:

<TABLE>
<CAPTION>
                                                        Principal      Percentage of       Number of
                                                         Balance    Principal Balance    Active Loans
                                                        ---------   -----------------    ------------
<S>                                                      <C>        <C>                  <C>
          North Carolina............................     $ 42,662           23.17%              4,158
          Georgia...................................       39,462           21.43               4,411
          South Carolina............................       20,546           11.16               1,994
          Texas.....................................       16,569            9.00               1,530
          California................................       13,032            7.08               1,659
          Florida...................................       12,906            7.01               1,669
          Virginia..................................        7,790            4.23                 906
          Illinois..................................        5,239            2.85                 469
          Tennessee.................................        5,068            2.75                 554
          Maryland..................................        3,721            2.02                 410
          All other states (1)......................       17,148            9.30               2,079
                                                         --------          ------             -------
               Total................................     $184,143          100.00%             19,839
                                                         ========          ======             =======
</TABLE>

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

(1) No state other than those listed represents more than 2% of the Servicing
Portfolio.


                                     - 9 -
<PAGE>   10

Securitization Program

      The Company historically funded its purchases of loans primarily through a
two-step asset securitization program consisting of (i) the securitized
warehousing of all of its loans through daily sales to the Master Trust financed
by purchases of B Certificate interests in such trust by First Union in
connection with the Master Trust Securitization Credit Facility, followed by
(ii) the transfer of such warehoused loans from time to time by the Master Trust
to a Permanent Securitization, thereby creating renewed availability of capital
from the Master Trust Securitization Credit Facility.

      Specifically, using the Master Trust Securitization Credit Facility, the
Company sold loans on a daily basis to Funding Trust II, which then sold the
loans to the Master Trust in exchange for cash and certain residual interests in
future excess cash flows from the Master Trust. The Master Trust to date, issued
two classes of investor certificates: the "Class B Certificates," which were
variable funding (i.e., revolving) certificates bearing interest at floating
rates, and "Class C Certificates," representing a portion of the residual
interest of the Company's special-purpose subsidiary in future excess cash flows
from the Master Trust after required payments to the holders of the Class B
certificates, deposits of funds to a restricted cash account as a reserve for
future loan losses, which provided additional credit enhancement for the holders
of the Class B Certificates, and payment of certain other expenses and
obligations of the Master Trust. First Union owned 100% of the outstanding Class
B Certificates in connection with its role as lender under the Master Trust
Securitization Credit Facility. Collectively, the restricted cash account and
the Class C Certificate portion of loan principal that collateralized the Master
Trust were components of the Company's cash spread accounts ("Cash Spread
Accounts"), over-Collateralization accounts ("Over-Collateralization Accounts")
and excess spread receivables ("Excess Spread Receivables" or "ESRs") reflected
cumulatively on the Company's balance sheet as Retained Interest in
Securitizations. See Note 13 of Notes to Financial Statements - Related Party
Transactions, for a discussion of relationships with First Union, and Note 14 of
Notes to Financial Statements for a discussion of Subsequent Events.

      On February 22, 2000, National Financial Auto Funding Trust II defaulted
on its obligation to deposit approximately $5 million in cash collateral to the
Master Trust Over-Collateralization Account, as required under the Master Trust
Securitization Credit Facility, thereby giving rise to First Union's decision to
terminate future funding availability under the facility and to commence
amortizing the outstanding amounts owed to First Union under the facility.

      In conjunction with such default, First Union agreed to waive until April
21, 2000 certain rights to liquidate the portfolio of approximately $58.9
million of auto loans that secure its loans to Funding Trust II, thereby
permitting the Company time to pursue various strategic options, including a
sale of such portfolio. On March 30, 2000, Funding Trust II, as Seller, the
Company, as Guarantor, and Nuvell entered into the Sale Agreement whereby a
substantial number of the loans previously sold to the Master Trust under the
Master Trust Securitization Credit Facility in the approximate amount of $47
million were sold by Funding Trust II to Nuvell after such loans had been
acquired by Funding Trust II from the Master Trust by an Assignment Agreement
dated as of April 5, 2000. The Company, pursuant to the Sale Agreement, will
retain servicing of substantially all of such loans under the terms and
provisions of the Servicing Agreement. Approximately $43.9 million of the
proceeds from the sale of such loans were then used to pay in full the Class B
Certificates held by First Union. (See Note 4 of Notes to Financial
Statements - Debt) The Company anticipates to receive additional cash from the
transaction and release of funds previously required to be held in reserve of
approximately $6.0 million, which will be used for general corporate purposes,
including the possible payment of certain of the debt of the Company. In related
developments, First Union terminated its commitment to purchase up to $20
million of subordinated asset-backed debt securities in connection with the
Company's future Permanent Securitizations and converted to a 48 month term loan
(requiring equal monthly principal payments) of $2.5 million outstanding under a
revolving working capital facility secured by the Company's ESRs.

      Since the Company's inception through termination of funding availability
through the Master Trust Securitization Credit Facility on February 23, 2000,
the Master Trust transferred an aggregate of $337.4 million of its receivables
through Permanent Securitizations effected pursuant to two private placements
and three public offerings of asset-backed securities. Payment of principal and
interest on $300.4 million of the securities issued in such transactions is
insured by payment guarantees issued by Financial Security Assurance Inc.
("FSA"), and such securities are rated AAA and Aaa by Standard and Poor's Rating
Group ("S&P") and Moody's Investors Service ("Moody's"), respectively. The
proceeds of each Permanent Securitization transaction were applied by the Master
Trust to repay the outstanding balance of the Class B Certificates. Since such
time, the Master Trust has issued additional beneficial interests in loans
purchased by the Master Trust, as evidenced by the Class B Certificates, to
finance its purchase of loans from the Company.


                                     - 10 -
<PAGE>   11
      The Company was initially appointed and continues to act as master
servicer for the loans sold to each of the trusts (the "Securitization Trusts")
formed as a result of the Permanent Securitization transitions mentioned above.
As master servicer the Company is eligible to receive monthly fees at base rates
of 2.0% to 3.0% per annum from the Permanent Securitization Trusts and 4.0% per
annum from the Master Trust, plus certain late fees and prepayment charges
received on the loans sold to the Permanent Securitization Trusts (the
"Securitized loans"). All collection functions with respect to the loans
included in the Master Trust and the Permanent Securitization trusts are
performed by the Company. Historically, the Company's Permanent Securitizations
have been credit enhanced by FSA, the financial guaranty insurer. The insurance
agreements generally provide that the Company is not entitled to receive excess
cash flows unless the loans in the pool meet certain performance requirements.

Competition

      The Non-Prime Consumer credit market is highly fragmented, consisting of a
few national and many regional and local competitors. Existing and potential
competitors include well-established financial institutions, such as consumer
finance companies, commercial banks, insurance companies, credit unions, savings
and loan associations, small loan companies, leasing companies and captive
finance companies owned by automobile manufacturers and others. Many of these
financial institutions do not consistently solicit business in the Non-Prime
Consumer credit market. The Company also believes that regulatory oversight and
capital requirements imposed by governmental agencies have limited the
activities of many banks and savings and loan associations in the Non-Prime
Consumer credit market. As a result, the Non-Prime Consumer credit market is
primarily serviced by smaller finance companies that solicit business when and
as their capital resources permit. Due to the lack of major, consistent
financing sources and the absence of significant barriers to entry, many
companies have entered this market in recent years, including well-capitalized
public companies.

      The Company believes that no one competitor or group of competitors has a
dominant presence in the Non-Prime Consumer market segment of "B-," "C+" and "C"
credit consumers. The Company's strategy is designed to capitalize on the lack
of a major national financing source in this market niche.

Regulation

      The Company's business is subject to regulation and licensing under
various federal, state and local statutes and regulations. As of December 31,
1999, the Company maintained contractual relationships with Dealers located in
35 states and, accordingly, the laws and regulations of such states govern the
Company's operations. Most states in which the Company purchases loans (i) limit
the interest rate, fees and other charges that may be imposed by, or prescribe
certain other terms of, the loans that the Company purchases and (ii) define the
Company's right to repossess and sell collateral. In addition, the Company is
required to be licensed or registered to conduct its business operations in 18
of the 35 states in which the Company has contractual relationships with Dealers
and Third-Party Originators. As the Company expands its operations into other
states, it will be required to comply with the laws of such states.

      Numerous federal, state, and in the case of the Navajo Nation, Indian
reservation consumer protection laws in certain Southwestern States, and related
regulations impose substantive disclosure requirements upon lenders and
servicers involved in automobile financing. Such federal laws and regulations
include the Truth-in-Lending Act and Regulation Z, promulgated thereunder by the
Federal Reserve Board, the Equal Credit Opportunity Act and Regulation B, also
promulgated thereunder by the Federal Reserve Board, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Federal Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, the Soldiers' and Sailors' Civil
Relief Act and similar state and local collection acts, including the Navajo
Nation Consumer Unfair Practices Act.

      In addition, the Federal Trade Commission ("FTC") has adopted a limitation
on the holder-in-due-course rule which may have the effect of subjecting persons
who finance consumer credit transactions (and certain related lenders and their
assignees) to all claims and defenses that the purchaser could assert against
the seller of goods and services. With respect to used automobiles specifically,
the FTC's Rule on Sale of Used Vehicles requires that all sellers of used
automobiles prepare, complete and display a Buyer's Guide that explains the
warranty coverage for such automobiles. The Credit Practices Rules of the FTC
impose additional restrictions on sales contract provisions and credit
practices.

      Certain states in which the Company operates have adopted automobile
retail installment sale acts or variations thereof. Certain states have adopted
the Uniform Consumer Credit Code, subject to certain variations. This law and
similar laws in the other states in which the Company purchases loans regulate,
among other things, the interest rate, fees and other charges and terms and
conditions of such loans. These laws also impose restrictions on consumer
transactions and require disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors who
fail to comply with such laws and regulations. In addition, certain states
impose plain-language restrictions and disclosure requirements on the textual
provisions of automobile retail installment sales contracts and related
documents in the context of


                                     - 11 -
<PAGE>   12

consumer credit transactions. Furthermore, certain states or municipalities
require that a creditor provide a purchaser of an automobile with a
foreign-language translation of the entire motor vehicle retail installment sale
contract if the contract was negotiated in a language other than English. The
plain-language and foreign-language laws impose specific liabilities on
creditors who fail to comply with such requirements.

      The laws of certain states grant to the purchasers of automobiles certain
rights of rescission under so-called "lemon laws." Under such statutes,
purchasers of automobiles seek recoveries from, or assert defenses against, the
Company if such laws have been violated.

      In the event of default by an obligor, the Company possesses all the
remedies of a secured party under respective state variations of the Uniform
Commercial Code ("UCC"), except where specifically limited by other state laws.
The remedies of a secured party under the UCC include the right to repossession
by self-help means, unless such means would constitute a breach of the peace. In
the event of default by the obligor, some jurisdictions require that the obligor
be notified and be given time in which to cure the default prior to repossess.
In addition, courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances.

      The UCC and other state laws require a secured party who has repossessed
collateral to provide an obligor with reasonable notice of the date, time and
place of any public sale and/or the date after which any private sale of the
collateral may be held. The obligor has the right to redeem the collateral prior
to actual sale.

      The proceeds from the resale of financed automobiles generally will be
applied first to the expenses of repossession and resale and then to the
satisfaction of the loan. A deficiency judgment can be sought in most states
subject to satisfaction of statutory procedural requirements by the secured
party and certain limitations as to the amount of any such judgment such as an
amount not in excess of the initial sale price of the automobile. Certain state
laws require the secured party to remit the surplus to any holder of a
subordinate lien with respect to the automobiles or, if no such lienholder
exists, the UCC requires the secured party to remit the surplus to the former
owner of the financed automobile.

      In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including federal bankruptcy laws and related state
laws, may interfere with or affect the ability of the Company to recover
collateral or enforce a deficiency judgment.

      The Company believes that it is in substantial compliance with all
applicable material laws and regulations. Adverse changes in the laws or
regulations to which the Company's business is subject, or in the interpretation
thereof, could have a material adverse effect on the Company's business. Because
the Company generally charges the highest finance charges permitted by law,
reductions in statutory maximum rates could directly impair the Company's
profitability.

Employees

      At December 31, 1999, the Company had 173 full and part-time employees in
the following areas: executive/administration (13), sales (21), finance (11),
originations (29), MIS (14) and servicing (85), none of whom was represented by
a union.

ITEM 2.  PROPERTIES.

      The Company's principal executive offices, where all loan origination,
servicing and collection functions are conducted and managed, are located at
10302 Deerwood Park Boulevard, Suite 100, Jacksonville, Florida 32256. The
Company currently leases approximately 44,000 square feet of office space at
such location. The Company believes its properties are adequate for its
currently anticipated future growth.

ITEM 3.  LEGAL PROCEEDINGS.

     On October 22, 1998, Pearl Peckerman, I.R.A., on behalf of herself and all
others similarly situated, filed a putative class-action complaint (the
"Peckerman Complaint") in the United States District Court for the Southern
District of Florida against the Company and certain current and former officers
and directors of the Company, as well as the co-lead underwriters of the
Company's initial public offering. On December 4, 1998, Harvey Rooks, Rachel
Rooks and Joyce Bornstein, on behalf of themselves and all others similarly
situated, filed a putative class action complaint (the "Rooks Complaint") in the
United States District Court for the Southern District of Florida against the
Company and certain current and former officers and directors of the Company, as
well as the co-lead underwriters of the Company's initial public offering.


                                     - 12 -
<PAGE>   13

     On February 5, 1999, the United States District Court for the Southern
District of Florida ordered that these actions be consolidated. Thereafter, on
July 29, 1999, the plaintiffs filed an amended and consolidated class-action
complaint (the "Amended and Consolidated Complaint") styled In re National Auto
Finance Company, Inc. Securities Litigation, Case Number 98-8767-CIV-Hurley.

     The individual lead plaintiffs (the "Lead Plaintiffs") in the Amended and
Consolidated Complaint are Pearl Peckerman, Harvey Rooks, Rachel Rooks, Joyce
Bornstein, Emanuel Androulidakis, Frank Rosetti, Thomas R. Bopp, Noel V.
Brodtman, Jr., Susan H. Jacobsen, Leonard R. Carothers, Fred Gaunce, Duane
Morris, Ralph Casey, Hiram Graham, and Vance Prigge. In addition, the action was
instituted on behalf of a putative class of plaintiffs consisting of those
persons who purchased or otherwise acquired stock of the Company between January
29, 1997 and April 15, 1998 inclusive, excluding the Company, its subsidiaries
and affiliates, the individual defendants, members of the immediate families of
each of the individual defendants, and the successors and assigns of any
defendant. Other than the Company, the defendants to the action are: Gary L.
Shapiro, Keith B. Stein, Roy E. Tipton, Kevin G. Adams, Edgar A. Otto, Peter
Offerman, Morgan M. Schussler, Steven L. Gurba, and the co-lead underwriters of
the Company's January 1997 initial public offering, Raymond James & Associates,
Inc. and Cruttenden Roth, Inc., (collectively, "the Underwriter Defendants').

     The Amended and Consolidated Complaint sets forth allegations surrounding
the Company's 1997 restated financial statements, the interpretation of FASB No.
125 and the relationship between the Company and its prior outside service
provider, Omni Financial Services of America, Inc. The plaintiffs' allegations
of liability are based on various theories of recovery, including alleged
violations of Section 11, 12(a)(2), 15 and 20(a) of the Securities Act of 1933,
as amended, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of
1934, as amended. The plaintiffs are seeking compensatory damages as the court
deems appropriate.

     The Company acknowledged its contracted obligation to indemnify the
Underwriter Defendants pursuant to the underwriting agreement entered into with
the Company in connection with its initial public offering with respect to their
legal and other costs incurred in this litigation, including but not limited to
any potential judgment against them.

     On September 13, 1999, the Lead Plaintiffs filed a motion for class action
certification. Also, on September 13, 1999, the Underwriter Defendants filed a
motion to dismiss the Amended and Consolidated Complaint. On September 20, 1999,
the Company, as well as certain other individual defendants, and Gary L.
Shapiro, individually, filed a motion to dismiss Lead Plaintiffs' Amended and
Consolidated Complaint. In conjunction with such motions, the Company, as well
as certain other individual defendants, filed a request for oral argument.

     Litigation is subject to many uncertainties, and it is possible that the
above action could be decided unfavorably. The Company has entered into
discussions in an attempt to settle the pending litigation if it is in the best
interests of the Company's stockholders to do so, but can give no assurance that
such negotiations will result in settlement. Management is presently unable to
make a meaningful estimate of the amount or range of loss that could result from
an unfavorable outcome or settlement of the pending litigation. It is possible
that the Company's business, volume, results of operations, cash flows or
financial position could be materially affected by an unfavorable outcome or
settlement of the pending litigation.

     The Company has a directors' and officers' liability insurance policy that
applies to this litigation with a liability limit of $5 million; and two excess
policies with liability limits of $2 million and $3 million, respectively. Each
insurer has raised certain coverage defenses or denied coverage. The Company has
engaged in and will continue to pursue appropriate strategies to protect and
preserve its claims of full coverage under all such policies.


                                     - 13 -
<PAGE>   14

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      The following matters were submitted during 1999 to a vote of security
holders, through the solicitation of proxies or otherwise:

(a)      The regular annual meeting of stockholders of National Auto Finance
         Company,  Inc. was held on September 14, 1999.

(b)      Proxies for the meeting were solicited pursuant to Section 14(a) of the
         Securities Exchange Act of 1934 and there was no solicitation in
         opposition to management's solicitations. All of management's nominees
         for directors were elected.

(c)      The following items were submitted to a vote of security holders as
         follows:

(1)      Amendment to Certificate of Incorporation.

                  To increase the number of authorized shares of the Company's
                  Common Stock from twenty million (20,000,000) to forty-four
                  million (44,000,000).

<TABLE>
<S>                                              <C>
                           FOR                   11,111,361
                           AGAINST                   57,225
                           ABSTAIN                   36,600
</TABLE>

         (2)      Election of two (2) person as Class II directors of National
                  Auto Finance Company, Inc. for terms expiring at the 2001
                  annual meeting of stockholders and election of two (2) persons
                  as Class III directors thereof for terms expiring at the 2002
                  annual meeting of stockholders.

<TABLE>
<CAPTION>
                       Class II                     FOR                      WITHHELD
                  ----------------               ----------                  --------
<S>                                              <C>                         <C>
                  Robert R. Gould                11,153,911                   54,275
                  David Benson                   11,154,411                   53,775

                     Class III
                  ----------------
                  Joseph P. Donlan               11,154,411                   53,775
                  David W. Young                 11,154,411                   53,775
</TABLE>

         (3)      AMENDMENT TO THE 1996 SHARE INCENTIVE PLAN.

                  To increase the number of shares of Common Stock available for
                  the grant of options, stock appreciation rights, stock awards,
                  performance awards and stock units (collectively, the
                  "Benefits") from five hundred thousand (500,000) to four
                  million (4,000,000) and to increase the maximum number of
                  shares of Common Stock which may be granted to any individual
                  participant under the 1996 Share Incentive Plan (the "1996
                  Plan") to two million (2,000,000).

<TABLE>
<S>                                              <C>
                           FOR                    9,237,093
                           AGAINST                   79,125
                           ABSTAIN                   20,600
</TABLE>

         (4)      APPOINTMENT OF INDEPENDENT AUDITORS.

                  To ratify the selection of BDO Seidman, LLP as independent
                  auditors to audit the Company's financial statements for the
                  year ending December 31, 1999.

<TABLE>
<S>                                              <C>
                           FOR                   11,191,636
                           AGAINST                   13,250
                           ABSTAIN                    3,300
</TABLE>


                                     - 14 -
<PAGE>   15


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      (a) Market Information.

      In connection with the initial public offering (the "Initial Public
Offering") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), in January 1997, the Common Stock was accepted for quotation in the
National Association of Securities Dealers Automated Quotation System - National
Market System ("NASDAQ-NMS"), under the symbol "NAFI."

      On August 12, 1998, NASDAQ advised the Company that unless the closing bid
price of the Company's Common Stock allowed for the maintenance of a greater
than $5 million public float, for at least 10 consecutive trading days during
the period ending on November 13, 1998, the Company's Common Stock would be
delisted on November 17, 1998. Further, on September 2, 1998, NASDAQ advised the
Company that if the Company's Common Stock did not trade at a minimum bid price
of $1.00 for a minimum of ten consecutive trading days, by December 1, 1998, the
Company's Common Stock would be delisted on December 3, 1998. Such delisting was
delayed until January 21, 1999, when the Company appeared before the NASDAQ
Listing Qualifications Panel ("Panel") to permit the Company the opportunity to
provide details of its business plan and restructuring, in furtherance of a
request for additional time to enable the Company to reestablish compliance with
the NASDAQ listing requirements. The Company was notified on March 9, 1999 of
the Panel's determination to delist the Company's Common Stock securities from
NASDAQ effective as of the close of business on March 9, 1999. The delisted
Common Stock shares were immediately eligible for trading on the OTC Bulletin
Board and are so traded today.

      Set forth below is the range of high and low bid quotations reported in
NASDAQ-NMS for the period from January 30, 1997 (the date on which trading
commenced) through and including December 31, 1999:

<TABLE>
<CAPTION>
                           Common Stock Market Prices
                  --------------------------------------------
1999              1st Q        2nd Q        3rd Q        4th Q
                  ------       -----        -----        -----
<S>               <C>          <C>          <C>          <C>
      High        $ .44        $ .34        $ .44        $ .84
      Low         $ .09        $ .09        $ .25        $ .25

1998              1st Q        2nd Q        3rd Q        4th Q
                  ------       -----        -----        -----
      High        $4.25        $3.38        $1.13        $0.31
      Low         $2.00        $0.75        $0.25        $0.06

1997              1st Q*       2nd Q        3rd Q        4th Q
                  ------       -----        -----        -----
      High        $9.88        $7.63        $7.50        $7.50
      Low         $7.00        $5.50        $6.13        $2.38
</TABLE>

      *January 30 - March 31, 1997

      (b) Holders.

      As of December 31, 1999, there were approximately 63 registered holders of
the Common Stock.

      (c) Dividends.

      The Company has never paid cash dividends on its Common Stock and
currently has no intention of paying cash dividends on the Common Stock.
Pursuant to the Securities Purchase Agreement dated December 22, 1997, by and
among the Company, The 1818 Mezzanine Fund, L.P, P.C. Investment Company,
Progressive Investment Company, Inc. and Manufacturers Life Insurance Company
(U.S.A.), as amended (the "December 1997 Securities Purchase Agreement"), and
the Securities Purchase Agreement dated March 22, 1998, by and between the
Company and The Structured Finance High Yield Fund L.L.C. (the "March 1998
Securities Purchase Agreement" and collectively, with the December 1997
Securities Purchase Agreement, the "Securities Purchase Agreements"), the
Company's ability to pay dividends in excess of $250,000 to holders of the
Company's Common Stock in any twelve-month period is restricted.



                                     - 15 -
<PAGE>   16


      (d) Recent sales of unregistered securities.

      On April 7, 1999, pursuant to the Company's comprehensive financial
restructuring (the "Restructuring") (see Note 5 of Notes to Financial Statements
- Comprehensive Financial Restructuring), 7,071,429 shares of Common Stock were
issued to The Progressive Investment Company, Inc., and PC Investment Company,
its affiliate, (together "Progressive") The 1818 Mezzanine Fund, L.P. (the "1818
Fund"), The Structured Finance High Yield Fund, LLC ("SFHY") and Manufacturers
Life Insurance Company (U.S.A.) ("ManuLife") (collectively, the "Senior
Subordinate Noteholders") as consideration for waivers and amendments granted to
the Company, and 1,178,571 additional shares of Common Stock were issued to
those Noteholders that also purchased Common Stock of the Company at the time of
their debt investment, in exchange for the execution and delivery of full and
complete releases of any claims arising by virtue of those Noteholders' equity
investment.

ITEM 6.  SELECTED FINANCIAL DATA.

      The income statement data for the years ended December 31, 1999, 1998,
1997, 1996 and 1995 and the balance sheet data as of December 31, 1999, 1998,
1997, 1996 and 1995 are derived from, and are qualified by reference to, the
audited financial statements of the Company (and from inception through January
29, 1997, it's predecessor). The following financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and the Financial Statements and notes
thereto included elsewhere in this Form 10-K.

                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.)


                                     - 16 -
<PAGE>   17

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                               1999              1998           1997              1996            1995
                                            -----------      ----------      ----------         --------        --------
                                                              (dollars in thousands, except per share data)
<S>                                         <C>              <C>             <C>                <C>             <C>
INCOME STATEMENT DATA:
Securitization related income (loss)        $     7,630      $  (13,531)     $     (323)        $ 13,564           7,367(1)
Servicing income                                  5,719           6,424           3,437              866             219
Interest income                                   1,443           2,399             817              258              11
Other income                                        716             377             214              103             214(3)
                                            -----------      ----------      ----------         --------        --------
Total revenue                                    15,508          (4,331)          4,145           14,791           7,811
                                            -----------      ----------      ----------         --------        --------
Servicing expenses                                3,285           6,262           5,944            1,291             371
Interest expense                                  8,489           8,417           1,638            1,204             498
Salaries and employee benefits                    5,087           7,705           6,346            3,634           1,666
Direct loan acquisition expenses                    914           1,520           3,591            1,924(2)          562(2)
Depreciation and amortization                     1,679             802             743              492             183
Other operating expenses                          5,624           4,544           3,602            1,755(2)        1,250(2)
                                            -----------      ----------      ----------         --------        --------
Total expenses                                   25,078          29,250          21,864           10,300           4,530
                                            -----------      ----------      ----------         --------        --------
Income (loss) before income taxes and
  extraordinary item                             (9,570)        (33,581)        (17,719)           4,491           3,281
Income taxes                                         --              --              --               --              --
                                            -----------      ----------      ----------         --------        --------
Income (loss) before extraordinary item          (9,570)        (33,581)        (17,719)           4,491           3,281
Extraordinary loss                                   --              --            (720)              --              --
                                            -----------      ----------      ----------         --------        --------
Net income before preferred stock
    dividends                                    (9,570)        (33,581)        (18,439)           4,491           3,281
Preferred stock dividends                          (160)           (160)           (148)              --              --
                                            -----------      ----------      ----------         --------        --------
Net income (loss) applicable to common
    stockholders                            $    (9,730)     $  (33,741)     $  (18,587)        $  4,491        $  3,281
                                            ===========      ==========      ==========         ========        ========

PER SHARE DATA:
Loss per common share before extraordinary
  item -- basic and diluted                 $      (.64)     $    (3.73)          (2.52)
Extraordinary item                                   --              --           (0.10)
                                            -----------      ----------      ----------
Loss per common share -- basic and diluted  $      (.64)     $    (3.73)     $    (2.62)
                                            ===========      ==========      ==========

Weighted average shares outstanding  --
  basic and diluted                          15,110,899       9,031,000       7,087,000
                                            ===========     ===========      ==========


PRO FORMA SHARE DATA (UNAUDITED):
Income (loss) before income taxes                                                               $  4,491        $  3,281
Income taxes                                                                                       1,689           1,066
                                                                                                --------        --------
Pro Forma net income                                                                            $  2,802        $  2,215
                                                                                                ========        ========
PRO FORMA NET INCOME PER SHARE:
Basic and diluted                                                                               $   0.66            0.52(5)
                                                                                                ========        ========
PRO FORMA WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (6)
Basic and diluted                                                                                  4,230           4,230
                                                                                                ========        ========
</TABLE>


                                     - 17 -
<PAGE>   18


<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                                  (dollars in thousands)

                                              1999            1998            1997           1996           1995
                                           ---------       ---------       ---------      ---------      ---------
<S>                                        <C>             <C>             <C>            <C>            <C>
BALANCE SHEET  DATA:
Cash                                       $   3,576       $   9,540       $  26,647      $   5,066      $     824
Retained interest in securitizations          35,058          34,117          31,569         23,404         10,313
Total assets                                  48,776          50,732          64,875         31,201         12,003
Senior Subordinated Notes                     56,395          53,578          34,546         12,000             --
Junior Subordinated Notes                      2,181           1,940           1,940          7,122          7,457
Total debt                                    58,576          55,518          36,486         19,122          7,457
Total liabilities                             64,481          59,096          41,581         21,650          8,556
Mandatorily Redeemable Preferred Stock         2,576           2,415           2,336             --             --
Partners' preferred equity                        --              --              --          2,295            482
Partners' equity                                  --              --              --          7,256          2,965
Stockholders' equity (capital deficit)     $ (18,281)      $ (10,779)      $  20,958      $      --      $      --

OTHER DATA:
Number of loans purchased during year          4,683           7,388          15,403          6,789          3,586
Principal balance of loans purchased
   during year                             $  67,743       $  95,911       $ 187,383      $  84,981      $  45,972
Cumulative number of loans purchased          38,145          33,466          26,078         10,675          3,886
Cumulative principal balance of loans
   purchased                               $ 483,442       $ 415,709       $ 322,156      $ 134,773      $  49,792
Number of outstanding loans at end of
    year                                      19,526          21,795          20,886          9,063          3,586
Principal balance of the Servicing
   Portfolio at end of year                $ 180,677       $ 211,686       $ 226,846      $ 102,852      $  43,145
Delinquencies as a percentage of the
   Servicing Portfolio (7)                      8.73%           7.65%           9.75%          7.95%          5.45%
Repossession inventory as a percentage
   of the Servicing Portfolio (8)               1.70%           1.74%           2.18%          2.20%          1.28%
Net chargeoffs during the year
   as a percentage of the
   average Servicing Portfolio (9)              7.45%           7.85%           6.34%          4.17%          2.76%
</TABLE>

(1)   Includes $639,000 of gains on sales of loans purchased between October 12,
      1994 and January 16, 1995 and sold to the Master Trust on January 16,
      1995.

(2)   Expenses relating to originating a loan such as Dealer incentive payments,
      travel and entertainment costs for the Dealer Relation Managers,
      advertising and printing costs for loan documents and Dealer manuals have
      been reclassified as direct loan acquisition expenses from other operating
      expenses to conform with current year presentation.

(3)   Other income in 1995 and other expenses in 1994 include a $182,000 loan
      loss provision, representing 5.0% of the $3.6 million of loans funded
      during the three months ended December 31, 1994. The reserve was reversed
      when the loans were sold to the Master Trust on January 15, 1995.
      Subsequently, the Master Trust accounts for all reserves as loans were
      sold to the trust on a daily basis.

(4)   Extraordinary item due to early extinguishment of $12,000,000 aggregate
      principal amount of Senior Subordinated Notes (the "Morgan Notes") held by
      certain trusts and accounts managed by Morgan Guaranty and Trust Company
      of New York in December 1997.

(5)   Includes approximately $0.15 per share attributable to gain on sales of
      loans purchased between October 12, 1994 and January 16, 1995, sold to the
      Master Trust on January 16, 1995.

(6)   Shares outstanding are pro forma for all periods other than the years
      ended December 31, 1998 and 1997. The number of shares utilized represents
      the number of shares granted to the Company's predecessor, National Auto
      Finance Company LP in conjunction with the Reorganization (as defined
      herein) and Initial Public Offering on January 29, 1997.

(7)   Represents the principal amount of loans more than 30 days past due as a
      percentage of the principal balance of the Servicing Portfolio at end of
      period.

(8)   Represents the outstanding principal balance of loans in respect of
      financed automobiles that were repossessed by the Company and were held as
      inventory at end of period as a percentage of the Servicing Portfolio at
      end of period.

(9)   Net charge-off includes the remaining principal balance of loans written
      off, after the application of the net proceeds from the liquidation of the
      repossessed automobiles.


                                     - 18 -
<PAGE>   19

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

      The following management's discussion and analysis should be read in
conjunction with the preceding "Selected Financial Data" and the Company's
Financial Statements and the notes thereto and the other financial data included
elsewhere in this Annual Report on Form 10-K. The ratios and percentages
provided below are calculated using detailed financial information contained in
the Company's Financial Statements, the notes thereto and the other financial
data included under Item 8 of this Annual Report on Form 10-K.

Overall

      The Company is a specialty consumer finance company that has, since
February 2000, focused its business strategy on performing a wide range of loan
portfolio services for third parties in the non-prime auto loan financing
industry including, but not limited to, loan product marketing, loan
underwriting, collections, customer service, asset remarketing, and litigation
handling, in return for both origination and servicing fees.

      The Company projects through the Nuvell Flow Program and scheduled cash
releases from the Retained Interest in Securitizations, sufficient cash flow to
operate over the next twelve months.

      The Company historically funded its purchases of loans primarily through a
two-step asset securitization program consisting of (i) the securitized
warehousing of all of its loans through their daily sale to the Master Trust
followed by (ii) the transfer of such warehoused loans from time to time by the
Master Trust through Permanent Securitizations. In connection with the
securitization of the loans sold by the Company, the Company is required to
establish and maintain certain credit enhancements to support the timely payment
of interest and principal on the bonds and notes issued to investors by the
securitization trusts, which credit enhancements include, among other things,
funding and maintaining spread accounts, which are moneys held on deposit ("Cash
Spread Accounts"), and maintaining a residual interest in the pools of
receivables held by such securitization trusts ("Over-Collateralization
Accounts"). The following discussion summarizes the effect of the Company's
securitization and other activities on its revenues, expenses, and cash flows.

Revenues.

      In January 1997, the Company adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" ("SFAS No. 125"). Pursuant to SFAS No. 125,
the Company periodically measures the fair value of its Retained Interest in
Securitizations based upon the performance of its loan portfolio. As a result,
during the fourth quarter of fiscal 1998 the Company increased the cumulative
net loss estimate from 12.88% applied during and as of the first, second and
third quarters of fiscal year 1998 to 14.00% for the years ended December 31,
1998 and 1999. The increase in the cumulative net loss estimate resulted
primarily from an increase in default rates expected to be experienced over the
life of the loans, lower expected recovery rates on the underlying collateral
and changes in loss timing, compared to the rates of such items estimated in
earlier periods. These factors were impacted significantly as a result of the
Company's conversion of its loan servicing to an in-house servicing platform in
June of 1998. Performance trends for the year ended December 31, 1999 indicate
that the negative impact of the immediate post conversion period has stabilized.
These changes are a significant factor in the securitization income realized by
the Company for the year ended December 31, 1999. See "Results of Operations."

      The Company receives monthly payments from the securitization trusts in
cash as a fee paid for the Company's servicing of the loans. Servicing income is
recognized when earned and typically offsets the direct expenses the Company
incurs in connection with the servicing of the Servicing Portfolio. Finally, the
Company also earns interest income on its cash investments (including the Cash
Spread Accounts) and from loans it temporarily holds for sale pending their
securitization. The Company earns only a nominal amount of interest on loans
held for sale because the Company securitizes substantially all of its loans on
a daily basis.

Distributions of Cash from Securitizations.

      When the Company securitizes loans, it is required to establish and
maintain credit enhancements on a trust-specific basis to support the timely
payment of interest and principal on the notes issued to investors by such
securitization trusts. Credit enhancements include, among other things, funding
and maintaining the Cash Spread Accounts and maintaining the
Over-Collateralization Accounts. The Cash Spread Accounts are funded through
initial cash deposits by the Company, plus a portion of the excess cash flows
from the loans (that is, the difference between cash received by the relevant
trust and its interest and principal payments on the asset-backed securities and
trust expenses). Once the funds in the Cash Spread Accounts meet specified
levels (which may be increased if the performance of the relevant loan pool
deteriorates), any subsequent excess cash flow thereafter will be released to
the Company on a monthly basis. Any remaining cash in the Cash


                                     - 19 -
<PAGE>   20

Spread Accounts after the asset-backed securities have been paid in full also
will be released to the Company. The amount of excess cash available for
distribution to the Company will be affected by the actual loss and prepayment
experience of the Servicing Portfolio. See Note 3 of the Notes to Financial
Statements - Retained Interest in Securitizations.

The table below sets forth-certain information relating to the Company's loan
purchasing activities:

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                             ----------------------------------
                                                               1999        1998          1997
                                                             -------     --------      --------
                                                      (dollars in thousands, except number of loans)
<S>                                                          <C>         <C>           <C>
Number of loans purchased .............................        4,683        7,388        15,403
Principal balance of loans purchased ..................      $67,743     $ 95,911      $187,383
Principal amount of loans funded (1) ..................       64,480       90,490       182,900
Securitization related income (loss), net of
      writedown of retained interest in
      securitizations, if any .........................        7,630      (13,531)         (323)
Servicing income ......................................        5,719        6,424         3,437
</TABLE>

------------------------
(1)   Amount funded represents the price at which the Company purchases a loan
      from a Dealer or Third-Party Originator (i.e., the amount actually paid to
      a Dealer or Third-Party Originator), calculated as the principal of the
      loan purchased less the Dealer Discount.

Results of Operations

      The Company reported a net loss applicable to common stockholders of $9.7
million for the year ended December 31, 1999, compared to a $33.8 million net
loss for the year ended December 31, 1998 and a $18.6 million net loss for the
year ended December 31, 1997. The reduction in net loss in 1999 is primarily the
result of a stabilized loan portfolio, a relatively accurate prediction of the
prepayment and defaults that would occur in 1999 by the December 31, 1998
valuation of the ESR's (see "Securitization Related Income Loss"), and a related
decrease in "Average Servicing Portfolio" for the year ended December 31, 1999.
The net loss in 1998 is primarily the result of: (a) the impact of changes in
assumptions relating to the calculation of gain on sale of loans and the
valuation of Retained Interest in Securitizations, including an increased
cumulative net loss estimate from 12.88% applied during and as of the first
three quarters of fiscal year 1998 to 14.00% during and as of the fourth quarter
ended December 31, 1998; and (b) start-up and duplicative expenses, associated
with the Company's transition from an outside servicer to in-house servicing,
including the opening of its service center in Jacksonville, Florida.

Securitization Related Income (Loss)

      For the year ended December 31, 1999, the Company recognized
securitization related income of $7.6 million, which includes a $2.1 million
writedown of Retained Interest in Securitizations resulting from the sale of
approximately $47 million of Master Trust loans on April 5, 2000 (See Note 14 of
the Notes to Financial Statements -- Subsequent Events)), compared to a "net
securitization related" loss of $13.5 million for the year ended December 31,
1998 (due to a 1998 $23.1 million writedown of Retained Interest in
Securitizations resulting from the reasons described in "Overall-Revenues"
above) and a net securitization related loss of $323,000 for the year ended 1997
(due to an increase in estimated cumulative net losses from 7% in 1996 to 12.88%
in 1997 and an increase in the discount rate applied to present value the
Company's Retained Interest in Securitizations from 11% in 1996 to 14% in 1997).
The Company's loan purchasing volume decreased significantly during the second
half of 1998 and first half of 1999 as the Restructuring was being completed.
See Note 5 of Notes to Financial Statements - Comprehensive Financial
Restructuring. In the second half of 1999, the Company sought to re-establish
its loan purchasing volume at a deliberate pace with emphasis on more stringent
credit and collateral standards. The Company purchased 4,683 loans, having a
principal balance of $64.5 million, during the year ended December 31, 1999,
compared to 7,388 loans, having a principal balance of $95.9 million, for the
year ended December 31, 1998 and 15,403 loans having a principal balance of
$187.4 million for the year ended December 31, 1997. These loan purchases
consisted of 4,596 loans purchased from Dealers ($66.7 million principal
balance) and 87 loans purchased from Third-Party Originators ($1.0 million
principal balance) during the year ended December 31, 1999. This compares to
5,348 loans purchased from Dealers ($74.6 million principal balance) and 2,029
loans purchased from Third-Party Originators ($21.3 million principal balance)
during the year ended December 31, 1998 and 10,354 loans purchased from dealers
($140.9 million principal balance) and 5,049 loans purchased from Third-Party
Originators ($46.5 million principal balance) during the year ended December 31,
1997.


                                     - 20 -
<PAGE>   21


      The Company's gain on sale model includes an estimated cumulative net loss
factor with respect to the loans securitized. Significant changes in such
cumulative net loss estimate will result in adjustments to the carrying value of
Retained Interest in Securitization ("ESR"). Included in reported securitization
related income of $7.6 million for the year ended December 31, 1999 was
approximately $1.3 million related to a net increase in the valuation of the
ESR's. The adjustment resulted from lower default rates and securitization fees
during the year ended December 31, 1999 than previously estimated. In 1998, the
servicing of the Company's Servicing Portfolio experienced significant
disruption resulting from the conversion from an out-sourced servicer to an
in-house servicing platform on June 19, 1998. The Company believes that the
conversion and resulting servicing disruption is largely responsible for the
increase in delinquency and net loss experience of the Servicing Portfolio
throughout the year ended December 31, 1998. In response thereto, the Company's
estimates for loan loss factor was increased from 12.88% applied during and as
of the first three quarters of fiscal year 1998 to 14.00% during and as of the
fourth quarter ended December 31, 1998 and for the year ended December 31, 1999.
The Company initiated servicing for loans more than 30 days past due in July
1997, and initiated servicing of the entire Servicing Portfolio on October 1,
1997. See discussion of delinquency rates under "Loan Loss and Delinquency
Experience."

      In 1997, the Company experienced significant servicing and collection
problems with the Servicing Portfolio, which the Company believes resulted
primarily from deficiencies in the servicing and collection performance of its
outside servicer. The Company believes that these performance deficiencies are
largely responsible for the increase in delinquency and net loss experience of
the Servicing Portfolio throughout the year ended December 31, 1997. In response
thereto, the Company's estimates for loan losses were increased to 12.0% as of
October 1, 1997, and 12.88% as of December 31, 1997, compared to 7.0% for the
year ended December 31, 1996.

Servicing Income

      The Company receives a servicing fee in cash of approximately 4.0% of the
principal amount of the loans sold to the Master Trust and 2.0% to 3.0% for the
principal amount of the loans subsequently sold to the Permanent
Securitizations, which typically offsets actual servicing expenses incurred by
the Company. This income is recognized when earned. Servicing income for the
years ended December 31, 1999, 1998, and 1997 was $5.7 million, $6.4 million and
$3.4, respectively. The decrease in servicing income in 1999 as compared to 1998
was attributable to the decrease in the outstanding Servicing Portfolio balance
during the year ended December 31, 1999.

Other Income

      Other income consists of interest income on cash investments (including
the Cash Spread Accounts), other income and finance charges earned. The other
income for the years ended December 31, 1999, 1998 and 1997 was $2.1 million,
$2.8 million and $1.0, respectively. The decrease in other income in 1999 as
compared to 1998, was primarily the result of a decrease in operating cash
invested in money market accounts. The increase in other income in 1998 as
compared to 1997 was primarily attributable to interest earned on the
outstanding cash spread account balances and operating cash invested in money
market accounts.

Total Expenses

      The Company reported total expenses for the years ended December 31, 1999,
1998 and 1997 of $25.1 million, $29.3 million and $21.9 million, respectively.
These expenses consisted primarily of interest expense on long-term
indebtedness, including the Company's Senior Subordinated Notes, salaries and
employee benefits, servicing expenses and direct loan acquisition expenses.
Total expenses, as a percentage of the average principal balance of the
Servicing Portfolio, decreased from 13.1% as of December 31, 1998 to 12.9% as of
December 31, 1999.

         Total servicing expenses for the years ended December 31, 1999, 1998
and 1997 were $3.3 million, $6.3 million and $5.9 million, respectively.
Servicing expenses were significantly lower during the year ended December 31,
1999 as compared to the year ended December 31, 1998 due to the Company
incurring both internal servicing expenses and external servicing expenses paid
as fees to an outside servicer in 1998 during a transitional phase during which
the Company implemented a transition from the outside servicer to in-house
servicing. Such transition period, occurred through the conversion date of June
19, 1998. Additionally, the Company further reduced its servicing expense
structure during the year ended December 31, 1999. The Company's Servicing
Portfolio decreased from a $226.8 million Servicing Portfolio, representing
20,886 outstanding loans as of December 31, 1997, to a $211.8 million Servicing
Portfolio, representing 21,795 outstanding loans, as of December 31, 1998 and a
$180.7 million Servicing Portfolio, representing 19,526 outstanding loans, as of
December 31, 1999.


                                     - 21 -
<PAGE>   22

      Interest expense for the years ended December 31, 1999, 1998 and 1997 was
$8.5 million, $8.4 million and $1.6 million, respectively. The increase in
interest expense for each year resulted from the increasing outstanding
long-term debt balances of the Company, including in particular the Senior
Subordinated Notes.

      Salaries and employee benefits for the years ended December 31, 1999, 1998
and 1997 were approximately $5.1 million, $7.7 million and $6.3 million,
respectively. These expenses were lower during the year ended December 31, 1999
as compared to the year ended December 31, 1998 due to the Company reducing its
staffing levels during the year ended December 31, 1999. During the year ended
December 31, 1998, the Company incurred duplicative salaries and benefits
expenses associated with its servicing conversion and phased move of sales,
originations and corporate support staff from Boca Raton, Florida to
Jacksonville, Florida. The increase in expense in 1998 as compared to 1997
resulted from the increase in the number of full-time employees, from 90 as of
December 31, 1997 to 159 as of December 31, 1998. These expenses consisted
primarily of salaries and wages, performance incentives, employee benefits and
payroll taxes. The Company expects that its number of full-time employees will
continue to increase commensurate with the growth of the Company.

      Direct loan acquisition expenses for the years ended December 31, 1999,
1998 and 1997 were $.9 million, $1.5 million and $3.6 million, respectively.
These expenses consisted primarily of Dealer incentive payments, fees paid to
Strategic Alliance partners, broker fees, credit information fees and telephone
expenses. The expenses declined primarily as a result of the decrease in the
volume of loans acquired by the Company for the year ended December 31, 1999 as
compared to the year ended December 31, 1998 and the cessation of the First
Union Strategic Alliance in April 1999.

      Other operating expenses for the years ended December 31, 1999, 1998, and
1997 were $5.6 million, $4.5 million and $3.6 million, respectively. These
expenses consisted primarily of telecommunications, travel, professional fees,
insurance expenses, MIS expenses, incremental rent and travel. Additionally,
other expenses include an adjustment to reflect a cumulative change in
accounting principle. Balances representing $474,144 of start-up costs were
written off in accordance with adoption of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" for the year ended December 31,
1998. These costs had been capitalized in conjunction with the Company
establishing its servicing center facility in Jacksonville, Florida.

Loan Loss and Delinquency Experience

      Loan losses and loan prepayments are continuously monitored on an overall
portfolio and month-of-purchase static pool basis. Pursuant to the requirements
of SFAS No. 125, the Company reviews its actual loan loss experience in
conjunction with its quarterly revaluation of the carrying value of Retained
Interest in Securitizations. Charge-off policies are based upon an
account-by-account review of delinquent loans by the Company. The Company
generally charges off a loan at the time its related collateral is liquidated,
although certain loans may be charged off sooner if management deems them to be
uncollectible.

      The following table summarizes the Company's loan loss experience:

<TABLE>
<CAPTION>
                                                                               As of December 31
                                                            ---------------------------------------------------------
                                                               1999           1998            1997            1996
                                                            ---------       ---------       ---------       ---------
                                                                             (dollars in thousands)
<S>                                                         <C>             <C>             <C>             <C>
Average Servicing Portfolio during period .............     $ 194,485       $ 219,266       $ 158,737       $  69,025
                                                            =========       =========       =========       =========

Gross charge-off ......................................        27,171          28,852          17,355           6,313
Liquidation proceeds from repossessed assets ..........       (12,679)        (11,633)         (7,294)         (3,435)
                                                            ---------       ---------       ---------       ---------
Net charge-off ........................................     $  14,492       $  17,219       $  10,061       $   2,878
                                                            =========       =========       =========       =========
Net charge-off as a percentage of average Servicing
    Portfolio .........................................          7.45%           7.85%           6.34%           4.17%
                                                            =========       =========       =========       =========
</TABLE>

      During June 1998, the Company converted its Servicing Portfolio computer
data from its outside servicer's computer system to an internal system. As a
result, since October 1998 the Company has been performing all collection
functions with respect to its Servicing Portfolio. After conversion, the Company
experienced an increase in the delinquency of its portfolio that occurred in or
about August 1998. Since initiating collections on its own internal servicing
system in June 1998, the resulting percentage of the outstanding principal
balance of loans that were more than 30 days past due decreased to approximately
7.65% of the Company's Servicing Portfolio as of December 31, 1998, from a high
of 11.5% as of July 31, 1998, and was approximately 8.73% as of December 31,
1999. The increase of delinquencies as a percentage of the outstanding principal
balance of the Servicing Portfolio in 1999 was primarily due to the decrease of
the size of the Servicing Portfolio compared to 1998.


                                     - 22 -
<PAGE>   23

      The securitization income the Company recognizes from the sale of loans to
the Master Trust, and the cash flow from its securitizations are substantially
dependent on the Servicing Portfolio's delinquency and loss performance.
Increase in delinquencies and losses may result in: (i) increased capital and/or
credit enhancement requirements for securitizations; (ii) reductions in cash
flow to the Company; and (iii) violations of Permanent Securitization
performance tests. Consequently, the Company's failure to effectively service
and collect the Servicing Portfolio could have a material adverse effect on the
Company's financial condition, results of operations and cash flows. See Note 3
to the Financial Statements - Retained Interest in Securitizations.

      The Company considers a loan to be delinquent if the borrower fails to
make any payment substantially in full on or before the due date as specified by
the terms of the loan. The Company typically initiates contact with borrowers
whose payments are not received by the tenth day following the due date. The
following table summarizes the delinquency and repossession experience with
respect to the Servicing Portfolio:

<TABLE>
<CAPTION>
                                                                          As of December 31,
                                                            ----------------------------------------------
                                                              1999        1998          1997       1996
                                                            -------      -------      -------      -------
                                                                         (dollars in thousands)
<S>      <C>                                                <C>          <C>          <C>          <C>
Period of delinquency
   31 to 60 days ......................................     $ 9,062      $10,577      $14,316      $ 6,104
   61 to 90 days ......................................       3,347        3,160        3,458        1,596
   91 days or more ....................................       3,672        2,452        4,343          487
                                                            -------      -------      -------      -------
Total delinquencies (1) ...............................     $16,081      $16,189      $22,117      $ 8,187
                                                            =======      =======      =======      =======
Total delinquencies as a percentage of the
   Servicing Portfolio ................................        8.73%        7.65%        9.75%        7.95%
Principal balance of loans related to repossession
   inventory ..........................................     $ 3,121      $ 3,692      $ 4,935      $ 2,266
Repossession inventory as a percentage of the
   Servicing Portfolio ................................        1.70%        1.74%        2.18%        2.20%
</TABLE>

   (1) Total delinquencies include loans delinquent in payments more than thirty
days, loans in bankruptcy, and loans related to repossession inventory.

      Management believes that the payment practices of Non-Prime Consumers are
partially a function of seasonality. Because Non-Prime Consumers typically have
low disposable incomes, they frequently tend to fall behind in payments on their
loans during the early winter months, when the holiday season generates demands
for their limited disposable income and when these borrowers encounter
weather-related work slow-downs. As a result, absent unforeseen circumstances,
management expects delinquencies to be highest in the first calendar quarter and
the fourth calendar quarter of each year. Generally, there is a 60 to 120-day
lag between initial delinquency and charge-off.

      The Company monitors historical loss experience on an overall portfolio
basis and on a monthly static pool basis. Loans acquired and sold to the Master
Trust in each calendar month are segregated into individual static pools. The
Company considers a pool of loans to be "seasoned" when it has been aged for an
average of 18 to 24 months. Actual pool losses are compared to the estimates for
net losses, and adjustments to the carrying value of Retained Interest in
Securitizations for the effect of any additional losses will be reflected in the
current period earnings.


                                     - 23 -
<PAGE>   24

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations


The following table summarizes the vintage static pools of the Company's
Servicing Portfolio for all loans purchased by the Company from inception
through the period ending December 31, 1999, and includes loss data through
December 31, 1999:


<TABLE>
<CAPTION>
      4Q 94      1Q 95      2Q 95     3Q 95     4Q 95     1Q 96    2Q 96     3Q 96     4Q 96     1Q 97
      -----      -----      -----     -----     -----     -----    -----     -----     -----     -----
<S>   <C>        <C>        <C>       <C>       <C>       <C>      <C>       <C>       <C>       <C>
1     0.00%      0.00%      0.00%     0.00%     0.00%     0.00%    0.00%     0.00%     0.00%     0.00%
2     0.00%      0.00%      0.00%     0.00%     0.00%     0.00%    0.00%     0.00%     0.00%     0.00%
3     0.00%      0.00%      0.00%     0.06%     0.05%     0.00%    0.00%     0.04%     0.00%     0.00%
4     0.05%      0.04%      0.00%     0.14%     0.25%     0.09%    0.03%     0.04%     0.01%     0.04%
5     0.31%      0.14%      0.29%     0.41%     0.48%     0.26%    0.28%     0.33%     0.08%     0.25%
6     0.47%      0.30%      0.92%     0.80%     0.86%     0.49%    0.62%     0.70%     0.69%     0.70%
7     0.51%      0.71%      1.62%     1.64%     1.27%     0.90%    1.10%     1.18%     1.25%     1.43%
8     1.08%      1.25%      2.05%     2.02%     1.69%     1.23%    2.06%     1.71%     1.85%     1.94%
9     1.36%      1.55%      2.39%     2.42%     2.21%     1.95%    2.70%     2.68%     2.50%     2.60%
10    1.75%      2.13%      2.72%     2.60%     2.46%     2.14%    3.37%     3.31%     3.27%     3.08%
11    1.75%      2.52%      3.30%     3.02%     2.84%     2.72%    4.29%     3.88%     3.77%     3.51%
12    3.12%      3.09%      3.44%     3.58%     3.33%     3.26%    5.20%     4.34%     4.12%     3.87%
13    3.21%      3.64%      3.71%     3.92%     3.97%     3.72%    5.55%     5.08%     4.57%     4.49%
14    3.80%      4.04%      4.21%     4.04%     4.28%     4.18%    6.13%     5.53%     4.97%     5.08%
15    4.45%      4.25%      4.31%     4.51%     5.07%     4.90%    6.52%     6.01%     5.46%     5.65%
16    4.55%      4.34%      4.53%     4.88%     5.09%     5.11%    6.78%     6.57%     5.94%     6.34%
17    4.91%      4.88%      4.92%     5.27%     5.65%     6.16%    7.16%     6.87%     6.40%     6.82%
18    4.91%      4.98%      5.54%     5.62%     5.96%     6.59%    7.67%     7.35%     7.17%     7.39%
19    5.05%      5.28%      5.96%     6.16%     6.61%     7.01%    8.00%     8.14%     7.78%     7.79%
20    5.05%      5.80%      6.18%     6.63%     6.78%     7.28%    8.14%     8.59%     8.25%     8.05%
21    5.79%      6.03%      6.55%     6.75%     7.15%     7.56%    8.66%     9.12%     8.66%     8.40%
22    5.79%      6.33%      7.33%     6.88%     7.42%     8.00%    9.09%     9.75%     9.05%     8.78%
23    6.20%      6.62%      7.88%     7.44%     7.99%     8.25%    9.81%     10.03%    9.23%     9.28%
24    6.80%      6.91%      8.30%     7.93%     8.21%     8.41%    10.17%    10.36%    9.43%     9.68%
25    6.99%      7.48%      8.59%     8.37%     8.46%     8.67%    10.68%    10.88%    9.67%     10.12%
26    7.49%      7.58%      8.73%     8.54%     8.77%     9.01%    11.22%    11.13%    10.02%    10.52%
27    8.06%      8.20%      9.16%     8.70%     8.98%     9.36%    11.50%    11.40%    10.35%    10.83%
28    8.23%      8.76%      9.34%     8.82%     9.35%     9.57%    11.61%    11.72%    10.80%    11.36%
29    9.07%      9.49%      9.36%     8.89%     9.97%     9.84%    11.71%    11.86%    11.25%    11.68%
30    9.17%      9.54%      9.39%     9.21%     10.16%    10.09%   11.88%    12.19%    11.42%    12.18%
31    9.71%      9.81%      9.82%     9.84%     10.61%    10.37%   12.56%    12.34%    11.78%    12.52%
32    9.99%      9.97%      9.82%     10.11%    10.74%    10.48%   12.77%    12.58%    11.94%    12.81%
33    10.47%     10.07%     10.11%    10.26%    11.09%    10.61%   12.85%    12.72%    12.19%    13.06%
34    11.44%     10.12%     10.52%    10.67%    11.28%    10.83%   13.10%    12.93%    12.48%    13.25%
35    11.48%     10.31%     10.58%    10.85%    11.33%    11.09%   13.38%    13.14%    12.75%
36    11.81%     10.55%     10.76%    10.89%    11.51%    11.20%   13.51%    13.37%    13.00%
37    11.86%     10.83%     10.88%    11.15%    11.70%    11.37%   13.77%    13.60%    13.21%
38    11.86%     11.01%     11.06%    11.22%    11.85%    11.50%   14.15%    13.76%
39    12.37%     11.19%     11.13%    11.37%    11.94%    11.79%   14.29%    13.95%
40    12.42%     11.47%     11.19%    11.46%    11.97%    11.88%   14.57%    14.11%
41    12.42%     11.62%     11.25%    11.78%    12.01%    11.99%   14.70%
42    12.57%     11.95%     11.30%    11.87%    12.08%    12.17%   14.80%
43    12.57%     12.00%     11.49%    12.01%    12.32%    12.34%   14.86%
44    12.71%     12.04%     11.54%    12.08%    12.39%    12.43%
45    12.71%     12.08%     11.75%    12.24%    12.46%    12.52%
46    12.75%     12.12%     11.82%    12.26%    12.50%    12.57%
47    12.79%     12.18%     12.04%    12.35%    12.55%
48    12.97%     12.28%     12.09%    12.42%    12.55%
49    12.97%     12.28%     12.09%    12.42%    12.63%
50    13.10%     12.28%     12.09%    12.45%
51    13.10%     12.45%     12.16%    12.57%
52    13.15%     12.52%     12.28%    12.66%
53    13.15%     12.65%     12.36%
54    13.15%     12.66%     12.36%
55    13.15%     12.68%     12.36%
56    13.15%     12.69%
57    13.17%     12.69%
58    13.18%     12.73%
59    13.38%
60    13.43%
</TABLE>


                                     - 24 -
<PAGE>   25

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                December 31, 1999

<TABLE>
<CAPTION>
     2Q 97     3Q 97     4Q 97    1Q 98   2Q 98    3Q 98    4Q 98    1Q 99   2Q 99    3Q 99    4Q 99
     -----     -----     -----    -----   -----    -----    -----    -----   -----    -----    -----
<S>  <C>       <C>       <C>      <C>     <C>      <C>      <C>      <C>     <C>      <C>      <C>
1    0.00%     0.00%     0.00%    0.00%   0.00%    0.00%    0.00%    0.00%   0.00%    0.00%    0.00%
2    0.00%     0.00%     0.00%    0.00%   0.00%    0.00%    0.00%    0.00%   0.00%    0.00%
3    0.00%     0.02%     0.00%    0.00%   0.00%    0.00%    0.00%    0.00%   0.00%    0.01%
4    0.22%     0.04%     0.01%    0.02%   0.00%    0.00%    0.07%    0.00%   0.18%    0.10%
5    0.66%     0.18%     0.14%    0.08%   0.13%    0.01%    0.16%    0.08%   0.47%
6    1.31%     0.42%     0.42%    0.29%   0.35%    0.81%    0.56%    0.46%   0.82%
7    2.11%     0.88%     0.74%    0.61%   0.65%    0.97%    0.99%    0.93%   1.39%
8    2.56%     1.21%     1.29%    0.84%   0.82%    2.10%    1.41%    1.19%
9    2.99%     1.60%     1.68%    1.16%   1.62%    2.40%    1.86%    1.51%
10   3.71%     2.30%     2.09%    1.78%   2.03%    2.79%    2.09%    2.02%
11   4.28%     2.78%     2.41%    2.28%   2.76%    3.20%    2.20%
12   5.05%     3.45%     2.76%    2.76%   3.09%    4.06%    2.93%
13   5.91%     3.87%     3.25%    3.25%   3.83%    4.26%    3.10%
14   6.50%     4.18%     3.68%    3.67%   4.39%    4.45%
15   6.96%     4.54%     4.14%    4.24%   5.09%    4.69%
16   7.42%     5.24%     4.68%    4.83%   5.56%    5.55%
17   7.63%     5.74%     5.02%    5.13%   6.06%
18   7.93%     6.28%     5.42%    5.57%   6.55%
19   8.48%     6.91%     5.93%    6.01%   7.00%
20   9.01%     7.45%     6.28%    6.48%
21   9.28%     7.88%     6.84%    6.77%
22   9.73%     8.40%     7.19%    7.09%
23   10.00%    8.73%     7.47%
24   10.31%    9.12%     7.75%
25   10.79%    9.55%     8.06%
26   11.04%    9.97%
27   11.35%    10.25%
28   11.75%    10.45%
29   12.05%
30   12.40%
31   12.72%
</TABLE>


                                     - 25 -
<PAGE>   26

LIQUIDITY AND CAPITAL RESOURCES

    General

      Since inception, the Company has funded its operations and the growth of
its loan purchasing activities primarily through five sources of capital: (i)
proceeds from securitization transactions; (ii) cash flows from servicing fees;
(iii) proceeds from the issuance of indebtedness; (iv) capital contributions of
certain affiliates of the Company; and (v) proceeds from the Company's Initial
Public Offering and subsequent private sales of Common Stock. On February 4,
2000, the Company entered into the Nuvell Agreements whereby the Company, with
funds made available by Nuvell, originates loans exclusively for the benefit of
Nuvell. See Note 14 of Notes to Financial Statements - Subsequent Events.

      Under the Nuvell Flow Program, loan originations are funded with capital
provided by Nuvell. Prior to implementation of the Nuvell Flow Program, the
Company's primary uses of cash were to fund: (i) Spread Accounts; (ii)
securitizations; (iii) loan purchases; (iv) debt service; (v) issuance costs of
asset securitizations; and (vi) operating expenses.

      Net cash used in operating activities decreased by $24.2 million to $9.6
million for year ended December 31, 1999 from $33.8 million for the year ended
December 31, 1998, principally due to reduced origination volume and a resulting
reduction in credit enhancement requirements of the Company's securitization
facilities, release of previously trapped excess cash spread from the trusts
under agreements with FSA, reduction in interest paid on Senior Subordinated
Notes (See Note 5 of Notes to Financial Statements - Comprehensive Financial
Restructuring) and the reduced net loss from operations as discussed in "Results
of Operations".

      Net cash used in investing activities was $908,000 and $1.5 million in
fiscal year 1999 and 1998. This cash was principally related to purchases of
furniture and equipment for the Company's service center in 1999 and 1998.

      Net cash provided by financing activities decreased by $13.9 million to
$4.5 million for the year ended December 31, 1999 from $18.4 million for the
year ended December 31, 1998. Net cash provided by financing activities for the
year ended December 31, 1998 was primarily the result of the proceeds received
from the March Private Placement of $20 million of Senior Subordinated Notes.

      During the year ended December 31, 1999, the Company was required to
maintain a minimum equity position in the Master Trust of 19.0% to 24.0% of the
net serviced receivables or 3.0 times net losses, whichever was greater. This
minimum equity position consists of cash invested by the Company and
over-collateralization in the form of the Company owning certain interests in
the principal balance of loans. As of December 31, 1999, the Company had a
25.71% equity investment in the Master Trust.

      As of December 31, 1999, the Company retained approximately $35.1 million
of Retained Interest in Securitizations, representing 72% of the total assets of
the Company. The value of these assets, representing the net present value of
future cash flows to the Company, would be reduced in the event of a future
material increase in loan losses or prepayment experience relative to the
amounts previously estimated by the Company.

      As of December 31, 1999, the principal amount owed by the Company on the
Senior Subordinated Notes was $61.7 million and the principal amount owed by the
Company on the Junior Subordinated Notes was approximately $2.2 million. The
Senior Subordinated Notes, which mature on December 2004, bear interest at
11.875% per annum until December 22, 2000, 12.875% per annum for the period from
December 22, 2000 until December 21, 2001, 13.875% per annum for the period from
December 22, 2001 until December 21, 2002, and 14.875% per annum thereafter,
with interest payable quarterly. See Note 4 of the Notes to Financial Statements
- Debt for further discussion of the Company's various debt facilities. See also
Note 5 of the Notes to Financial Statements - Comprehensive Financial
Restructuring.

SENIOR SUBORDINATED NOTES

       On April 7, 1999, the Company completed a comprehensive financial
restructuring (the "Restructuring"), including its Senior Subordinated Notes and
resolved certain other issues with its Senior Subordinated Noteholders. More
specifically, the agreements and transactions with the Senior Subordinated
Noteholders provide for and include, among other things: (1) the waiver of the
past defaults and breaches of covenants, representations and warranties, if any,
made in connection with the Senior Subordinated Notes; (2) the elimination of
the previously existing Net Worth Covenant; (3) the establishment of a new
covenant requiring that on a quarterly basis, the Company's net return on assets
invested in loan receivables, expressed as a percentage, exceed pre-established
quarterly goals (the "Return on Assets Covenant"); the first quarterly
measurement period for this covenant began as of the quarter ending September
30, 1999; (4) the granting to the Company of the option to pay during the
two-year period ending March 31, 2001 fifty percent (50%) of the interest owed
on the Senior Subordinated Notes


                                     - 26 -
<PAGE>   27

(and the interest on such interest) through the issuance of the Convertible
Senior Subordinated Notes; (5) the issuance to the Senior Subordinated
Noteholders of 7,071,429 shares of Common Stock as consideration for the waivers
and amendments granted to the Company; (6) the issuance to those Noteholders
that also purchased Common Stock of the Company at the time of their debt
investment of an additional 1,178,571 shares of additional Common Stock in
exchange for the execution and delivery of full and complete releases of any
claims arising by virtue of those Noteholders' equity investment; and (7) the
execution and delivery of full and complete releases by and among the Company,
the Noteholders and affiliates of and other parties related to each of such
parties. In addition, the Senior Subordinated Noteholders were granted the right
to designate three additional persons to the Board of Directors of the Company,
increasing to six seats their total number of Board representatives, thereby
giving them majority control of the Board.

First Union

       Until termination of funding availability under the Master Trust
Securitization Credit Facility on February 23, 2000 (See Note 14 of Notes to
Financial Statements - Subsequent Events) the Company sold loans that it had
purchased from Dealers on a daily basis to a special-purpose subsidiary, which
then sold the loans to the Master Trust in exchange for cash and certain
residual interests in future excess cash flows from the Master Trust. The Master
Trust has issued two classes of investor certificates: "Class B Certificates,"
which were variable funding (i.e., revolving) certificates bearing interest at
floating rates, and "Class C Certificates," representing a portion of the
residual interest of the Company's special-purpose subsidiary in future excess
cash flows from the Master Trust after required payments to the holders of the
Class B Certificates, deposits of funds to a restricted cash account as a
reserve for future loan losses which provided additional credit enhancement for
the holders of the Class B Certificates and payment of certain other expenses
and obligations of the Master Trust. First Union owned 100% of the outstanding
Class B Certificates until paid in full on April 5, 2000 (See Note 14 of the
Financial Statements - Subsequent Events). Collectively, the restricted cash
account and the Class C Certificate portion of loan principal
(Over-Collateralization Accounts, which are held by the Company) that
collateralize the Master Trust are the components of the Spread Accounts. The
Spread Accounts and ESRs are reflected collectively on the balance sheet as
"Retained Interest in Securitizations."

       Periodically the Master Trust transferred loans and Spread Account
balances to Permanent Securitizations in exchange for cash, which was used to
repay the Class B Certificates. Debt securities representing interests in the
Permanent Securitizations were sold to third-party investors, who are repaid
from cash flows from the loan receivables in the applicable Permanent
Securitization. Excess Spread Receivables and return of Spread Accounts
attributable to such loans flow from the Permanent Securitization to the Company
to the extent such funds are available. Pursuant to the Restructuring described
above, the Company entered into several loan facilities and arrangements with
First Union. As described in Note 5 of Notes to Financial Statements -
Comprehensive Financial Restructuring, the restructured agreements with First
Union provided for and include, among other things: (1) the extension of the
Company's warehouse line for an additional two years (through March 31, 2001)
and an increase in the amount the Company may borrow under such facility from
$75 million to $85 million; (2) the commitment by First Union to purchase up to
$20 million of subordinated asset-backed debt securities in connection with the
Company's securitizations; and (3) a revolving credit facility enabling the
Company to borrow up to $8 million for working capital purposes secured by the
Company's Retained Interest in Securitizations.

      On February 22, 2000, Funding Trust II, defaulted on its obligation to
deposit approximately $5 million in cash collateral to the Master Trust
Over-Collateralization Account, as required under the Master Trust
Securitization Credit Facility, thereby giving rise to First Union's decision to
terminate future funding availability under the facility and to commence
amortizing the outstanding amounts owed to First Union under the facility.

      In conjunction with such default, First Union agreed to waive until April
21, 2000 certain rights to liquidate the portfolio of approximately $58.9
million of auto loans that secure its loans to Funding Trust II, thereby
permitting the Company time to pursue various strategic options, including a
sale of such portfolio. On March 30, 2000, Funding Trust II, as Seller, the
Company, as Guarantor, and Nuvell entered into the Sale Agreement whereby a
substantial number of the loans previously sold to the Master Trust under the
Master Trust Securitization Credit Facility in the approximate amount of $47
million were sold by Funding Trust II to Nuvell after such loans had been
acquired by Funding Trust II from the Master Trust by an Assignment Agreement
dated as of April 5, 2000. The Company, pursuant to the Sale Agreement, will
retain servicing of substantially all of such loans under the terms and
provisions of the Servicing Agreement. Approximately $43.9 million of the
proceeds from the sale of such loans were then used to pay in full the Class B
Certificates held by First Union. (See Note 4) The Company anticipates to
receive additional cash from the transaction and release of funds previously
required to be held in reserve of approximately $6.0 million, which will be used
for general corporate purposes, including the possible payment of certain of the
debt of the Company. In related developments, First Union terminated its
commitment to purchase up to $20 million of subordinated asset-backed debt
securities in connection with the Company's future Permanent Securitizations and
converted to a 48 month term loan (requiring equal monthly principal payments)
of $2.5 million outstanding under a revolving working capital facility secured
by the Company's ERSs. See Note 14 of Notes to Financial Statements - Subsequent
Events


                                     - 27 -
<PAGE>   28

FSA

      The Company's future liquidity and financial condition, and its ability to
finance the growth of its business and to repay or refinance its indebtedness,
will depend substantially on distributions of excess cash flow from the
Permanent Securitization trusts and the extension of the Nuvell Agreements which
require the mutual consent of both parties (See Note 14 of Notes to Financial
Statements - Subsequent Events). The Company's agreements with FSA provide that
each Permanent Securitization trust must maintain specified levels of cash in
its Cash Spread Account during the life of the trust. These spread accounts were
funded initially out of beginning deposits and are funded thereafter with excess
cash flow from the loan pool. During each month, excess cash flow available to
the Company from all Permanent Securitization trusts is first used to replenish
any Cash Spread Account deficiencies and then is distributed to the Company. The
timing and amount of distributions of excess cash from securitization trusts
varies based on a number of factors, including loan delinquencies, defaults and
net losses, the rate of disposition of repossession inventory and recovery
rates, the age of loans in the portfolio, prepayment experience and required
spread account levels.

      Under the financing structures the Company used for its Permanent
Securitizations, certain excess cash flows generated by the loans are retained
in the Spread Accounts within the securitization trusts to provide liquidity and
credit enhancement. While the specific terms and mechanics of the Spread
Accounts can vary depending on each transaction, the Company's agreements with
FSA generally provide that the Company is not entitled to receive any excess
cash flows unless the level of certain Spread Account balances, comprised of
cash and an interest in the principal balance of the loans in the trust (the
"Over-Collateralization Accounts"), have been attained and/or the delinquency or
losses related to the loans in the pool are below certain predetermined levels.

      Since completion of the Restructuring, under the terms of the Company's
insurance agreements with FSA, upon the occurrence of a Permanent Securitization
failing to meet portfolio performance tests (an "Insurance Agreement Event of
Default"), the Company would be in default under such insurance agreements. Upon
an Insurance Agreement Event of Default, FSA may: (i) permanently suspend
distributions of cash flow to the Company from the related securitization trust
and all other FSA-insured trusts until the asset-backed securities have been
paid in full; (ii) capture all excess cash flows from performing FSA-insured
trusts; (iii) increase its premiums; and (iv) replace the Company as servicer
with respect to all FSA-insured trusts.

      Pursuant to the Restructuring, certain of the terms of the insurance
guarantee arrangements with FSA were modified. The agreements and transactions
with FSA provide for and include, among other things: (1) the resetting of the
cash spread accounts in each of the Company's then existing term asset-backed
securitizations that have been guaranteed by FSA to 11% of the outstanding
principal balance of the receivables in each of such securitizations for the
remaining term of such securitizations; (2) the elimination of all portfolio
performance maintenance requirements that, if otherwise violated, would have
resulted in the trapping of cash flows to over fund such cash spread accounts;
(3) the resetting of the portfolio performance requirements that, if violated,
would constitute a default under the insurance guaranty agreements issued by
FSA, to levels that are commensurate to the Company's expected future portfolio
performance in each of such securitizations; and (4) waiver of all past breaches
and defaults of portfolio performance requirements, the result of which is to
enable the Company to resume the receipt of excess cash flow under each of the
Company's term asset-backed securitizations guaranteed by FSA. As a result of
amended agreements with FSA entered into on April 7, 1999, going forward the
Company will be subject to only Insurance Agreement default tests as shown
below. The following table shows the performance tests (three month rolling
average) as of December 31, 1999:

<TABLE>
<CAPTION>
           Delinquency Test        Default Test           Loss Test
         -------------------   -------------------   -------------------
         Actual    Insurance   Actual    Insurance   Actual    Insurance
         ------    ---------   ------    ---------   ------    ---------
<C>      <C>       <C>         <C>       <C>         <C>       <C>
95-1      9.55%     12.00%     12.05%     25.00%     11.47%     14.00%
96-1     10.02%     12.00%     12.59%     25.00%     10.56%     14.00%
97-1     11.13%     12.00%     15.97%     25.00%     10.44%     14.00%
98-1      9.84 %    12.00%     15.69%     25.00%     10.07%     13.00%
99-1      6.30%     12.00%      8.00%     25.00%      2.30%     13.00%
</TABLE>

      The Company's right to service the loans sold in FSA-insured
securitizations is generally subject to the discretion of FSA. Accordingly,
there can be no assurance that the Company will continue as servicer for such
loans and receive related servicing fees. Additionally, there can be no
assurance that there will not be additional Insurance Agreement Events of
Default in the future, or, if such events of default occur, waivers will be
available. If the Company's Servicing Portfolio does not meet such performance
requirements, the future carrying value of the Company's Retained Interest in
Securitizations would be materially impacted in a negative manner. In addition,
any increase in limitations on cash flow available to the Company from


                                     - 28 -
<PAGE>   29

Permanent Securitization trusts, the Company's inability to obtain any necessary
waivers from FSA or the termination of servicing arrangements could materially
adversely affect the Company's financial condition, results of operations and
cash flows. See Note 5 of the Notes to Financial Statements - Comprehensive
Financial Restructuring.

      The Company as servicer, is required per the trust agreements to have the
books and records of the trusts audited on or before March 30, 2000. The Company
anticipates the audit to be completed in the near future and does not anticipate
problems stemming from the late filing.

Going Concern

      The Company has suffered significant losses from operations during 1999,
1998 and 1997, has a capital deficiency as of December 31, 1999 and its Master
Securitization Credit Facility has been terminated. Such matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in the following
paragraphs.

      While the Company's business has historically required substantial cash to
support the funding of Cash Spread Accounts for its securitizations, issuance
costs of its securitizations, operating expenses, tax payments, debt service and
other cash requirements. These cash requirements increase as the number of loans
purchased, securitized, and serviced by the Company increase. Historically, the
Company has operated on a negative operating cash flow basis. The Company has
funded its negative operating cash flows principally through borrowings under
its secured financing facilities, issuances of subordinated debt and sales of
equity securities. The Company's current business strategy for future growth is
to focus on originating loans for other consumer finance companies, such as
Nuvell, on a service retained basis in return for both origination and
servicing fee income, rather than dedicating capital resources, particularly
cash, to originate loans for its own account and/or in anticipation of engaging
in periodic asset-backed securitization transactions.

      In furtherance of such strategy, on February 4, 2000, the Company entered
into the Nuvell Agreements whereby the Company, in return for origination fees,
has agreed to originate non-prime retail motor vehicle installment sale loans
exclusively for the account of Nuvell. The Company retains servicing of all such
loans in return for servicing fees, for the term of the Nuvell Agreements and
any extension thereof. The Company originates and services loans under the
Nuvell Flow Program in the same manner as it has historically conducted its
business operations.

      The Nuvell Agreements, initially scheduled to expire on May 31,, 2000,
were renewed and extended through December 31, 2000, by the mutual consent of
both the Company and Nuvell. During the course of negotiating the Nuvell
Agreements, the Company and Nuvell had, and continue to have very preliminary
and limited discussions regarding the potential acquisition by Nuvell of the
operational assets of the Company and its personnel including, in particular,
the assets and personnel comprising the Company's loan origination and servicing
capabilities, but there can be no assurance that such discussions will continue
or if they do continue, that they will lead to a transaction. In the event that
the Nuvell Agreements are not renewed or that no other transaction arises
between Nuvell and the Company, the Company will immediately seek to enter into
relationships similar to those represented by the Nuvell Flow Program with other
third-party auto finance companies.

      Further, pursuant to the Company's current business strategy, the Company
projects over the next 12 months an increase in cash flow over 1999. The Company
projects through the Nuvell Flow Program and scheduled cash releases from the
Retained Interest in Securitizations, sufficient cash flow to operate over the
next twelve months. Although there can be no assurance that the Company will
successfully execute this business plan, both the Nuvell Flow Program and the
business plan were designed and implemented to enable the Company, among other
things, to increase its cash flow and further stabilize its financial condition.

      In conjunction with the Company's comprehensive financial restructuring,
the Senior Subordinated Noteholders waived the previously existing Net Worth
Covenant and established the Return on Assets Covenant requiring that, on a
quarterly basis, the Company's net return on assets invested in loan
receivables, expressed as a percentage, exceed pre-established quarterly goals
(the first quarterly measurement period (the "Measurement Period") for such
covenant began as of the quarter ended September 30, 1999). The Company failed
to comply with the Return on Assets Covenant for the Measurement Periods ended
September 31, 1999 and December 31, 1999. The Senior Subordinated Noteholders
waived compliance with such covenant for both Measurement Periods. As a result
of the Company's adoption of a new business plan as implemented by the Nuvell
Flow Program, the Company anticipates that it will fail to comply with such
covenant for future Measurement Periods. The Company expects, but can give no
assurance, that the Senior Subordinated Noteholders will continue to waive
compliance with such covenant for future Measurement Periods.


                                     - 29 -
<PAGE>   30

Inflation

      Increases in the rate of inflation of prices in the U.S. economy generally
result in higher interest rates. Typically, higher interest rates result in a
decrease in the Company's net interest margins and a corresponding decrease in
the Company's gain on sale revenue for a given loan amount; to the extent not
offset by increases in the volume of loans purchased, inflation can therefore
lead to decreases in the Company's profitability.

New Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 as delayed by SFAS No. 137
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The SFAS is effective for periods beginning after June 15,
2000, and is not expected to have a significant impact on the Company's
financial statements.


                                     - 30 -
<PAGE>   31


ITEM 8.  FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>                                                                                                    <C>
Reports of Independent Certified Public Accountants .............................................       32

Balance Sheets as of December 31, 1999 and 1998..................................................       34

Statements of Operations For the Years Ended December 31, 1999, 1998 and 1997....................       35

Statements of Stockholders' Equity (Capital Deficit) For the Years Ended December 31, 1999, 1998
    and 1997.....................................................................................       36

Statements of Cash Flows For the Years Ended December 31, 1999, 1998 and 1997....................       38

Notes to Financial Statements....................................................................       40
</TABLE>



                                     - 31 -
<PAGE>   32

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





National Auto Finance Company, Inc.

Jacksonville, Florida



We have audited the accompanying balance sheets of National Auto Finance
Company, Inc. as of December 31, 1999 and 1998 and the related statements of
operations, stockholders' equity (capital deficit), and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.


We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Auto Finance Company,
Inc. at December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.


The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 15 to the
financial statements, in 1999 and 1998 the Company suffered a loss from
operations, and has a capital deficiency. Such matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 15. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.



West Palm Beach, Florida                                   BDO SEIDMAN LLP
April 7, 2000


                                     - 32 -
<PAGE>   33

INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
National Auto Finance Company, Inc.

We have audited the accompanying consolidated balance sheet of National Auto
Finance Company, Inc. and subsidiaries (formerly National Auto Finance Company,
L.P. and subsidiaries) as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the two year period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
National Auto Finance Company, Inc. and subsidiaries as of December 31, 1997,
and the consolidated results of their operations and their cash flows for each
of the years in the two year period ended December 31, 1997 in conformity with
generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," in 1997.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 3, 4
and 14 to the consolidated financial statements, in 1997 the Company suffered
losses from operations, experienced an Insurance Agreement Event of Default with
respect to its securitizations, and at December 31, 1997 was in violation of
various covenants related to its borrowings. Such matters raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                   /s/ KPMG LLP


April 15, 1998


                                     - 33 -
<PAGE>   34

                      NATIONAL AUTO FINANCE COMPANY, INC.
                                 BALANCE SHEETS
                    DECEMBER 31, 1999 AND DECEMBER 31, 1998
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                     1999          1998
                                                                                   --------      --------
<S>                                                                                <C>           <C>
ASSETS:

Cash and cash equivalents                                                          $  3,576      $  9,540
Retained interest in securitizations, at estimated fair value (Note 3)               35,058        34,117
Furniture, fixtures and equipment, net of accumulated
     depreciation of $1,872 and $1,065                                                3,377         3,277
Deferred financing costs                                                              4,117         2,759
Other assets                                                                          2,648         1,039
                                                                                   --------      --------
    Total assets                                                                   $ 48,776      $ 50,732
                                                                                   ========      ========

LIABILITIES:

Accounts payable and accrued expenses                                              $  1,357      $  2,444
Accrued interest payable-related parties                                                986           117
Junior Subordinated Notes-related parties (Note 13)                                   2,181         1,940
Senior Subordinated Notes (Note 4)                                                   56,395        53,578
Notes payable (Note 4)                                                                3,562         1,017
                                                                                   --------      --------
    Total liabilities                                                                64,481        59,096
                                                                                   --------      --------

COMMITMENTS AND CONTINGENCIES (Note 8)

MANDATORILY REDEEMABLE PREFERRED STOCK series A-$0.01 par value; $1,000 stated
  value; 1,000,000 shares authorized; 2,295 shares
    outstanding; redeemable in January 2005, stated at
    redemption value (Note 6)                                                         2,576         2,415

CAPITAL DEFICIT:
Common Stock -$0.01 par value; 44,000,000 shares authorized;
    17,280,762 and 9,030,762 shares outstanding, respectively (Note 6)                  173            90
Paid-in-capital                                                                      38,246        36,261
Accumulated deficit                                                                 (56,700)      (47,130)
                                                                                   --------      --------
    Total capital deficit                                                           (18,281)      (10,779)
                                                                                   --------      --------
    Total liabilities, mandatorily redeemable preferred stock and
      capital deficit                                                              $ 48,776      $ 50,732
                                                                                   ========      ========
</TABLE>



See accompanying notes to the financial statements.


                                     - 34 -
<PAGE>   35



                       NATIONAL AUTO FINANCE COMPANY, INC.
                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  1999          1998          1997
                                                                --------      --------      --------
<S>                                                             <C>           <C>           <C>
REVENUE:
   Securitization related income (loss) (Note 3)                $  7,630      $(13,531)     $   (323)
   Servicing income                                                5,719         6,424         3,437
   Interest income                                                 1,443         2,399           817
   Other income                                                      716           377           214
                                                                --------      --------      --------
     Total revenue                                                15,508        (4,331)        4,145
                                                                --------      --------      --------
EXPENSES:
   Servicing                                                       3,285         6,262         5,944
   Interest                                                        8,489         8,417         1,638
   Salaries and employee benefits                                  5,087         7,705         6,346
   Direct loan acquisition expenses                                  914         1,520         3,591
   Depreciation and amortization                                   1,679           802           743
   Other operating expenses (Note 7)                               5,624         4,544         3,602
                                                                --------      --------      --------
     Total expenses                                               25,078        29,250        21,864
                                                                --------      --------      --------
Loss before extraordinary item                                    (9,570)      (33,581)      (17,719)
Extraordinary loss due to early extinguishment of debt                --            --          (720)
                                                                --------      --------      --------
Net loss before preferred stock dividends                         (9,570)      (33,581)      (18,439)
Preferred stock dividends                                           (160)         (160)         (148)
                                                                --------      --------      --------
Net loss applicable to Common Stockholders                      $ (9,730)     $(33,741)     $(18,587)
                                                                ========      ========      ========

PER SHARE DATA: (NOTE 2)
Loss per common share before extraordinary item - basic and
   diluted                                                      $   (.64)     $  (3.73)     $  (2.52)
Extraordinary loss
                                                                      --            --         (0.10)
                                                                --------      --------      --------
Loss per common share- basic and diluted                        $   (.64)     $  (3.73)     $  (2.62)
                                                                ========      ========      ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted                                                 15,111         9,031         7,087
                                                                ========      ========      ========
</TABLE>

See accompanying notes to the financial statements.


                                     - 35 -
<PAGE>   36

                       NATIONAL AUTO FINANCE COMPANY, INC.
              STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   Equity of
                                                           Common       Paid-in    Accumulated    Predecessor
                                                           Stock        Capital      Deficit         Entity          Total
                                                          --------     --------    -----------    -----------       --------
<S>                                                       <C>          <C>         <C>            <C>               <C>
Balance as of December 31, 1996                           $     --     $     --      $     --      $  9,551         $  9,551
      Net income from January 1, 1997
       through reorganization on January 29, 1997                                                       526              526
      Assets retained by partnership                            --           --            --           (31)             (31)
                                                          --------     --------      --------      --------         --------

Balance as of January 29, 1997                                  --           --            --        10,046           10,046

Exchange of predecessor equity for Common Stock
    in connection with reorganization on
    January 29, 1997 (Note 1)                                   42        7,709            --       (10,046)(1)       (2,295)

Deferred income taxes recorded in connection
    with reorganization                                         --       (5,416)           --            --           (5,416)

Issuance of 496,000 shares of Common Stock in
    exchange for deferred interest on Senior
    Subordinated Notes (Note 4)                                  5          164            --            --              169

Issuance of 2,300,000 shares of Common Stock
    in initial public offering, net of costs (Note 1)           23       16,817            --
                                                                                                         --           16,840

Issuance of 100,000 shares of Common Stock to
    Financial Security Assurance Inc. for certain
    waivers relating to Permanent Securitizations                1          699            --            --              700


Issuance of 1,904,762 shares of Common Stock (Note 4)           19        9,138            --            --            9,157

Issuance of 1,038,924 Warrants to purchase
    Common Stock in connection with the
    issuance of Senior Subordinated Notes (Note 4)              --        5,454            --            --            5,454

Dividends on mandatorily redeemable preferred stock             --         (148)           --            --             (148)

Net loss subsequent to reorganization                           --           --       (13,549)           --          (13,549)
                                                          --------     --------      --------      --------         --------

Balance as of December 31, 1997                                 90       34,417       (13,549)           --           20,958
</TABLE>


(1) $2,295 of such amount was attributed to mandatorily redeemable preferred
    stock.


See accompanying notes to the financial statements.


                                     - 36 -
<PAGE>   37


                       NATIONAL AUTO FINANCE COMPANY, INC.
              STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)
                                   (CONCLUDED)


<TABLE>
<CAPTION>
                                                                                                           Equity of
                                                              Common       Paid-in      Accumulated      Predecessor
                                                              Stock        Capital        Deficit           Entity         Total
                                                             --------      --------     -----------      -----------     ---------

<S>                                                          <C>           <C>          <C>              <C>             <C>
Issuance of 593,671 Warrants to purchase
      Common Stock in connection with the
      issuance of Senior Subordinated Notes (Note 4)               --         2,004              --              --          2,004

Dividends on mandatorily redeemable preferred stock                --          (160)             --              --           (160)

Net loss for year ending December 31, 1998                         --            --         (33,581)             --        (33,581)
                                                             --------      --------       ---------       ---------      ---------

Balance as of December 31, 1998                                    90        36,261         (47,130)             --        (10,779)

Issuance of 8,250,000 Shares of  Common Stock                      83         2,145              --              --          2,228

Dividends on mandatorily redeemable preferred stock                --          (160)             --              --           (160)

Net loss for year ending December 31, 1999                         --            --          (9,570)             --         (9,570)
                                                             --------      --------       ---------       ---------      ---------

Balance as of December 31, 1999                              $    173      $ 38,246       $ (56,700)      $      --      $ (18,281)
                                                             ========      ========       =========       =========      =========
</TABLE>


See accompanying notes to the financial statements.



                                     - 37 -
<PAGE>   38

                       NATIONAL AUTO FINANCE COMPANY, INC.
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                               1999            1998           1997
                                                                            ---------       ---------       ---------

<S>                                                                         <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                    $  (9,570)      $ (33,581)      $ (18,439)
   Adjustments to reconcile net income (loss) to net cash used in
    operating activities:
      Securitization related income                                            (7,630)         13,531             323
      Depreciation expense                                                        810             802             223
      Purchases of loans held for sale                                        (67,743)        (95,911)       (187,383)
      Proceeds from transfer of loans to Master Trust                          67,743          95,911         187,383
      Cash flows from Retained Interest released to Company                    16,348          12,160          10,095
      Cash deposits to Spread Accounts                                         (9,658)        (28,329)        (18,564)
      Amortization and write-off of deferred financing costs                      869             567           1,024
      Amortization of Warrants                                                  1,070           1,036              --
      Amortization of deferred placement costs                                     --              --             254
      Changes in other assets and liabilities:
        Other assets                                                           (1,609)            998          (1,516)
        Accounts payable and accrued expenses                                  (1,087)           (998)          1,489
        Accrued interest payable-related parties                                  869              75            (105)
        Accrued interest payable-Senior Subordinated Notes
         and other notes                                                           --              --            (157)
                                                                            ---------       ---------       ---------
Net cash used in operating activities                                          (9,588)        (33,739)        (25,373)
                                                                            ---------       ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Fixed assets purchased                                                        (908)         (1,543)         (1,524)
                                                                            ---------       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Junior Subordinated Notes-related parties                        240              --              --
   Principal payments on Junior Subordinated Notes-related parties                 --              --          (5,182)
   Proceeds from notes payable                                                  3,000              81           1,018
   Proceeds from Senior Subordinated Notes                                      1,747          19,031          37,834
   Principal payments on Notes Payable                                           (455)           (677)             --
   Principal payments on Senior Subordinated Notes                                 --              --         (12,000)
   Proceeds from BankBoston revolving credit facility                              --              --           7,996
   Principal payment on BankBoston revolving credit facility                       --              --          (8,000)
   Principal payments on capital leases                                            --              --             (33)
   Payment of Mandatorily Redeemable Preferred Stock dividends                     --             (80)           (107)
   Proceeds from initial public offering                                           --              --          17,615
   Proceeds from issuance of Common Stock, net                                     --              --           9,157
                                                                            ---------       ---------       ---------
Net cash provided by financing activities                                       4,532          18,355          48,298
                                                                            ---------       ---------       ---------
Net increase (decrease) in cash and cash equivalents                           (5,964)        (16,927)         21,401
Cash and cash equivalents at beginning of year                                  9,540          26,467           5,066
                                                                            ---------       ---------       ---------
Cash and cash equivalents at end of year                                    $   3,576       $   9,540       $  26,467
                                                                            =========       =========       =========

SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid for interest                                                   $   4,580       $   6,921       $   1,656
                                                                            =========       =========       =========
</TABLE>



See accompanying notes to the financial statements



                                     - 38 -
<PAGE>   39

                       NATIONAL AUTO FINANCE COMPANY, INC.
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)
                                   (CONCLUDED)



<TABLE>
<CAPTION>
                                                                                                 1999        1998        1997
                                                                                                ------      ------      ------

<S>                                                                                            <C>         <C>         <C>
NON-CASH FINANCING ACTIVITIES:
   Offering costs deferred in 1997 transferred to paid-in capital in 1998                       $   --      $   --      $  775
   Accrued dividends on mandatorily redeemable preferred stock                                     160         160          41
   Conversion of deferred interest on Senior Subordinated Notes to Common
     Stock and paid-in capital                                                                      --          --         169
   Conversion of predecessor entity capital to Mandatorily Redeemable Preferred Stock               --          --       2,295
   Conversion of predecessor entity capital to Common Stock and
     paid-in capital                                                                                --          --       7,225
   Deferred income taxes from reorganization considered reduction in paid-in capital                --          --       5,416
   Income earned in 1998 prior to reorganization included in
     paid-in capital                                                                                --          --         526
   Issuance of 1,038,924 warrants in conjunction with Senior Subordinated                           --          --       5,454
     Notes considered paid-in-capital
   Issuance of 593,671 warrants in conjunction with Senior Subordinated                             --       2,004          --
     Notes considered paid-in-capital
   Issuance of 8,250,000 Shares of Common Stock to Senior Subordinated
     Noteholders                                                                                 2,228          --          --
   Conversion of accrued interest on Senior Subordinated Notes into
     Senior Subordinated Notes                                                                      --          --       2,689
</TABLE>

See accompanying notes to the financial statements



                                     - 39 -
<PAGE>   40


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(1)   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (a)  Organization and Business

           National Auto Finance Company, Inc. (the "Company") is a specialty
           consumer finance company historically engaged in the business of
           purchasing, financing, securitizing and servicing loans originated
           primarily by manufacturer-franchised dealers ("Dealers") in the sale
           of new and used automobiles. The Company is located in Jacksonville,
           Florida. Through its loan purchases, the Company provides indirect
           financing to non-prime consumers ("Consumers"). The Company serves as
           a source of financing for Dealers, allowing them to sell automobiles
           to Consumers who otherwise might not qualify under underwriting
           criteria required by more traditional sources such as commercial
           banks. On February 4, 2000, the Company entered into the Nuvell
           Agreements, (See Note 14) whereby the Company agreed to originate
           loans exclusively for the benefit of Nuvell through the Company's
           existing Dealer network and immediately, as such loans are accepted
           and funded by Nuvell, assign such loans to Nuvell. The Company
           retains servicing of all such loans for the term of the Nuvell
           Agreements and any extension of such Agreements negotiated between
           the Company and Nuvell.

           National Auto Finance Company, LP, a Delaware limited partnership
           (the "National Auto Partnership") was organized in October 1994 and
           conducted the business of the Company until January 29, 1997. On that
           day, in connection with the closing of the Company's Initial Public
           Offering (the "Offering"), the assets and certain liabilities of the
           National Auto Partnership were transferred to the Company in exchange
           for all of the Common Stock then outstanding and all of the preferred
           stock of the Company then outstanding (the "Reorganization"). The
           Company then issued 2,300,000 shares of stock to the public in the
           underwritten Initial Public Offering. The reorganization was
           accounted for in a manner similar to a pooling of interests since the
           Company and National Auto Partnership were under common control at
           the time of reorganization.

      (b)  Summary of Significant Accounting Policies


           A description of the significant accounting policies that are
followed by the Company is presented below:

                (i)   Principles of Consolidation

                      The financial statements reflect the operations of the
                      National Auto Partnership and subsidiaries for an
                      approximate one-month period of January 1997 and National
                      Auto Finance Company, Inc. and subsidiaries for the eleven
                      months ended December 31,1997. All significant
                      intercompany accounts and transactions have been
                      eliminated in consolidation. As the Company has no
                      subsidiaries as of December 31, 1998 and 1999, such
                      financial statements are not consolidated.

                (ii)  Cash and Cash Equivalents

                      The Company considers money market funds and all other
                      highly liquid debt instruments purchased with an original
                      maturity of three months or less to be cash equivalents.

                (iii) Furniture, Fixtures and Equipment

                      Furniture, fixtures and equipment are stated at cost less
                      accumulated depreciation and amortization. Owned
                      properties are depreciated on a straight-line basis over
                      their useful lives. Capital lease assets are amortized on
                      a straight-line basis over the lesser of their estimated
                      useful lives or their lease terms.



                                     - 40 -
<PAGE>   41


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


                (iv)  Securitization of Loans and Retained Interest in
                      Securitizations

                      Effective January 1, 1997, the Company adopted Financial
                      Accounting Standards Board (FASB) Statement of Financial
                      Accounting Standards (SFAS) No. 125, "Accounting for
                      Transfers and Servicing of Financial Assets and
                      Extinguishments of Liabilities" (SFAS No. 125). Under SFAS
                      No. 125, an entity recognizes only assets it controls and
                      liabilities it has incurred, discontinues recognition of
                      assets only when control has been surrendered, and
                      discontinues recognition of liabilities only when they
                      have been extinguished.


                      Until availability of access to funds through the Master
                      Securitization Credit Facility was terminated on February
                      23, 2000 (see Note 14), loans purchased by the Company
                      were sold on a daily basis in a two-step securitization
                      program as described in Note 3. Gains or losses are
                      recognized (1) upon transfer of loans to the Master Trust
                      based upon the amount of cash received upon transfer of
                      such loans generally equal to the Company's purchase price
                      of the loan and (2) an estimate of the Company's residual
                      interest in the Master Trust (which constitute a portion
                      of Retained Interest in Securitizations). The value of the
                      Company's residual interest in the Master Trust is
                      determined by estimating the fair value of amounts to be
                      received from the Master Trust and the subsequent
                      "Permanent Securitizations."

                      The Retained Interest in Securitizations is classified as
                      a trading security for financial reporting purposes with
                      changes in the estimated fair value either credited or
                      charged to the statement of operations.

                      The Company is aware of a limited market for the purchase
                      or sale of its Overcollateralization Accounts (a portion
                      of its Retained Interest in Securitizations), but is not
                      aware of an active market for the purchase or sale of the
                      other components of its Retained Interest in
                      Securitizations (Excess Spread Receivables ("ESRs") and
                      Cash Spread Accounts) and accordingly, the Company has
                      determined the estimated fair value of the Retained
                      Interest in Securitizations at December 31, 1999 and 1998
                      by the following process:

                      1.   The Company has estimated the timing and amount of
                           cash flows to be received from loans transferred to
                           each securitization trust based upon assumptions
                           relating to estimates of net losses, prepayments and
                           normal principal and interest amortization (cash-in).

                      2.   The Company has calculated the timing, amount of the
                           total remaining principal, and interest to be paid to
                           the securitization trusts' investors given the
                           assumptions noted above and the contractual
                           requirements of each securitization trust.

                      3.   The Company has estimated the total amount to be paid
                           by each securitization trust for any servicing,
                           insurance and other costs and the timing of such
                           payments.

                      4.   The estimated cash payments described in (2) and (3)
                           above have been subtracted from the estimated cash
                           flows to determine the estimated Excess Spread
                           Receivable (ESR) for each month.



                                     - 41 -
<PAGE>   42


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


                      5.   The Company has estimated the required Cash Spread
                           Account balance. See Note 3 for the securitization
                           trusts for each period given the requirements of each
                           trust and the impact of the assumptions noted above.
                           The Company then calculated the amount of Excess
                           Spread Receivable to be added to the Cash Spread
                           Account or the amount of Cash Spread Account to be
                           released to the Company each month.

                      6.   The estimated amount of cash available to the Company
                           as described in (5) represents the Company's estimate
                           of the "cash-out" of the securitization trusts.

                      7.   The estimated fair value of cash-out over the
                           remaining life of the securitization trusts has been
                           determined by discounting the estimated cash-out at a
                           rate management believed an investor would require
                           for a stream of cash flows with similar risk
                           characteristics.

                      8.   The estimated fair value of cash-out for the
                           securitization trusts were compared to the Retained
                           Interest in Securitizations for the securitization
                           trusts. Adjustments to estimated fair value are
                           charged to securitization related income (loss).

                (v)   Deferred Financing Costs

                      Costs incurred in connection with certain borrowings are
                      capitalized and are amortized on a straight-line basis
                      over the term of the debt.

                (vi)  Stock-Based Compensation

                      The Company accounts for stock-based compensation to
                      employees using the intrinsic value method of accounting
                      prescribed by Accounting Principles Board ("APB") Opinion
                      No. 25.

                (vii) Income Taxes

                      Subsequent to the reorganization on January 1997 income
                      taxes are accounted for under the asset and liability
                      method. Deferred tax assets and liabilities are recognized
                      for the future tax consequences attributable to
                      differences between the financial statement carrying
                      amounts of existing assets and liabilities and their
                      respective tax bases and operating loss and tax credit
                      carryforwards. Deferred tax assets and liabilities are
                      measured using enacted tax rates expected to apply to
                      taxable income in the years in which those temporary
                      differences are expected to be recovered or settled. The
                      effect on deferred tax assets and liabilities of a change
                      in tax rates is recognized in income in the period that
                      includes the enactment date. A deferred tax valuation
                      allowance is provided to the extent that it is more likely
                      than not that deferred tax assets will not be realized.

                (ix)  Servicing

                      Servicing fees are reported as income when earned.
                      Servicing expenses are charged to expense as incurred.
                      External servicing expenses include charges paid to third
                      parties for servicing related charges. Internal servicing
                      expense includes salaries and other costs associated with
                      the Company's service center.



                                     - 42 -
<PAGE>   43

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


                (x)   Use of Estimates

                      In preparing the financial statements, management is
                      required to make estimates and assumptions that affect the
                      reported amounts of assets, liabilities, revenue and
                      expense. The most significant of the estimates relate to
                      the calculations and modeling underlying the valuation of
                      the Retained Interest in Securitizations and the related
                      gain on sales of loans. Actual results could differ from
                      these estimates in the near term and could be significant.

                (xi)  Reclassifications

                      Certain reclassifications have been made to 1997 and 1998
                      amounts to conform to the 1999 presentation.

      (c)  New Accounting Pronouncements

           In June 1998, the FASB issued SFAS No. 133, "Accounting for
           Derivative Instruments and Hedging Activities". SFAS 133 as delayed
           by SFAS No. 137 establishes accounting and reporting standards for
           derivative instruments, including certain derivative instruments
           embedded in other contracts, and for hedging activities. The SFAS is
           effective for periods beginning after June 15, 2000, and is not
           expected to have a significant impact on the Company's financial
           statements.

(2)   LOSS PER COMMON SHARE (EPS)

      Loss per common share for 1999 is calculated as follows:

<TABLE>
<CAPTION>
                                                                                  Weighted Average
                                                                                  ----------------
                                                                         Loss          Shares        Per Share
                                                                     (Numerator)    (Denominator)     Amount
                                                                     -----------    -------------    ---------
                                                                      (in thousands, except per share amount)

<S>                                                                    <C>               <C>           <C>
      Loss before preferred stock dividends                            $ (9,570)         15,111        $ (.63)
      Preferred stock dividends                                            (160)         15,111          (.01)
                                                                       --------                        ------
      Net loss applicable to Common Stockholders                       $ (9,730)         15,111        $ (.64)
                                                                       ========                        ======
</TABLE>


      Loss per common share for 1998 is calculated as follows:

<TABLE>
<CAPTION>
                                                                                   Weighted Average
                                                                                   ----------------
                                                                         Loss          Shares        Per Share
                                                                     (Numerator)    (Denominator)     Amount
                                                                     -----------    -------------     ------
                                                                        (in thousands, except per share amount)

<S>                                                                    <C>                <C>            <C>
      Loss before preferred stock dividends                            $ (33,581)         9,031          (3.71)
      Preferred stock dividends                                             (160)         9,031           (.02)
                                                                       ---------                       -------
      Net loss applicable to Common Stockholders                       $ (33,741)         9,031        $ (3.73)
                                                                       =========                       =======
</TABLE>


               Inclusion of 2,402,090 and 388,000 options and 1,632,594 and
      1,632,594 warrants outstanding at December 31, 1999 and 1998 respectively,
      would have an antidilutive effect on the net loss per share for the years
      ending December 31, 1999 and 1998 for diluted EPS, thus, such Common Stock
      equivalents are excluded from the calculation.



                                     - 43 -
<PAGE>   44

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(3)   RETAINED INTEREST IN SECURITIZATIONS

      Retained Interest in Securitizations was $35.1 million and $34.1 million
      at December 31, 1999 and 1998 respectively. During 1998, the Company
      reduced the carrying value of Retained Interest in Securitizations by
      $23.1 million.

      Assumptions used to value the Retained Interests in Securitizations at
      December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                                      1999                 1998
                                                                   ---------             --------

<S>                                                               <C>                   <C>
           Weighted average cumulative net loss rate                  14.00%              14.00%
           Weighted average cumulative prepayment rate                22.60%              21.40%
           Discount rate                                              14.00%              14.00%
           Level of required Cash Spread Account                   8% to 11%              11.00%
           Rate of interest on Cash Spread Account                     4.90%               4.85%
           Weighted average interest rate on loans                    18.88%              19.35%
           Weighted average yield on bonds and notes
             held by securitization investors                          6.59%               6.12%
</TABLE>

           Until termination of capital availability under the Master Trust
      Securitization Credit Facility on February 23, 2000, (see Note 14) the
      Company funded loans primarily through a two-step asset securitization
      program consisting of (i) the securitized warehousing of all of its loans
      through daily sales to bankruptcy-remote Master Trust financed by
      purchases of "B Certificate" interests in such Trust by the First Union
      Master Trust Securitization Credit Facility, followed by (ii) the transfer
      of such warehoused loans from time to time by the Master Trust to a
      Permanent Securitization, thereby creating additional availability of
      capital from the Master Trust Securitization Credit Facility.

           Until availability of access to funds through the Master Trust
      Securitization Credit Faculty was terminated on February 23, 2000 (See
      Note 14), the Company sold loans that it purchased from Dealers on a daily
      basis to a special-purpose subsidiary, which then sold the loans to the
      Master Trust in exchange for cash and certain residual interests in future
      excess cash flows from the Master Trust. Prior to payment in full of the
      Class B Certificates, the Master Trust had issued two classes of investor
      certificates: "Class B Certificates," which were variable funding (i.e.,
      revolving) certificates bearing interest at floating rates, and "Class C
      Certificates," representing a portion of the residual interest of the
      Company's special-purpose subsidiary in future excess cash flows from the
      Master Trust after required payments to the holders of the Class B
      Certificates, deposits of funds to a restricted cash account as a reserve
      for future loan losses which provides additional credit enhancement for
      the holders of the Class B Certificates and payment of certain other
      expenses and obligations of the Master Trust. First Union had owned 100%
      of the outstanding Class B Certificates and the Company indirectly owns
      100% of the Class C Certificates. Collectively, the Cash Spread Accounts
      and the Class C Certificate portion of loan principal
      (Over-Collateralization Accounts), are held by the Company to
      collateralize the Master Trust. The Spread Accounts and Excess Spread
      Receivables ("ESR") are reflected collectively on the balance sheet as a
      part of "Retained Interest in Securitizations."

           Periodically the Master Trust transferred loans and Spread Account
      balances to Permanent Securitizations in exchange for cash, which is used
      to repay the Class B Certificates. Debt securities representing interests
      in the Permanent Securitizations are sold to third-party investors, who
      are repaid from cash flows from the loans in the applicable Permanent
      Securitization. Excess Spread Receivables and return of Spread Accounts
      attributable to such loans flow from the Permanent Securitization to the
      Company to the extent such funds are available.

           In September 1999, the National Auto Finance 1999-1 Trust (the
      "1999-1 Trust") was formed and the Master Trust refinanced approximately
      $60 million of its receivables in a private placement of asset-back
      securities through their transfer by the Master Trust to the 1999-1 Trust,
      as part of a Permanent Securitization. Securities were issued to Pruco
      Life Insurance Company, Pruco Life Insurance Company of New Jersey, The
      Prudential Insurance Company of America and First Union in the amounts of
      $10.5 million, $7.9 million, $29.6 million and $3 million, respectively.
      Payment of principal of, and interest on, the collective $48 million of
      the securities issued to Prudential related entities in that transaction
      is insured by a payment guarantee by FSA, and such securities are rated
      AAA and Aaa by Standards & Poor's Rating Service and Moody's Investor
      Service, Inc., respectively. The proceeds of that Permanent Securitization
      transaction were used by the Master Trust to repay a portion of the then
      outstanding balance of the Class B Certificates.



                                     - 44 -
<PAGE>   45

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


      Since such time, the Master Trust had issued additional beneficial
      interests in loans purchased by the Master Trust, as evidenced by the
      Class B Certificates, to finance its purchase of loans from the Company.
      Under the financing structures the Company has used to date for its
      securitizations, certain excess cash flows generated by the loans are
      retained in the Cash Spread Accounts within the securitization trusts to
      provide liquidity and credit enhancement. While the specific terms and
      mechanics of the Cash Spread Accounts can vary depending on each
      transaction, the Company's agreements with FSA, the financial guaranty
      insurer that has provided credit enhancements in connection with the
      Company's securitizations, generally provide that the Company is not
      entitled to receive any excess cash flows unless the level of certain
      Spread Account balances, comprised of cash and the Overcollateralization
      Accounts, have been attained and/or the delinquency or losses related to
      the loans in the pool are below certain predetermined levels.
      Additionally, effective as of the Restructuring date (See Note 5 of Notes
      to Financial Statements - Comprehensive Financial Restructuring), the
      Company is required to maintain a minimum equity position in the Revolving
      Securitization of 24.0% of the net serviced receivables in the Master
      Trust, or 3.0 times net losses, whichever is greater. This minimum equity
      position currently consists of cash invested by the Company and
      overcollateralization in the form of the discount from the face amount of
      a loan at which the Company is willing to purchase the loan from an
      automobile dealer ("Dealer Discount") related to the principal balance of
      loans. As of December 31, 1999 and 1998, the Company had a 25.71% and
      14.00% minimum equity position investment in the Revolving Securitization.
      See Note 5. As of February 22, 2000 the Company was in default of the
      required minimum equity position. See Note 14.

      Since the completion of the Restructuring, under the terms of the
      Company's insurance agreements with FSA, upon the occurrence of a
      Permanent Securitization failing to meet portfolio performance tests (an
      "Insurance Agreement Event of Default"), the Company would be in default
      under such insurance agreements. Upon an Insurance Agreement Event of
      Default, FSA may: (i) permanently suspend distributions of cash flow to
      the Company from the related securitization trust and all other
      FSA-insured trusts until the asset-backed securities have been paid in
      full; (ii) capture all excess cash flows from performing FSA-insured
      trusts; (iii) increase its premiums; and (iv) replace the Company as
      servicer with respect to all FSA-insured trusts. See Note 5.

      The Company's right to service the loans sold in FSA-insured
      securitizations is generally subject to the discretion of FSA.
      Accordingly, there can be no assurance that the Company will continue as
      servicer for such loans and receive related servicing fees. Additionally,
      there can be no assurance that there will not be Insurance Agreement
      Events of Default in the future, or if such events of default occur,
      waivers will be available. If the Company's Servicing Portfolio does not
      meet such performance requirements, the future carrying value of the
      Company's Retained Interest in Securitizations would be materially
      impacted in a negative manner. In addition, any increase in limitations on
      cash flow available to the Company from Permanent Securitization trusts,
      the Company's inability to obtain any necessary waivers from FSA or the
      termination of servicing arrangements could materially adversely affect
      the Company's financial condition, results of operations and cash flows.
      See Note 5.




                                     - 45 -
<PAGE>   46

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


      During the years ended December 31, 1999, 1998 and 1997 the following
      activity took place with respect to securitizations:

<TABLE>
<CAPTION>
                                                                           1999           1998            1997
                                                                           ----           ----            -----
                                                                                 (dollars in thousands)

<S>                                                                     <C>            <C>             <C>
      Principal balance of loans purchased                              $  67,743      $  95,911       $  187,383
                                                                        =========      =========       ==========

      Weighted average coupon rate on loans purchased
      during the period                                                     18.88%         19.35%           19.24%
                                                                        =========      =========       ==========
</TABLE>

(4)   DEBT

      Notes payable at December 31, are as follows:

<TABLE>
<CAPTION>
                                                                                 1999       1998
                                                                               -------    -------
                                                                                 (in thousands)
<S>                                                                            <C>        <C>
      Revolving $1.5 million line of credit with First Union dated
         August 25, 1997; matures March, 2001; interest payable
         monthly at LIBOR + 2.5% (See Note 13)                                 $   368    $   734

      Revolving $8.0 million credit facility with First Union
      (See Notes 5 and 14)                                                       3,000         --
      Other                                                                        194        283
                                                                               -------    -------
                                                                               $ 3,562    $ 1,017
                                                                               =======    =======
</TABLE>

      In March 1998, the Company completed a private placement (the "March
      Private Placement") of $20 million principal amount of Senior Subordinated
      Notes with detachable Warrants under terms similar to that of the December
      Private Placement. In December 1997, the Company completed a private
      placement (the "December Private Placement") of $10 million of the
      Company's Common Stock, $.01 per value ("Common Stock") and $40 million
      principal amount of Senior Subordinated Notes with detachable warrants to
      purchase Common Stock ("Warrants"). The December Private Placement of the
      $10 million in Common Stock resulted in the issuance of 1,904,762 shares
      of the Company's Common Stock at $5.25 per share. Additionally, a
      representative of each of two of the Senior Subordinated Noteholders who
      were also stock purchasers was elected to the Company's Board of
      Directors.

      In connection with the December Private Placement and the March Private
      Placement, the Company issued an aggregate of 1,632,685 detachable
      Warrants with a ten-year life, exercisable into Common Stock of the
      Company at $0.01 per share. The fair value of such Warrants was estimated
      to be based upon a share value of $5.25 for the December Private Placement
      and $3.37 for the March Private Placement, for a total of $7.5 million.
      Such amount is recorded as a discount to the related debt, as additional
      paid-in capital, and is being amortized over the life of the debt using
      the interest method. The effective interest rate, including the value of
      the Warrants, is approximately 15%.

      The balance of the Senior Subordinated Notes payable was $56.4 and $53.6
      million as of December 31, 1999 and December 31, 1998, respectively. Such
      amounts are shown net of discounts of $5.3 million and $6.4 million
      respectively. The principal amount of the aggregate $61.7 million of
      Senior Subordinated Notes is due in December 2004 and bears interest at
      11.875% per annum until December 21, 2000, 12.875% per annum for the
      period from December 22, 2000 until December 21, 2001, 13.875% per annum
      for the period from December 22, 2001 until December 21, 2002, and 14.875%
      per annum thereafter, with interest payable quarterly.

      Until the completion of the Restructuring (see Note 5), the Company was in
      violation of the Minimum Consolidated Net Worth and Adjusted Interest
      Expense covenants contained in the Securities Purchase Agreements pursuant
      to which it issued the $60,000,000 aggregate principal amount of Senior
      Subordinated Notes. The Minimum Consolidated Net



                                     - 46 -
<PAGE>   47


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


      Worth covenant required that the Company maintain Consolidated Net Worth
      (as defined) of not less than (a) $25,890,000 plus (b) on a cumulative
      basis commencing with the fiscal quarter ending March 31, 1998, 50% of net
      income (if positive) for each fiscal quarter plus(c) 100% of the net
      proceeds from any public offering or private placement of Common Stock.
      The Adjusted Interest Expense covenant required generally that the sum of
      the Company's Net Income (as defined), Consolidated Total Interest Expense
      (as defined) and income and franchise taxes divided by its Consolidated
      Total Interest Expense (as defined) for each period of four fiscal
      quarters ending December 31, 1997 and thereafter be at least 1.4:1.

      In December 1997, in connection with the consummation of the December
      Private Placement (as described above), the Company repaid the $12,000,000
      senior subordinated notes held by J.P. Morgan Investment Management, Inc.
      on behalf of certain institutional investors (the "Morgan Notes"). In
      connection with the repayment of such debt in 1997, the Company recorded
      an extraordinary item for the write-off of related deferred financing
      costs of $720,000. Prior to the Company's Initial Public Offering
      (Offering) in January, 1997, the Morgan Notes had a 3% deferred interest
      coupon that accrued interest on a compounded basis and was payable in
      August, 2006, but was converted into 496,000 shares of common stock upon
      consummation of the Initial Public Offering.

      See Note 13 for a description of Junior Subordinated Notes.

      Convertible Senior Subordinated Promissory Notes in the principal amount
      of approximately $900,000 were issued on each of July 1, October 1, 1999
      and January 1, 2000 in lieu of the payment of cash interest. See Note 5
      for a discussion of the impact of the comprehensive financial
      restructuring on the Senior Subordinated Debt.

(5)   COMPREHENSIVE FINANCIAL RESTRUCTURING

      On April 7, 1999, the Company completed a comprehensive financial
      restructuring (the "Restructuring") of its Senior Subordinated and Junior
      Subordinated Notes, resolved certain other issues with its Senior
      Subordinated Noteholders and Junior Subordinated Noteholders, entered into
      several loan facilities and arrangements with First Union, and modified
      certain of the terms of the insurance guarantee arrangements with FSA,
      related to the Company's securitized asset-backed bonds.

      Senior Subordinated Notes

      The agreements and transactions with the Senior Subordinated Noteholders
      provide for and include, among other things: (1) the waiver of the past
      defaults and breaches of covenants, representations and warranties, if
      any, made in connection with the Senior Subordinated Notes; (2) the
      waiving of the previously existing Net Worth Covenant; (3) the
      establishment of a new covenant requiring that, on a quarterly basis, the
      Company's net return on assets invested in loan receivables, expressed as
      a percentage, exceed pre-established quarterly goals (the "Return on
      Assets Covenant"); the first quarterly measurement period for this
      covenant begins as of the quarter ending September 30, 1999, (See Note
      15); (4) the granting to the Company of the option to pay during the
      two-year period ending March 31, 2001 fifty percent (50%) of the interest
      owed on the Senior Subordinated Notes (and the interest on such interest)
      through the issuance of additional Senior Subordinated Notes, convertible
      into Common Stock at the conversion price of $.75 per share (the
      "Convertible Senior Subordinated Promissory Notes"); (5) the issuance to
      the Senior Subordinated Noteholders of 7,071,429 shares of Common Stock as
      consideration for the waivers and amendments granted to the Company; (6)
      the issuance to those Noteholders that also purchased Common Stock of the
      Company at the time of their debt investment 1,178,571 additional shares
      of Common Stock in exchange for the execution and delivery of full and
      complete releases of any claims arising by virtue of those Noteholders'
      equity investment; and (7) the execution and delivery of full and complete
      releases by and among the Company, the Noteholders and affiliates of and
      other parties related to each of such parties. In addition, the Senior
      Subordinated Noteholders were granted the right to name three additional
      persons to the Board of Directors of the Company, increasing to six seats
      their total number of Board representatives, thereby giving them majority
      control of the Board. The Company capitalized deferred financing costs of
      $2,227,500 associated with the issuance of the 7,071,429 and 1,178,571
      shares issued to the Senior Noteholders. These costs are being amortized
      over the remaining term of the Senior Subordinated Notes. During 1999, the
      Company issued approximately $2.7 million of Senior Subordinated Notes in
      payment of accrued interest (as described in (4) of this paragraph).




                                     - 47 -
<PAGE>   48

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


      First Union

      Until February 22, 2000 (see Note 14) the agreements and transactions with
      First Union provided for and included, among other things: (1) the
      extension of the Master Trust warehouse line for an additional two years
      (through March 31, 2001) and an increase in the amount the

      Master Trust could borrow under such facility from $75 million to $85
      million; the interest rate for this facility was established at LIBOR +
      1.5%; (2) the commitment by First Union to purchase up to $20 million of
      subordinated asset-backed debt securities in connection with the Company's
      securitizations; the interest rate for this commitment was established at
      LIBOR + 5%; (3) a revolving credit facility enabling the Company to borrow
      up to $8 million for working capital purposes, secured by the Company's
      Residual Interest in Securitizations; the interest rate for this facility
      was established at LIBOR + 5%; and (4) waiver of violations of certain
      covenants with respect to the Master Trust, specifically, the covenant
      that the Master Trust maintain certain interest rate hedging agreements
      and covenants related to allowable repossession and recovery limits.

      Junior Subordinated Notes

      The agreements and transactions with the Junior Subordinated Noteholders
      provide for and include, among other things: (1) the waiver of the past
      defaults and breaches under the Junior Subordinated Notes; (2) the
      granting to the Company of the option to pay during the period ending
      January 31, 2002 up to one hundred percent (100%) of the interest owed on
      the Junior Subordinated Notes (and the interest on such interest) through
      the issuance of additional

      Junior Subordinated Notes that are convertible into Common Stock at the
      conversion price of $.75 per share (the "Junior Convertible Subordinated
      Notes"); (3) the granting to the designees of the Senior Subordinated
      Noteholders to the Company's Board of Directors an irrevocable proxy to
      vote the 4,230,000 shares of Common Stock held by National Auto Finance
      Company, LP (a limited partnership controlled by certain of the Junior
      Noteholders) in all matters as to which such shares are entitled to vote;
      (4) the execution and delivery of full and complete releases by and among
      the Company, the Senior Subordinated Noteholders, the Junior Subordinated
      Noteholders, National Auto Finance Company, LP, their respective officers,
      directors, affiliates, and other parties related to each of such parties;
      and (5) the granting of a covenant not to sue in the future by the Junior
      Subordinated Noteholders, National Auto Finance Company, LP, and
      affiliates of and other parties related to each of such parties in favor
      of the Company, the Senior Subordinated Noteholders, their respective
      officers, directors, affiliates, and other parties related to both such
      parties.

      FSA

      The agreements and transactions with FSA provide for and include, among
      other things: (1) the resetting of the cash spread accounts in each of the
      Company's then existing term asset-backed securitizations that have been
      guaranteed by FSA to 11% of the outstanding principal balance of the
      receivables in each of such securitizations for the remaining term of such
      securitizations; (2) the elimination of all portfolio performance
      maintenance requirements that, if otherwise violated, would have resulted
      in the trapping of cash flows to overfund such cash spread accounts; (3)
      the resetting of the portfolio performance requirements that, if violated,
      would constitute a default under the insurance guaranty agreements issued
      by FSA, to levels that are commensurate to the Company's expected future
      portfolio performance in each of such securitizations; and (4) the waiver
      of all past breaches and defaults of portfolio performance requirements,
      the result of which is to enable the Company to resume the receipt of
      excess cash flow under each of the Company's term asset-backed
      securitizations that have been guaranteed by FSA. The following table
      shows the performance tests (three month rolling average) as of December
      31, 1999:

<TABLE>
<CAPTION>
                   Delinquency Test        Default Test             Loss Test
                -------------------     -------------------     -------------------
                Actual    Insurance     Actual    Insurance     Actual    Insurance
                ------    ---------     ------    ---------     ------    ---------

<S>              <C>        <C>         <C>         <C>         <C>         <C>
95-1             9.55%      12.00%      12.05%      25.00%      11.47%      14.00%
96-1            10.02%      12.00%      12.59%      25.00%      10.56%      14.00%
97-1            11.13%      12.00%      15.97%      25.00%      10.44%      14.00%
98-1             9.84%      12.00%      15.69%      25.00%      10.07%      13.00%
99-1             6.30%      12.00%       8.00%      25.00%       2.30%      13.00%
</TABLE>



                                     - 48 -
<PAGE>   49

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(6)   DESCRIPTION OF CAPITAL STOCK

      The authorized capital stock of the Company consists of 44,000,000 shares
      of Common Stock and 1,000,000 shares of preferred stock, par value $0.01
      per share, issuable in series (the "Preferred Stock").

      Common Stock

      The holders of Common Stock will be entitled to receive dividends when and
      as dividends are declared by the Board of Directors of the Company out of
      funds legally available for such purpose, provided that if any shares of
      the Preferred Stock are outstanding at the time, the payment of dividends
      on the Common Stock or other distributions may be subject to the
      declaration and payment of full cumulative dividends on outstanding shares
      of Preferred Stock. Holders of Common Stock are entitled to one vote per
      share on all matters to be voted upon by the stockholders. The holders of
      Common Stock are not entitled to preemptive, conversion or subscription
      rights.

      In the event of liquidation, dissolution or winding-up of the Company, the
      holders of Common Stock are entitled to share ratably in all assets
      remaining after payment of liabilities, subject to prior distribution
      rights of the Preferred Stock, if any, outstanding.

      Preferred Stock

      The Board of Directors is authorized, without any action of the
      stockholders, to provide for the issuance of one or more series of
      Preferred Stock and to fix the designation, preferences, powers and
      relative, participating, optional and other rights, qualifications,
      limitations and restrictions thereof including, without limitation, the
      dividend rate, voting rights, conversion rights, redemption price and
      liquidation preference per series of Preferred Stock. Any series of
      Preferred Stock so issued may rank senior to the Common Stock with respect
      to the payment of dividends or amounts to be distributed upon liquidation,
      dissolution or winding up. The existence of authorized but unissued
      Preferred Stock may enable the Board of Directors to render more difficult
      or to discourage an attempt to obtain control of the Company by means of a
      merger, tender offer, proxy contest or otherwise. For example, if in the
      due exercise of its fiduciary obligations, the Board of Directors were to
      determine that a takeover proposal is not in the Company's best interests,
      the Board of Directors could cause shares of Preferred Stock to be issued
      without stockholder approval in one or more private offerings or other
      transactions that might dilute the voting or other rights of the proposed
      acquirer or insurgent stockholder or stockholder group. The issuance of
      shares of Preferred Stock pursuant to the Board of Directors' authority
      described above could decrease the amount of earnings and assets available
      for distribution to holders of Common Stock and adversely affect the
      rights and powers, including voting rights, of such holders and may have
      the effect of delaying, deferring or preventing a change in control of the
      Company.

      The Board of Directors has adopted a Certificate of Designation of the
      Mandatorily Redeemable Preferred Stock, Series A (the "Series A Preferred
      Stock"). The terms of 2,295 outstanding shares of Series A Preferred Stock
      are 7% cumulative dividend, payable quarterly; callable at stated value
      plus accrued dividends at the option of the Company; non-voting, except
      under certain circumstances; and with mandatorily redemption at stated
      value in January 2005. The Company has accrued approximately $281,000 and
      $120,000 in preferred stock dividends as of December 31, 1999 and 1998,
      which are included in the balance sheet category Mandatorily Redeemable
      Preferred Stock. The Company paid approximately $0 and $80,000 in
      preferred stock dividends during the years ended December 31, 1999 and
      1998. Due to its losses, the Company has ceased paying quarterly
      dividends.




                                     - 49 -
<PAGE>   50

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(7)   OTHER OPERATING EXPENSES

      Other operating expenses for the years ended December 31, consisted of the
following:

<TABLE>
<CAPTION>
                                       1999         1998         1997
                                       ----         ----         ----
                                               (in thousands)

<S>                                 <C>          <C>          <C>
Professional fees............       $   893      $ 1,186      $ 1,037
Rent.........................           698          785          367
Travel and entertainment.....           307          311          387
Management fees..............            --          225          540
Other........................         3,726        2,037        1,271
                                    -------      -------      -------
                                    $ 5,624      $ 4,544      $ 3,602
                                    =======      =======      =======
</TABLE>

      Management fees represent fees paid to National Financial Companies LLC
      for operational, legal, administrative and other services provided to the
      Company and its predecessors under a management agreement that was
      terminated in June 1998.

      Other includes an adjustment to reflect a cumulative change in accounting
      principle. Balances representing $474,144 for 1998 of start-up cost were
      written off in accordance with adoption of AICPA Statement of Position
      98-5, "Reporting on the Costs of Start-up Activities." These costs had
      been capitalized in conjunction with the Company establishing a servicing
      center facility in Jacksonville, Florida.

(8)   COMMITMENTS AND CONTINGENCIES

      Future minimum rental payments under various office and equipment leases
as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
      Year Ending                                          Operating
      December 31,                                           Leases
      ------------                                         ---------
                            (in thousands)

<S>                                                           <C>
          2000 .....................................          836
          2001 .....................................          860
          2002 .....................................          762
          2003 .....................................          359
                                                          -------
                                                          $ 2,817
                                                          =======
</TABLE>

     Rent expense under operating leases was $698,000, $785,000 and $367,000 in
     1999, 1998 and 1997, respectively.

     On October 22, 1998, Pearl Peckerman, I.R.A., on behalf of herself and all
     others similarly situated, filed a putative class-action complaint (the
     "Peckerman Complaint") in the United States District Court for the Southern
     District of Florida against the Company and certain current and former
     officers and directors of the Company, as well as the co-lead underwriters
     of the Company's initial public offering. On December 4, 1998, Harvey
     Rooks, Rachel Rooks and Joyce Bornstein, on behalf of themselves and all
     others similarly situated, filed a putative class action complaint (the
     "Rooks Complaint") in the United States District Court for the Southern
     District of Florida against the Company and certain current and former
     officers and directors of the Company, as well as the co-lead underwriters
     of the Company's initial public offering.

     On February 5, 1999, the United States District Court for the Southern
     District of Florida ordered that these actions be consolidated. Thereafter,
     on July 29, 1999, the plaintiffs filed an amended and consolidated
     class-action complaint (the "Amended and Consolidated Complaint") styled In
     re National Auto Finance Company, Inc. Securities Litigation, Case Number
     98-8767-CIV-Hurley.

     The individual lead plaintiffs (the "Lead Plaintiffs") in the Amended and
     Consolidated Complaint are Pearl Peckerman, Harvey Rooks, Rachel Rooks,
     Joyce Bornstein, Emanuel Androulidakis, Frank Rosetti, Thomas R. Bopp, Noel
     V.



                                     - 50 -
<PAGE>   51

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


     Brodtman, Jr., Susan H. Jacobsen, Leonard R. Carothers, Fred Gaunce, Duane
     Morris, Ralph Casey, Hiram Graham, and Vance Prigge. In addition, the
     action was instituted on behalf of a putative class of plaintiffs
     consisting of those persons who purchased or otherwise acquired stock of
     the Company between January 29, 1997 and April 15, 1998 inclusive,
     excluding the Company, its subsidiaries and affiliates, the individual
     defendants, members of the immediate families of each of the individual
     defendants, and the successors and assigns of any defendant. Other than the
     Company, the defendants to the action are: Gary L. Shapiro, Keith B. Stein,
     Roy E. Tipton, Kevin G. Adams, Edgar A. Otto, Peter Offerman, Morgan M.
     Schussler, Steven L. Gurba, and the co-lead underwriters of the Company's
     January 1997 initial public offering, Raymond James & Associates, Inc. and
     Cruttenden Roth, Inc.

     The Amended and Consolidated Complaint sets forth allegations surrounding
     the Company's 1997 restated financial statements, the interpretation of
     FASB No. 125 and the relationship between the Company and its prior outside
     service provider, Omni Financial Services of America, Inc. The plaintiffs'
     allegations of liability are based on various theories of recovery,
     including alleged violations of Section 11, 12(a)(2), 15 and 20(a) of the
     Securities Act of 1933, as amended, and Section 10(b) and Rule 10b-5 of the
     Securities Exchange Act of 1934, as amended. The plaintiffs are seeking
     compensatory damages, as the court deems appropriate.

     The Company acknowledged its contracted obligation to indemnify Raymond
     James, Inc., and Cruttenden Roth, Inc., (collectively, "the Underwriter
     Defendants') pursuant to the underwriting agreement entered into with the
     Company in connection with its initial public offering with respect to
     their legal and other costs incurred in this litigation, including but not
     limited to any potential judgment against them.

     On September 13, 1999, the Lead Plaintiffs filed a motion for class action
     certification. Also, on September 13, 1999, the Underwriter Defendants
     filed a motion to dismiss the Amended and Consolidated Complaint. On
     September 20, 1999, the Company, as well as certain other individual
     defendants, and Gary L. Shapiro, individually, filed a motion to dismiss
     Lead Plaintiffs' Amended and Consolidated Complaint. In conjunction with
     such motions, the Company, as well as certain other individual defendants,
     filed a request for oral argument.

     Litigation is subject to many uncertainties, and it is possible that the
     above action could be decided unfavorably. The Company has entered into
     discussions in an attempt to settle the pending litigation if it is in the
     best interests of the Company's stockholders to do so, but can give no
     assurance that such negotiations will result in settlement. Management is
     presently unable to make a meaningful estimate of the amount or range of
     loss that could result from an unfavorable outcome or settlement of the
     pending litigation. It is possible that the Company's business, volume,
     results of operations, cash flows or financial position could be materially
     affected by an unfavorable outcome or settlement of the pending litigation.

     The Company has directors' and officers' liability insurance policies that
     apply to this litigation with a liability limit of $5 million; two excess
     policies with liability limits of $2 million and $3 million, respectively.
     Each insurer has raised certain coverage defenses or denied coverage. The
     Company has engaged, and will continue to pursue appropriate strategies to
     protect and preserve its claims of full coverage under all such policies.

     The Company employs its executives pursuant to employment agreements with
     terms ranging from two to three years. The agreements provide for salary
     and incentive compensation including bonuses and stock option grants.

     The employment agreements provide for minimum compensation of $1.1 million
     in each of 1999 and 2000 and $326,000 in 2001.

     Pursuant to a registration rights agreement with the Company, First Union's
     partnership interest (See Note 13 of Notes to Financial Statements -
     Related Party Transactions) was granted certain rights with respect to the
     registration under the Securities Act of Common Stock distributed to it by
     the National Auto Partnership (no such distribution has been made as of the
     date of this Form 10-K). Under the registration rights agreement, Ironbrand
     Capital, LLC, a wholly-owned subsidiary of First Union (the "First Union
     Partner") can, in certain circumstances, require the Company to effect up
     to two registrations of any or all of the First Union Partner's share of
     Common Stock. The Company is not required to honor such request to register
     shares of Common Stock if the request is made within 90 days of a firm
     commitment underwritten public offering or before the expiration of any
     lock-up period required by the underwriters in connection therewith.



                                     - 51 -
<PAGE>   52


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


     Pursuant to a registration rights agreement, the Company has granted the
     1818 Fund, Progressive, ManuLife, the First Union Partner, FSA and others
     certain rights with respect to the registration under the Securities Act of
     Common Stock held by each. Under the registration rights agreement, the
     other entities can, in certain circumstances, require the Company to effect
     up to two registrations of any or all of the their shares of Common Stock.
     The Company is not required to honor such request to register shares of
     Common Stock if the request is made within 90 days of a firm commitment
     underwritten public offering or before the expiration of any lock-up period
     required by the underwriters in connection therewith.

(9)  INCOME TAXES

     The Company had no current income tax provision in 1999 and 1998 due to its
     losses incurred for tax purposes.

     Pro Forma adjustments for income taxes represent the difference between
     historical income taxes and income taxes that would have been reported had
     the Partnerships filed income tax returns as taxable "C" corporations in
     1996.

     For the Year Ended December 31, 1997

<TABLE>
<CAPTION>
                                                     (in thousands)

<S>           <C>                                    <C>
          Pro forma income tax adjustments
            (unaudited)
               Federal..............................     $  1,527
               State and local......................          162
                                                         --------
                                                            1,689
                                                         ========
</TABLE>

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and tax liabilities as of December 31
     were:

<TABLE>
<CAPTION>
                                                              1999             1998
                                                              ----             ----
                                                                 (in thousands)
<S>                                                       <C>                  <C>
      DEFERRED TAX ASSETS (IN THOUSANDS):
      Securitized assets sold for financial statement
          purposes, financed for income tax purposes      $  15,710            13,518
      Net operating loss carryforward                         6,789             6,160
                                                          ---------           -------
      Total gross deferred asset                             22,489            19,678
      Less valuation allowance                              (22,489)          (19,678)
                                                          ---------           -------
      Total deferred tax assets                                --                --
                                                          ---------           -------

      DEFERRED TAX LIABILITIES:
      Other                                                    --                --
                                                          ---------           -------

      Net deferred tax asset                              $    --                --
                                                          =========           =======
</TABLE>

     As of December 31, 1999, the Company had a $18.0 million net operating loss
     for income tax purposes, of which $5.7 million will expire in 2012, $1.5
     million will expire in 2018 and $10.8 million will expire in 2019. Due to
     the uncertainty of the realization of the net deferred tax assets, the
     Company has established a 100% valuation allowance. The change in
     ownership in 1999 represents an over fifty percent change in ownership,
     net operating losses occurring prior to the change will be severely
     limited.



                                     - 52 -
<PAGE>   53

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


     The actual provision for income taxes for 1999, 1998 and pro forma income
     taxes for 1997 differ from the amounts computed by applying federal
     statutory rates to income before income taxes and extraordinary item due
     to:

<TABLE>
<CAPTION>
                                                             For the Year Ended December 31,
                                                         -----------------------------------------
                                                            1999           1998             1997
                                                            ----           ----             ----
                                                                     (in thousands)
<S>                                                     <C>             <C>              <C>
          Provision (benefit) computed at
            federal statutory rate of 34%.............   $ (3,294)       $  (11,418)      $ (6,269)
          State income taxes, net of federal
            tax benefit...............................       (353)           (1,219)          (669)
          Change in deferred tax asset valuation
            allowance.................................      3,647            12,637          1,457
          Deferred income liability recorded in
               conjunction with the reorganization....       --                --            5,416
          Other.......................................       --                --               65
                                                         --------          --------       --------
                                                         $   --            $   --         $    --
                                                         ========          ========       ========
</TABLE>

(10)  EMPLOYEE BENEFIT PLANS

      The Company adopted a 401(k) profit sharing plan (the "Plan") in August
      1996 that is intended to be a tax-qualified defined-contribution plan. All
      employees of the Company, other than employees who work less than 1,000
      hours per year, are eligible to participate in the Plan once they have
      completed three months of continuous service.

      Participating employees may contribute up to 15% of their compensation,
      with a current maximum contribution of $10,000 to the Plan on a pretax
      basis. The Company may make a matching contribution to each employee's
      account based on the amount of pretax contributions made by the employee.

      Currently, the Company is allocating a 50% match of the first 6%
      contributed by the employee, subject to certain legal limitations imposed
      on tax-qualified plans. Matching contributions by the Company are made
      regardless of profits and are allocated only to qualified participants on
      a monthly basis. Compensation expense related to the Plan was
      approximately $46,000, $101,000 and $75,000 in 1999, 1998 and 1997,
      respectively.

      Contributions to the Plan are invested in a variety of funds as directed
      by the Plan participants. All pretax employee contributions to the Plan
      are 100% vested and matching contributions by the Company are vested at
      20% per annum over a five-year period from the date the employee joined
      the Plan. All active employees that had completed 1,000 hours of service
      as of August 30, 1996 were invited to join the Plan and have
      matching-contribution vested rights predated to their date of employment.

      Generally, employees may not receive distributions from the Plan until
      their retirement, death, certain disability or termination of employment.
      Loans are prohibited by the Plan, although distributions for certain
      hardship purposes are allowed in accordance with tax regulations
      promulgated under the Internal Revenue Code. All distributions from the
      Plan are made in the form of a single lump-sum distribution.

(11)  STOCK OPTION PLAN

      In 1996, the Board of Directors of the Company adopted the 1996 Share
      Incentive Plan (the "Plan"). The Plan provides for the granting of certain
      benefits in any one or a combination of (i) stock options, (ii) stock
      appreciation rights, (iii) stock awards, (iv) performance awards and (v)
      stock units. The aggregate number of shares of Common Stock that may be
      subject to such benefits, including stock options, is 4,000,000 shares of
      Common Stock (subject to adjustment in the event of a merger,
      consolidation, reorganization, recapitalization, stock dividend, stock
      split, reverse stock split, split up, spin-off, combination of shares,
      exchange of shares, dividend in-kind or other like change in capital
      structure or distribution).



                                     - 53 -
<PAGE>   54

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


     As of December 31, 1999, outstanding stock options with respect to shares
     of Common Stock under the Plan where held by the Company's directors,
     officers and employees. The strike price of these options approximates the
     fair market value at the date of grant. Employee stock options vest
     one-third immediately and one-third in each of the following two years,
     respectively; and director stock options vest immediately. All stock
     options expire 10 years from the date of grant.

     A summary of the Company's stock option activity is as follows:

<TABLE>
<CAPTION>
Years ended December 31,                                        1999                          1998
------------------------                                     ----------------------------    --------------------------
                                                                         Weighted Average              Weighted Average
                                                               Shares     Exercise Price     Shares     Exercise Price
                                                               ------    ----------------    ------    ----------------

<S>                                                         <C>           <C>               <C>        <C>
Options outstanding, beginning of year                         262,500      $    3.61        217,500      $    3.89

     Granted                                                 2,139,590            .24         45,000           2.25
     Exercised                                                      --             --             --             --
     Forfeited/Canceled                                        232,107           2.56             --             --
                                                             ---------                       -------

Outstanding at end of year                                   2,169,983      $     .24        262,500      $    3.61
                                                             =========      =========        =======      =========
Exercisable at end of year                                     879,315      $    1.11        208,333      $    3.39
                                                             =========      =========        =======      =========

Weighted average fair market value
 of options granted during year                                             $     .15                     $    1.45
                                                                            =========                     =========
</TABLE>

     The following table summarizes information about fixed stock options
     outstanding at December 31, 1999:

<TABLE>
<S>                                                                <C>
           Range of exercise price............................     $ .23 - .4375
           Options outstanding................................         2,169,983
           Weighted average remaining
           contractual life in years..........................              9.04
           Weighted average exercise price....................     $         .24
           Options exercisable
           December 31, 1999..................................           879,315
           Weighted average exercise price....................     $        1.11
</TABLE>

     SFAS no. 123, "Accounting for Stock-Based Compensation," requires the
     Company to provide pro forma information regarding net loss and loss per
     share as if compensation cost for the Company's employee stock option plans
     had been determined in accordance with the fair value based method
     prescribed in SFAS No. 123. The Company estimates the fair value of each
     option at the grant date by using the Black-Scholes option pricing model
     with the following weighted-average assumptions used for grants in 1999 and
     1998, expected volatility ranging from 45.5% to 46.9% and risk-free
     interest rates ranging from 5.31% to 6.63% and a zero percent dividend
     yield.

     Under accounting provisions of SFAS 123 the Company's net loss per share
     would have been increased to the pro forma information indicated below:

<TABLE>
           Years ended December 31,                           1999          1998
           ------------------------                           ----          ----
           (In thousands, except per share data)

<S>                                                        <C>           <C>
           Net loss applicable to Common
           Stockholders as reported.................       $ (9,730)     $ (33,741)
           Pro forma................................         (9,960)       (33,997)

           Loss per share - basic and
           diluted as reported......................       $   (.64)     $   (3.73)
           Pro forma................................           (.66)         (3.76)

</TABLE>



                                     - 54 -
<PAGE>   55


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

      The Company and certain of its executive officers executed employment
      agreements in which the Company agreed to grant such executive officers as
      a group an aggregate of up to 2,196,292 incentive stock options of the
      Company's Common Stock, ratified by the Company's Board of Directors and
      stockholder approval on June 13, 1999 to amend the Company's existing
      stock option plan to increase the number of authorized shares of Common
      Stock reserved for future issuance of such shares upon exercise of such
      incentive stock options and the filing with the Securities and Exchange
      Commission of appropriate amendments to the existing Registration
      Statement on Form S-8 or in the alternative adoption of a new incentive
      stock option plan and the filing with the Securities and Exchange
      Commission of an additional Registration Statement on Form S-8.
      Accordingly, these option shares are not included above.

(12)  FAIR VALUE OF FINANCIAL INSTRUMENTS

      The following methods and assumptions were used to estimate the fair value
      of each class of financial instruments:

      o     The carrying amounts of cash and cash equivalents have approximate
            fair value because of the short maturity of these instruments.

      o     Retained Interest in Securitizations is stated at estimated fair
            value.

      o     The fair value of the Junior Subordinated Notes is determined as the
            present value of expected future cash flows discounted at an
            interest rate for such borrowing that is based on a spread above the
            actual yield on Senior Notes. The fair value, calculated on such
            basis, was $1,773,000 and $1,546,000 at December 31, 1999 and 1998,
            respectively. Book value of such debt was $2,181,000 and $1,940,000
            at December 31, 1999 and 1998, respectively.

      o     The fair value of Senior Subordinated Notes and notes payable is
            determined as the present value of expected future cash flows
            discounted at the interest rate currently offered to the Company,
            which approximates rates currently offered for loans of similar
            terms to companies with comparable credit risk. The carrying amount
            approximates fair value.

(13)  RELATED PARTY TRANSACTIONS

      National Financial Companies LLC ("NFC")

      The Company was previously party to a management agreement and a service
      agreement pursuant to which NFC provided operational, financial, legal,
      accounting, management, advisory and other administrative services
      relating to the management, business operations, assets and interests of
      the Company. This agreement was terminated in June 1998. Amounts paid to
      NFC pursuant to such agreements were $289,000 and $884,000 in 1998 and
      1997, respectively; $333,000 of the amount paid in 1997 was for services
      as described in the following paragraph. Gary L. Shapiro, the former
      Chairman and Chief Executive Officer of the Company, is the Chairman and
      Chief Executive Officer and a principal owner of NFC and National Auto
      Finance Corporation ("National Auto"), the general partner of the National
      Auto Partnership. National Auto Partnership owns a 22.1% beneficial
      interest in the Company. Keith B. Stein, Chairman of the Board and Chief
      Executive Officer, was formerly a managing director of NFC.

      During 1997, NFC provided various services related to the December Private
      Placement. NFC received $333,000 in fees and reimbursements related to
      such services, which was treated as a cost of such offering.

      During 1998, NFC acquired a controlling interest in BNI, Inc. BNI was the
      vendor for the Company's loan servicing software and hardware system. The
      Company paid BNI $859,000 and $644,000 in 1998 and 1997 for this system.





                                     - 55 -
<PAGE>   56



              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

      Junior Subordinated Notes

      The Junior Subordinated Notes are payable to certain affiliates of the
      Company on January 31, 2002, and accrue interest at eight percent (8%) per
      annum. Such debt is subordinated to all other debt of the Company.
      Interest expense recognized for this debt for the years ended December 31,
      1999, 1998, and 1997 was $168,000, $155,000 and $201,000 respectively.

      Senior Subordinated Notes

      As discussed in Note 4 of Notes to Financial Statements - Debt, in
      conjunction with the issuance of the Senior Subordinated Notes and Common
      Stock in December, 1997, representatives of each of the stock purchasers,
      who were also lenders of Senior Subordinated Notes, were elected to the
      Board of Directors. As discussed in Note 5, the Senior Subordinated
      Noteholders were granted the right to designate three additional
      representatives to the Board in conjunction with the Company's
      Restructuring.

      FIRST UNION

      Until March 1999, the Company was party to an agreement with First Union
      and certain of its affiliates (the "First Union Strategic Alliance")
      whereby First Union received a fee from the Company for each purchase of a
      loan through a dealer relationship established as a result of the First
      Union Strategic Alliance. Fees paid to First Union under this arrangement
      were approximately $23,000, $247,000 and $400,000 in 1999, 1998 and 1997,
      respectively.

      For the years ended December 31, 1999, 1998 and 1997 approximately 43%,
      44%, and 43% of the loans the Company purchased were attributable to
      Dealers established through the First Union Strategic Alliance.

      First Union has also served as underwriting and placement agent related to
      the Company's past securitizations. Underwriting fees paid and expense
      reimbursements related to securitizations was approximately $425,000 in
      1997.

      First Union also had owned 100% of the Class B or Senior Certificates
      related to the Master Trust until such Certificates were paid in full by
      proceeds from the sale of loans to Nuvell. See Note 14. Such investment
      aggregated $43.3 million and $69 million at December 31, 1999 and 1998.

      First Union acted as placement agent related to the December 1997 Private
      Placement for which First Union received fees and expense reimbursements
      of $1.7 million.

      First Union received a fee of $25,000 in 1997 in conjunction with
      negotiation of amendments to the Company's Master Trust Agreement at
      December 31, 1997. As described in Note 4, the Company has a note payable
      to First Union with outstanding balances of $368,000 and $735,000 as of
      December 31, 1999 and 1998, respectively, related to equipment financing.
      Also described in Note 4, as of the year ended December 31, 1999, the
      Company has a note payable (related to the revolving credit facility) of
      $3.0 million.

      A subsidiary of First Union is a limited partner of the National Auto
      Partnership and holds a vested limited, minority interest in the National
      Auto Partnership.

      See Note 3 for related party transaction with Prudential Insurance Company
      of North America and affiliates related to 1999-1 Securitization.

      (14) SUBSEQUENT EVENTS

      On February 4, 2000, the Company and Nuvell Credit Corporation ("Nuvell")
      entered into agreements whereby the Company, in return for origination
      fees, agreed to originate loans exclusively for the benefit of Nuvell
      through its existing Dealer Network and immediately assign such contracts
      to Nuvell. The Company will retain servicing of all such loans assigned to
      Nuvell in return for servicing fees. The Nuvell agreements were extended
      from May 31, 2000 through December 31, 2000 and are subject to further
      extension upon mutual consent of both parties.



                                     - 56 -
<PAGE>   57

              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

      On February 22, 2000, National Financial Auto Funding Trust II ("Funding
      Trust II"), a special purpose wholly-owned subsidiary of NAFI, defaulted
      in its obligation to deposit approximately $5 million in cash collateral
      to the Master Trust Over-Collateralization Account, as required under the
      Master Trust Securitization Credit Facility, thereby giving rise to First
      Union's decision to terminate future funding availability under the
      facility and to commence amortizing the outstanding amounts owed to First
      Union under the facility.

      In conjunction with such default, First Union agreed to waive until April
      21, 2000 certain rights to liquidate the portfolio of approximately $58.9
      million of auto loans that secure its loans to Funding Trust II, thereby
      permitting the Company time to pursue various strategic options, including
      a sale of such portfolio. On April 5, 2000, Funding Trust II, the Company,
      and Nuvell entered into a Sale and Purchase Agreement (the "Sale
      Agreement") whereby a substantial number of the loans previously sold to
      the Master Trust under the Master Trust Securitization Credit Facility in
      the approximate amount of $47 million were sold by Funding Trust II to
      Nuvell after such loans had been acquired by Funding Trust II from the
      Master Trust by an Assignment Agreement dated as of April 5, 2000. The
      Company, pursuant to the Sale Agreement, will retain servicing of
      substantially all of such loans under the terms and provisions of the
      Servicing Agreement. Approximately $43.9 million of the proceeds from the
      sale of such loans were then used to pay in full the Class B Certificates
      held by First Union (Note 4). The Company anticipates to receive
      additional cash from the transaction and release of funds previously
      required to be held in reserve of approximately $6.0 million, which will
      be used for general corporate purposes, including the possible payment of
      certain of the debt of the Company. In related developments, First Union
      terminated its commitment to purchase up to $20 million of subordinated
      asset-backed debt securities in connection with the Company's future
      Permanent Securitizations and converted to a 48 month term loan (requiring
      equal monthly principal payments) $3 million outstanding under a revolving
      working capital facility secured by the Company's ESRs.

(15)  LIQUIDITY AND GOING CONCERN

      The Company has suffered significant losses from operations during 1999,
      1998 and 1997, has a capital deficiency as of December 31, 1999 and its
      Master Trust Securitization Credit Facility has been terminated. Such
      matters raise substantial doubt about the Company's ability to continue as
      a going concern. Management's plans in regard to these matters are
      described in the following paragraphs.

      The Company's business has historically required substantial cash to
      support the funding of Cash Spread Accounts for its securitizations,
      issuance costs of its securitizations, operating expenses, tax payments,
      debt service and other cash requirements. These cash requirements increase
      as the number of loans purchased, securitized, and serviced by the Company
      increase. Historically, the Company has operated on a negative operating
      cash flow basis. The Company has funded its negative operating cash flows
      principally through borrowings under its secured financing facilities,
      issuances of subordinated debt and sales of equity securities. The
      Company's current business strategy for future growth is to focus on
      originating loans for other consumer finance companies, such as Nuvell, on
      a service retained basis in return for both origination and servicing fee
      income, rather than dedicating capital resources, particularly cash, to
      originate loans for its own account and/or in anticipation of engaging in
      periodic asset-backed securitization transactions.

      In furtherance of such strategy, on February 4, 2000, the Company entered
      into the Nuvell Agreements whereby the Company, in return for origination
      fees, has agreed to originate non-prime retail motor vehicle installment
      sale loans exclusively for the account of Nuvell. The Company retains
      servicing of all such loans in return for servicing fees, for the term of
      the Nuvell Agreements and any extension thereof. The Company originates
      and services loans under the Nuvell Flow Program in the same manner as it
      has historically conducted its business operations.

      The Nuvell Agreements, initially scheduled to expire on May 31, 2000, were
      renewed and extended through December 31, 2000, by the mutual consent of
      both the Company and Nuvell. During the course of negotiating the Nuvell
      Agreements, the Company and Nuvell had, and continue to have very
      preliminary and limited discussions regarding the potential acquisition by
      Nuvell of the operational assets of the Company and its personnel
      including, in particular, the assets and personnel comprising the
      Company's loan origination and servicing capabilities, but there can be no
      assurance that such discussions will continue or if they do continue, that
      they will lead to a transaction. In the event that the Nuvell




                                     - 57 -
<PAGE>   58


              NATIONAL AUTO FINANCE COMPANY, INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

      Agreements are not renewed or that no other transaction arises between
      Nuvell and the Company, the Company will immediately seek to enter into
      relationships similar to those represented by the Nuvell Flow Program with
      other third-party auto finance companies.

      Further, pursuant to the Company's current business strategy, the Company
      projects over the next 12 months an increase in cash flow over 1999. The
      Company projects through the Nuvell Flow Program and Scheduled Cash
      releases from the Retained Interest in Securitizations, sufficient cash
      flow to operate over the next twelve months. Although there can be no
      assurance that the Company will successfully execute this business plan,
      both the Nuvell Flow Program and the business plan were designed and
      implemented to enable the Company, among other things, to increase its
      cash flow and further stabilize its financial condition.













                                     - 58 -
<PAGE>   59


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Certain information concerning the executive officers and directors of the
Company as of February 29, 2000 is set forth below:

<TABLE>
<CAPTION>

Name                          Age      Position with the Company
----                          ---      -------------------------
<S>                           <C>      <C>
Keith B. Stein.............   42       Chairman of the Board and Chief Executive
                                       Officer

William G. Magro...........   50       President and Chief Operating Officer

Brent E. Wombolt...........   41       Senior Vice President, Operations and
                                       Loan Originations

Stephen R. Veth............   51       Vice President, Secretary and General
                                       Counsel

Brian W. Thompson..........   38       Vice President, Finance and Accounting,
                                       Treasurer

James E. Shuler............   39       Vice President, Sales and Marketing

Joseph Glick...............   37       Vice President, Collections and Customer
                                       Service

Frank A. Florio............   48       Vice President, Information Systems

Robert R. Gould............   40       Director

David Benson...............   41       Director

Joseph P. Donlan...........   53       Director

David W. Young.............   56       Director

Evelyn Erb ................   41       Director

Peter Offermann............   55       Director
</TABLE>

     Keith B. Stein has been the Chairman of the Board of the Company since June
1999 and the Chief Executive Officer of the Company since May 1998; was Vice
Chairman, Treasurer and a Director of the Company since January 1997; and held
other senior executive positions with the Company since 1994. Mr. Stein served
from March 1993 to September 1994 as Senior Vice President, Secretary and
General Counsel of WestPoint Stevens Inc., a textile company, after having
served the same company from October 1992 to February 1993 in the capacity of
Acting General Counsel and Secretary. From May 1989 to February 1993, Mr. Stein
was associated with the law firm of Weil, Gotshal & Manges, LLP. Mr. Stein has
served as a director of DVL, Inc., a public company engaged in the real estate
finance and management business, since September 1996.

     William G. Magro was promoted to President in May 1999 and has been the
Chief Operating Officer of the Company since January 1998, Executive Vice
President of the Company from October 1994 to May 1999, and was President of the
financial services division of the Company from September 1997 to June 1998. Mr.
Magro served from January 1985 to August 1994 as Director of Collection and
Client Services for Omni Financial Services of America ("OFSA"). Mr. Magro
served from January 1972 to December 1984 as a Collection Supervisor and a
Dealer Relations Supervisor at General Motors.

     Brent E. Wombolt was promoted to Senior Vice President, Operations and Loan
Originations in May 1999 and was a Vice President of the Company from February
1998 to May 1999, and an Assistant Vice President of the Company from May 1997
to January 1998. Mr. Wombolt held various positions with First Merchants
Acceptance Corporation from March 1995 through July 1996. Mr. Wombolt held
various positions with OFSA from December 1984 through February 1995.

     Stephen R. Veth has been the Vice President, Secretary and General Counsel
for the Company since March 1999. Mr. Veth served as Vice President and Legal
Counsel of First Street Mortgage Corporation from September 1997 to December
1998. Mr. Veth was General Counsel of EquiCredit Corporation from July 1990 to
August 1997.

     Brian W. Thompson was promoted to Vice President of the Company in December
1999 and was Controller since August 15, 1998. Mr. Thompson served as Vice
President, Finance for EquiCredit Corporation from May 19, 1996 to August of
1998. Mr. Thompson served as Audit Supervisor with Barnett Bank from March 1995
to May 1996. Prior to that time, Mr. Thompson was employed by Deloitte & Touche,
as a Senior Accountant from January 1990 to March 1995.

     James E. Shuler has been Vice President of the Company since February 1998
and from May 1996 to February 1998 held various positions with the Company. Mr.
Shuler was employed by Greentree Financial Corporation, a consumer finance
company, as a Collection Manager from March 1995 to May 1996. Prior to that
time, Mr. Shuler was employed by TransSouth Financial Services, also a consumer
finance company, as a Branch Manager from September 1994 to March 1995. Mr.
Shuler held various positions with OFSA from August 1988 to September 1994.





                                     - 59 -
<PAGE>   60


     Joesph P. Glick has been Vice President of the Company since March 1999,
Assistant Vice President from August 1998 to March 1999, and from January 1997
to August 1998 held various positions with the Company. From October 1995 to
January 1997, Mr. Glick was involved in residential construction, and held
several positions with OFSA from September 1988 to October 1995.

      Frank A. Florio was promoted to Vice President in May 1999, and was an
Assistant Vice President of the Company from February 1998 to May 1999. Prior to
that time, Mr. Florio held the senior-most position in the Company's information
systems department since his employment with the Company in April 1997. Mr.
Florio held a position with Queue Systems from June 1992 through March 1997.

     Robert R. Gould is a partner of Brown Brothers Harriman & Co. ("BBH&Co."),
where he began his career in 1981 as a commercial banker providing lending and
advisory services to small to medium sized companies. Beginning in 1988, Mr.
Gould became engaged exclusively in the firm's selection and monitoring of
equity investments on behalf of the 1818 Equity Funds and in providing merger
and acquisition advisory services to domestic and foreign companies. In 1996, he
co-founded the 1818 Fund, a $250 million private equity fund. Mr. Gould became a
General Partner of BBH&Co. in 1996. Mr. Gould is a director of Irving Tanning
Company, DB Companies, Inc., Robert F. Driver Company, Flents Products Company,
Inc. and Magnetic Analysis Corporation.

     David Benson has served since 1997 as a Portfolio Manager of Progressive
Capital Management Corp., a wholly-owned subsidiary of the Progressive
Corporation. Prior to that time, Mr. Benson served as Managing Director of Tokai
Securities from 1996 to 1997, where he engaged in proprietary trading in global
credit and currency markets. From 1985 to 1996, Mr. Benson served as Senior Vice
President and Head Trader for Aubrey G. Lanston and Co., primarily dealing in
U.S. Treasury Bonds.

     Joseph P. Donlan has held a number of positions with BBH&Co. since 1970,
and is currently co-manager of the 1818 Fund, which he co-founded in 1996. Prior
to his current position, Mr. Donlan was the Manager of BBH&Co.'s US Banking
Department, with responsibility for managing five banking groups engaged in
international trade finance, domestic commercial finance, financial advisory
service and private placement activities.

     David W. Young was the Chief Investment Officer of the Progressive
Corporation, a $6.5 billion property and casualty company from June 1995 until
January 1999 when he resigned to pursue other interests. Prior to that time, Mr.
Young served as Senior Managing Director of Progressive Partners, an affiliate
of the Progressive Corporation, from July 1988 to June 1995. Prior to joining
Progressive Partners in 1988, Mr. Young was a Vice President with Salomon
Brothers, Inc. from November 1983 to July 1988.

     Evelyn Erb has served since 1989 as a Portfolio Manager for Progressive
Capital Management Corp., a wholly- owned subsidiary of the Progressive
Corporation. Prior to such position, she spent 4 years with Goldman Sachs.

     Peter Offermann served as Executive Vice President and Chief Financial
Officer of TLC Beatrice International Holdings, Inc., a food manufacturing and
distribution business from January 1995 to August 1999. Since May 1994, Mr.
Offermann has been President of Offermann Financial Inc., a provider of
strategic financial advice. From 1968 to April 1994, Mr. Offermann held a number
of positions with Bankers Trust Company and its affiliates, including Managing
Director of BT Investment Partners, Inc. from October 1992 to May 1994, Managing
Director of BT Securities Corporation from October 1991 to October 1992 and
Managing Director of Bankers Trust Company from 1986 to October 1991. Since
April 1996, Mr. Offermann has served as a Director of Jan Bell Marketing, Inc.,
a jewelry distribution company.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and any persons who own more than ten percent
of the Company's Common Stock to file reports of initial ownership of the
Company" Common Stock and subsequent changes in that ownership with the
Securities and Exchange Commission. Officers, directors and greater than
ten-percent beneficial owners are also required to furnish the Company with
copies of all Section 16(a) forms they file. Based solely upon a review of the
copies of the forms furnished to the Company, or written representations from
certain reporting persons, Forms 5 were filed by all executive officers and
Messrs. Offermann and Young. The Company believes that during Fiscal 1999, all
Section 16(a) filing requirements were met with the exception of late filings of
Form 3 by Stephen R. Veth, Frank A. Florio and Joseph P. Glick. In addition,
Manufacturers Life Insurance Company (USA) tendered no filings of Schedule 13-d
in Fiscal 1999.





                                     - 60 -
<PAGE>   61

Election of Directors

     Pursuant to the Certificate of Incorporation and By-laws of the Company,
the Board of Directors consists of such number of directors as the Board of
Directors determines from time to time. The number of directors of the Board of
Directors is currently set at not less than four directors. The directors are
divided into three classes. The initial term of office of the Class I Directors
will expire at the Annual Meeting of the Company's stockholders in 2000. The
initial term of office of the Class II directors was to expire at the Annual
Meeting of the Company's stockholders in 1998. Roy Tipton, former President of
the Company, and Stephen Gurba, who comprised all the Class II Directors, both
resigned from the Board of Directors during calendar year 1998 and the Company
did not have an Annual Meeting in 1998. The Board did not fill the vacancies
created by their resignations until the election by the Board of Evelyn Erb and
David Benson of Progressive, and Robert Gould, of the 1818 Fund, in connection
with completion of the Restructuring. The initial term of office of the Class
III Directors expired at the Annual Meeting of the Company's stockholders on
September 14, 1999.

     The number of Class I Directors currently is set at three; the Class I
Directors are Keith Stein, Chairman of the Board of Directors and Chief
Executive Officer of the Company, Peter Offermann, and Evelyn Erb. Ms. Erb was
elected by the Board of Directors on May 12, 1999, to fill the vacancy created
by the resignation of Mr. Shapiro as a Class I Director in December 1998. The
number of Class II Directors currently is set at three, one seat of which is
vacant; the Class II Directors are David Benson and Robert Gould. The number of
Class III Directors currently is set at three, one seat of which is vacant; the
Class III Directors are Joseph Donlan of the 1818 Fund and David Young. Mr.
Donlan and Mr. Young were named to the Company's Board of Directors in December
1997 in connection with the completion of the Company's $50,000,000 private
placement of Senior Subordinated Notes and equity in December 1997.

     At the Annual Meeting of the Company's stockholders on September 14, 1999,
Messrs. Gould and Benson were elected for two (rather than three) year terms as
Class II Directors until the 2001 Annual Meeting of Stockholders in order to
establish a consistent three year term for each respective class of directors on
a rotating basis at succeeding annual stockholder meetings of the Company in
compliance with the Company's Certificate of Incorporation and By-laws. At the
same Meeting, Messrs. Young and Donlan were elected as Class III Directors until
the 2002 Annual Meeting of Stockholders. The other three directors (Messrs.
Stein and Offermann and Ms. Erb) will continue in office as Class I Directors.

     The terms of office of each class of directors are staggered so that the
terms of no more than one class of directors will expire in any one-year. At
each annual meeting stockholders, the directors elected to succeed those whose
terms then expire are elected for a term of office to expire at the third
succeeding annual meeting of stockholders, with each director holding office
until his or her successor is duly elected and qualified or until his or her
earlier resignation or removal. In conjunction with the Company's Restructuring,
the Senior Subordinated Noteholders were granted the right to name three
additional persons to the Board of Directors of the Company, increasing to six
seats their total number of Board representatives, thereby giving them majority
control of the Board. Messrs. Gould, Donlan, and Benson, and Ms. Erb hold four
of such six seats, leaving two seats available for election of additional Board
representatives of the Senior Subordinated Noteholders. Mr. Morgan M. Schuessler
resigned as a director in April 1999.




                                     - 61 -
<PAGE>   62

EXECUTIVE COMPENSATION

      The following table sets forth information concerning total compensation
earned by or paid to the Company's Chief Executive Officer, and the four other
most highly compensated executive officers of the Company employed as of
December 31, 1999 (the "named Executive Officers"), during Fiscal 1999, 1998 and
1997 for services rendered to the Company.

<TABLE>
<CAPTION>

                                                                                   Long-Term
                                                                                 Compensation
                                                  Annual Compensation               Awards

                                                                                    Securities
                                                                                  Underlying          All Other
Name and Principal Position            Year(1)       Salary(1)    Bonus(1)       Options/SARs(8)  Compensation($)


<S>                                   <C>          <C>          <C>          <C>                 <C>
Keith B. Stein (2)                      1999       $  308,021   $  184,797          906,161          4,800(3)
    Chairman and Chief Executive        1998          257,808      150,000          85,000              --
      Officer                           1997               --       75,000           37,500             --

William G. Magro                        1999          214,284      131,308          426,429          4,800(4)
    President and                       1998          173,748       90,000           30,000        121,749(4)
      Chief Operating Officer           1997          130,000       55,000           35,000         31,290(4)

Brent E. Wombolt (5)                    1999          136,685       60,632          133,259          4,800(3)
    Senior Vice President, Operations   1998          121,288       20,000            7,500          4,186(3)
      and Loan Originations             1997           78,751       40,000           15,000            481(3)

James E. Shuler (6)                     1999          124,196       35,797          106,607          1,625(3)
    Vice President, Sales and           1998           95,790       31,500               --          1,662(3)
      Marketing                         1997             88,338      17,573              --          1,462(3)

Frank A. Florio (7)                     1999          106,959       38,374          106,607          1,275(3)
    Vice President, Information         1998           89,929           --               --            100(3)
      Technology                        1997           49,135           --               --             --
</TABLE>

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

(1)   Bonuses for certain members of senior management for services rendered in
      a given year were finally determined by the Compensation Committee of the
      Board pursuant to guidelines established in such executives' employment
      agreements. These bonuses were paid by the end of March of the year
      following the year to which such bonuses relate. See "Employment
      Agreements." "Salary" includes additional miscellaneous compensation in
      the form of car allowances.

(2)   Mr. Stein was Vice Chairman, Chief Executive Officer, Treasurer and
      Director until his election as Chief Executive Officer in May 1998 and
      Chairman of the Board in June 1999. No compensation was received directly
      from the Company in 1997 and 1996. The Company, however, paid fees and
      costs to National Financial Companies, LLC ("NFC"), pursuant to management
      and service agreements, for the rendering of various services in support
      of the Company's operations. Mr. Stein was formerly a Managing Director of
      NFC.

(3)   Includes contributions made by the Company in accordance with the
      Company's 401(k) Plan.

(4)   Mr. Magro was Executive Vice President and Chief Operating Officer until
      his election as President and Chief Operating Officer in May 1999.
      Includes (i) contributions made by the Company in accordance with the
      Company's 401(k) Plan of $4,057, $1,213, and $87.50 in 1998, 1997 and 1996
      respectively, (ii) forgiveness of indebtedness of $40,854 in 1998, and
      (iii) $76,838, $30,077 and $11,041 for relocation expenses paid in 1998,
      1997 and 1996, respectively.

(5)   Mr. Wombolt was promoted to Senior Vice President, Operations, and Loan
      Originations in May 1999.

(6)   Mr. Shuler has been an executive officer of the Company in his present
      capacity since February 1998.

(7)   Mr. Florio was promoted to his current position in May 1999.

(8)   Number of shares of Common Stock, par value $.01 per share, of the
      Company, underlying options.



                                     - 62 -
<PAGE>   63

No stock appreciation rights were awarded to, earned by, or paid to the named
Executive Officers during the fiscal year ended December 31, 1999.

    Director Compensation

     Keith B. Stein, the sole director who is also an employee of the Company,
receives no extra compensation or retainer fees for his service as a member of
the Board of Directors or any committee thereof. Each independent non-employee
director of the Company receives an annual retainer of $10,000 and $1,000 for
each meeting of the Board of Directors attended in person and $500 for each
meeting of the Board of Directors attended telephonically, plus, in each case,
expenses incident to attendance at such meetings. Stock options exercisable for
shares of Common Stock are granted to independent non-employee directors of the
Company pursuant to the 1996 Plan in order to provide such directors an
opportunity to acquire a proprietary interest in the Company through awards of
Common Stock, and thus to create in such directors an increased interest in and
a greater concern for the welfare of the Company. The purchase price of the
Common Stock covered by such stock options is equal to or greater than the fair
market value of such Common Stock on the date of grant. These stock options are
fully exercisable on the first anniversary of the date of grant.

    Employment Agreements

     The Company employs each of Keith B. Stein, Chairman and Chief Executive
Officer, William G. Magro, President and Chief Operating Officer, Brent E.
Wombolt, Senior Vice President, Operations and Loan Originations, James E.
Shuler, Vice President, Sales and Marketing, and Frank A. Florio, Vice
President, Information Technology (individually an "Executive" and collectively,
the "Executives"), pursuant to employment agreements effective as of June 1,
1998, June 1, 1998 (as amended and restated) August 1, 1998, August 1, 1998 (as
amended and restated), and April 10,1997 respectively. The term of Mr. Stein's
agreement will end on June 1, 2001, the term of Mr. Magro's agreement will end
on May 31, 2001, the term of Mr. Wombolt's agreement will end on February 28,
2001, and the term of Mr. Shuler's agreement will end on February 28, 2001
unless sooner terminated pursuant to the terms of each respective agreement. Mr.
Florio's employment agreement terminates on June 1, 2001.

     Mr. Stein's employment agreement provides for an annual base salary of
$300,000, with such amount to be reviewed annually by the Compensation
Committee. Mr. Stein's base salary was increased to $321,000 for 2000. Mr. Stein
was paid an incentive bonus in January 1999 with respect to Fiscal 1998 of
$150,000, pursuant to the terms of his employment agreement. Mr. Stein may
receive from the Company an incentive bonus in each year of his employment under
such agreement, the amount of which is payable on or before March 31 of the year
following the year to which such bonus relates. Pursuant to an Executive
Incentive Bonus Program adopted by the Board of Directors for Fiscal 1999 (the
"1999 Bonus Program"), Mr. Stein was paid incentive bonus in January 2000 for
Fiscal 1999 of $184,797 based upon the Company achieving certain pre-established
performance goals.

     Mr. Magro's annual base salary was $140,000 from January 1, 1998 through
May 31, 1998, and from the effective date of his agreement to May 31, 1999 was
$180,000 and will be (i) no less than $192,600 from June 1, 1999 through May 31,
2000, and (ii) no less than $206,082 from June 1, 2000 through May 31, 2001. Any
increase in Mr. Magro's annual base salary in excess of seven percent (7%) for
such periods will be determined by the Compensation Committee. Mr. Magro was
paid in January 1999 an incentive bonus with respect to Fiscal 1998 of $90,000,
equal to 50% of his 1998 annual base salary, and will receive from the Company
an incentive bonus in each year of his employment agreement of not less than
fifty percent (50%). The incentive bonus for Fiscal 1999 was based upon the 1999
Bonus Program and resulted in Mr. Magro receiving a bonus of $131,308 in January
2000.

     Mr. Wombolt's annual base salary was $112,350 from March 1, 1998 through
January 4, 1999, and from January 5, 1999 through May 10, 1999 was $121,056, and
from May 11, 1999 through January 3, 2000 was $133,161 and from January 4, 2000
to January 4, 2001 is $142,483. Any increase in Mr. Wombolt's annual salary in
excess of seven percent (7%) for Fiscal 2001 and thereafter will be determined
by the Compensation Committee. Mr. Wombolt was paid in January 2000 an incentive
bonus with respect to Fiscal 1999 of $60,632 based upon the 1999 Bonus Program,
and will receive from the Company an incentive bonus in each remaining year of
his employment agreement of not less than thirty percent (30%) of his annual
base salary.

     Mr. Shuler's annual base salary was $105,000 from March 1, 1998 through
January 4, 1999 and from January 5, 1999 through February 1, 1999 was $113,106,
and from February 2, 1999 through January 3, 2000 was $119,817, and from January
4, 2000 through February 29, 2001 is $128,204. Any increase in Mr. Shuler's
annual base salary in excess of seven percent (7%) for Fiscal 2001 and
thereafter will be determined by the Compensation Committee. Mr. Shuler was paid
in January 2000 an incentive bonus with respect to Fiscal 1999 of $35,374 based
upon the 1999 Bonus Program, and will receive from the





                                     - 63 -
<PAGE>   64


Company an incentive bonus in each remaining year of his employment agreement of
not less than thirty percent (30%) of his annual base salary.

     Mr. Florio's annual base salary was $95,768 from January 4, 1999 to May 10,
1999 and from May 11, 1999 to December 31, 1999 was $105,345. Mr. Florio's
annual base salary for 2000 is $112,720.11. Any increase in Mr. Florio's annual
base salary in excess seven percent (7%) for Fiscal 2001 and thereafter will be
determined by the Compensation Committee. Mr. Florio was paid in January 2000 an
incentive bonus with respect to Fiscal 1999 of $38,374 based upon the 1999 Bonus
Program, and will receive from the Company an incentive bonus in each year of
his employment with the Company of not less than 40% of his annual base salary.

     Pursuant to their employment agreements, each of the Executives may
participate in any stock option and benefit plans adopted by the Company or its
successors. In addition, Messrs. Stein, Magro, Wombolt and Shuler agreed to
maintain the confidentiality of the Company's proprietary information and
agreed, during the term of each of their respective agreements, not to compete
directly or indirectly with the business of the Company.

     The employment agreement of each of Messrs. Stein, Magro, Wombolt, Shuler,
and Florio may be terminated by the Company due to such Executive's disability
or death, and either without "Cause" or for "Cause" (as defined in the
employment agreements). In the event that an Executive is terminated without
"Cause," he will be entitled to receive all accrued but unpaid base salary,
benefits and other compensation and, under certain circumstances, an additional
payment or payments equal to his base salary for a twelve-month period in the
case of Messrs. Stein and Magro, and for a six-month period for Messrs. Wombolt,
Shuler and Florio. Each of the Executives may also terminate his employment for
Good Reason (as defined in the employment agreements). In such event, each of
the Executives will be entitled to receive all accrued but unpaid base salary,
benefits and other compensation.

     In the event Mr. Stein terminates his employment with the Company for "Good
Reason" or is terminated by the Company without "Cause" (as such terms are
defined in his employment agreement), he will be entitled to receive a severance
payment equal to (i) $680,000 plus (ii) his target incentive bonus for the year
of such termination pro-rated for the number of days during such year in which
he was employed up to the date of termination. If Mr. Stein is terminated for
any reason within 120 days following a "Change in Control" (as such term is
defined in his employment agreement), he will be entitled to receive a severance
payment equal to the amount described in clause (ii) above plus $980,000.

Option Grants

      The following table sets forth stock options granted in Fiscal 1999 to
each of the Company's Executives named in the Summary Compensation Table who
held office as of December 31, 1999. The Company did not issue any stock
appreciation rights. The table also sets forth the hypothetical gains that would
exist for the options at the end of their ten-year terms for the Executives
named in the Summary Compensation Table at assumed compound rates of stock
appreciation of 5% and 10%. The actual future value of the options will depend
on the market value of the Company's Common Stock.

Option/SAR Grants in Last Fiscal Year

                                Individual Grants

<TABLE>
<CAPTION>


                                        Percent
                                       of Total
                        Number of      Options/
                        Securities        SARs                                Potential Realizable Value
                        Underlying     Granted to   Exercise                   at Assumed Annual Rates
                         Options/       Employees   or Base                   of Stock Price Appreciation
                           SARs         in Fiscal    Price        Expiration       For Option Term(a)
    Name                Granted(#)        Year       ($/Sh)           Date        5% ($)        10%($)

<S>                     <C>             <C>       <C>             <C>          <C>          <C>
Keith B. Stein            906,161         43.0%   $      .23(b)         2009   $  131,072   $  332,163
William G. Magro          426,429         20.0%          .23            2009   $   61,681   $  156,312
Brent Wombolt             133,259          6.3%          .23            2009   $   19,275   $   48,848
James A. Shuler           106,607          5.0%          .23            2009   $   15,420   $   39,078
Frank A. Florio           106,607          5.0%          .23            2009   $   15,420   $   39,078
</TABLE>




                                     - 64 -
<PAGE>   65

(a)      These amounts, based on assumed appreciation rates of 5% and 10%, the
         rates prescribed by the Securities and Exchange Commission rules, are
         not intended to forecast possible future appreciation, if any, of the
         Company's stock price.

(b)      Mr. Stein's stock options became fully vested in June 1999 pursuant to
         applicable provisions of his employment agreement contingent upon the
         successful consummation of the Restructuring.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

     There were no shares acquired on exercise of stock options and no aggregate
gains realized upon exercise in 1999 by the Company's named Executive Officers.
The following table sets forth the number of shares covered by exercisable and
unexercisable options held by such Executives on December 31, 1999 and the
aggregate gains that would have been realized had these options been exercised
on December 31, 1999, even though these stock options were not exercised on
December 31, 1999. The Company did not issue stock appreciation rights.

FY-End Option/SAR Values


<TABLE>
<CAPTION>

                       Number of Securities
                       Underlying Unexercised                 Value of Unexercised In-The-
                        Options/SARs at FY-                   Money Options/SAR at Fiscal
                              End (#)                               Year End(a)($)

Name                 Exercisable     Unexercisable          Exercisable     Unexercisable

<S>                  <C>             <C>                    <C>             <C>
Keith B. Stein        1,028,661               --              $   288,025       $       --
William G. Magro        197,143          294,286                   55,200           82,400
Brent Wombolt            64,419           91,340                   18,037           25,575
James A. Shuler          55,535           73,572                   15,550           20,600
Frank A. Florio          35,535           71,072                    9,950           19,900
</TABLE>

(a)  As of December 31, 1999, the market stock price of the Company's Common
     Stock was $.28.

Report on Repricing of Stock Options

     On June 3, 1999 (the "Repricing Date"), in light of the significant
challenges facing the Company and the need to retain key executives and
directors and to strengthen the mutuality of interests between such persons and
the Company's stockholders, the Board of Directors approved the Compensation
Committee's repricing of options then outstanding granted to executive officers
and certain directors under the 1996 Plan, to an exercise price of $.23 per
share, which was the fair market value of the Company's Common Stock immediately
after the Restructuring Date as determined by the Board of Directors. In the
Compensation Committee's view, the repricing was in the best interest of the
Company and its stockholders and provided performance and retention incentives
to key executives, whose efforts are essential for the Company's continual
progress to achieve profitability. No other material terms of the options were
revised. Options held by Mr. Offermann and Mr. Young, non-employee directors,
were also repriced in the same manner as the stock options of the Company's
executive officers.









                                     - 65 -
<PAGE>   66

The following table contains information concerning the repricing with respect
to the named executive officers and directors:

10-YEAR OPTION/SAR REPRICINGS

<TABLE>
<CAPTION>

                                                                                                            Length Of
                                                              Market                                        Original
                                            Number of         Price Of        Exercise                      Option Term
                                            Securities        Stock At        Price At                      Remaining At
                                            Underlying        Time Of         Time Of                       Date Of
                                            Options/SARs      Repricing Or    Repricing Or    New           Repricing Or
                                            Repriced Or       Amendment       Amendment       Exercise      Amendment
Name                  Date                  Amended           ($)              ($)            Price ($)     (Years)
----                  ----                  ------------      ------------    ------------    ---------     -------------
<S>                   <C>                   <C>               <C>             <C>             <C>           <C>


Keith  Stein          June 3, 1999          85,000            $.23            $2.25           $.23          8.66
                      June 3, 1999          22,500            $.23            $5.25           $.23          7.91
                      June 3, 1999          15,000            $.23            $5.25           $.23          8.33

William Magro         June 3, 1999          35,000            $.23            $5.25           $.23          7.91
                      June 3, 1999          30,000            $.23            $2.25           $.23          9.33

Brent Wombolt         June 3, 1999          15,000            $.23            $5.25           $.23          8.00
                      June 3, 1999           7,500            $.23            $2.25           $.23          8.66

James Shuler          June 3, 1999          15,000            $.23            $5.25           $.23          8.00
                      June 3, 1999           7,500            $.23            $2.25           $.23          8.66

Peter Offermann       June 3, 1999           5,000            $.23            $5.25           $.23          7.91
                      June 3, 1999           5,000            $.23            $5.25           $.23          8.25

David Young           June 3, 1999          10,000            $.23            $5.25           $.23          8.50

</TABLE>


Compensation Committee:           Board of Directors:
David W. Young                    Keith B. Stein           David Benson
Peter Offermann                   Peter Offermann          Robert Gould
Joseph Donlan                     Joseph P. Donlan         Evelyn Erb
Evelyn Erb                        David W. Young

Stock Options Granted in 1999

     In conjunction with employment agreements that the Company's executive
officers executed during 1998, contingent upon the Restructuring and promotions
of certain non-executive officers to executive officers, the Company granted
such executive officers as a group an aggregate of 1,892,277 stock options of
the Company's Common Stock, 1,420,898 of which the Company believes qualify as
incentive stock options.







                                     - 66 -
<PAGE>   67


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 29, 2000, by (i) each
person who is known by the Company to own beneficially 5.0% or more of the
Common Stock; (ii) each director of the Company, (iii) each of the named
executive officers; and (iv) all directors and executive officers as a group.
Unless otherwise indicated, the Company believes all persons listed have sole
voting power and investment power with respect to such shares.

<TABLE>
<CAPTION>

                                                                         Number of
Name and Address of Beneficial Owner                                     Shares(1)      Percent(1)
------------------------------------                                     ---------      ----------
<S>                                                                     <C>             <C>

National Auto Finance Company, L.P. (2) ..............................    4,230,000        24.48%
    Via Mizner Financial Plaza, Suite 200
    700 South Federal Highway 33432
    Boca Raton, Florida
The Progressive Entities(3) ..........................................    8,950,212        48.42%
    3 Parklands Drive
    Darien, Connecticut 06820
The 1818 Mezzanine Fund, L.P. (4) ....................................    8,730,714        46.78%
    59 Wall Street
    New York, New York 10005
The Structured Finance High Yield Fund, LLC (5) ......................    8,376,259        43.92%
    One Gateway Center
    Newark, New Jersey 07102
Manufacturers Life Insurance Company  (USA) (6) ......................    6,256,862        34.54%
    45 Milk Street, Suite 600
    Boston, Massachusetts 02109
Robert R. Gould (7) ..................................................    8,730,714        46.78%
    Brown Brothers
    63 Wall Street, 7th Floor
    New York, New York 10005
Evelyn Erb (8) .......................................................    8,950,212        48.42%
    Progressive Capital Markets
    3 Parklands Drive
    Darien CT 06820
David Benson (9) .....................................................    8,950,212        48.42%
    Progressive Capital Markets
    3 Parklands Drive
    Darien CT 06820
Joseph P. Donlan (10) ................................................    8,730,714        46.78%
    Brown Brothers
    63 Wall Street, 7th Floor
    New York, New York 10005
Peter O. Offermann ...................................................       20,000            *
David W. Young .......................................................       35,000            *
Keith B. Stein  (11) .................................................    1,028,661         5.61%
William B. Magro .....................................................      207,143            *
Brent E. Wombolt .....................................................       66,919            *
James E. Shuler ......................................................       58,035            *
Frank A. Florio ......................................................       35,535            *
All directors and executive officers as a group (13 persons) .........   21,190,716        88.05%
</TABLE>


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

(1)   Unless otherwise indicated, the named entities either have sole or shared
      voting and investment power with respect to the shares shown for them.
      Percentage ownership is based on 17,280,762 shares outstanding as of
      February 29, 2000. Includes shares of Common Stock subject to options
      granted under the Company's 1996 Plan, warrants issued to the Senior
      Subordinated Noteholders and stock issuable upon the conversion of
      Convertible Senior Subordinated Promissory Notes, in each case exercisable
      within 60 days of December 31, 1999 are deemed outstanding for computing
      the beneficial ownership percentage of the person, group of persons or
      entities holding such options, warrants or Convertible Senior Subordinated
      Promissory Notes, but are not deemed outstanding for computing the
      beneficial ownership




                                     - 67 -
<PAGE>   68


      percentage of any other person. Unless otherwise indicated, the business
      address of each of the directors and current executive officers listed in
      the table above is c/o National Auto Finance Company, Inc., 10302 Deerwood
      Park Blvd. Suite 100, Jacksonville FL 32256.

(2)   The General Partner holds a 1% general partner interest in the
      Partnership. The Partners of the Partnership include, among others, the
      First Union Partner, Keith B. Stein, the Chairman and Chief Executive
      Officer of the Company, and William G. Magro, the President and Chief
      Operating Officer of the Company. The remaining Partners of the
      Partnership hold the balance of the limited partner economic interests,
      including certain of the Junior Subordinated Noteholders; one of the
      largest such holders is Gary Shapiro, the former Chairman and Chief
      Executive Officer of the Company. Except for the First Union Partner, each
      Partner of the Partnership has the right to vote on certain matters
      specified in the partnership agreement commensurate with each such
      Partner's respective economic limited partner interest. In accordance with
      the partnership agreement, the consent of the First Union Partner is
      generally required before the Partnership may take certain fundamental
      actions. Pursuant to the Restructuring, the Partnership has granted an
      irrevocable proxy to the Board designees of the Senior Subordinated
      Noteholders to vote the 4,230,000 shares of Common Stock held by the
      Partnership in all matters as to which such shares are entitled to vote.
      Each of Messrs. Stein and Magro disclaims beneficial ownership of the
      shares owned by the Partnership.

(3)   Includes 3,520,000 shares of the Company's Common Stock over which
      Progressive shares voting and dispositive power with the Progressive
      Corporation, Progressive Casualty Insurance Company, and PCI, its
      affiliates (collectively, the "Progressive Entities"). Also includes an
      aggregate of $627,442 principal amount of Convertible Senior Subordinated
      Promissory Notes (which are convertible, at the rate of $.75 per share,
      into 836,589 shares of the Company's Common Stock), and warrants to
      purchase 363,623 shares of the Company's Common Stock at $0.01 per share.
      Also includes 4,230,000 shares of Common Stock held by the Partnership
      over which the Progressive Entities share voting power with the other
      Senior Subordinated Noteholders.

(4)   Includes 3,119,047 shares of the Company's Common Stock held by the 1818
      Fund. Also includes an aggregate of $717,073 principal amount of
      Convertible Senior Subordinated Promissory Notes (which are convertible,
      at the rate of $.75 per share, into 956,097 shares of the Company's Common
      Stock), and warrants to purchase 415,570 shares of the Company's Common
      Stock at $0.01 per share. Also includes 4,230,000 shares of Common Stock
      held by the Partnership over which the 1818 Fund shares voting power with
      the other Senior Subordinated Noteholders. Also includes, in the case of
      Joseph Donlan, an affiliate of the 1818 Fund, 10,000 shares of the
      Company's Common Stock that he may purchase pursuant to stock options
      granted him under the 1996 Plan.

(5)   Includes 2,357,143 shares of the Company's Common Stock held by SFHY. Also
      includes an aggregate of $896,345 principal amount of Convertible Senior
      Subordinated Promissory Notes (which are convertible, at the rate of $.75
      per share, into 1,195,126 shares of the Company's Common Stock), and
      warrants to purchase 593,761 shares of the Company's Common Stock at $0.01
      per share. Also includes 4,230,000 shares of the Company's Common Stock
      held by the Partnership, over which SFHY shares voting power with the
      other Senior Subordinated Noteholders.

(6)   Includes 1,178,572 shares over which ManuLife holds voting and dispositive
      power. Also includes an aggregate of $448,170 principal amount of
      Convertible Senior Subordinated Promissory Notes held by Gerlach & Co., as
      Nominee for ManuLife (which are convertible, at the rate of $.75 per
      share, into 597,560 shares of the Company's Common Stock), and warrants to
      purchase 259,730 shares of the Company's Common Stock at $0.01 per share.
      Also includes 4,230,000 shares of the Company's Common Stock held by the
      Partnership over which ManuLife shares voting power with the other Senior
      Subordinated Noteholders.

(7)   Mr. Gould is a director of the Company and Co-manager of the 1818 Fund,
      which beneficially owns 8,730,714 shares of the Company's Common Stock.

(8)   Mrs. Erb is a director of the Company and a Portfolio Manager for
      Progressive Capital Management Corp., affiliate of the Progressive
      Entities, which beneficially owns 8,950,212 shares of the Company's Common
      Stock.

(9)   Mr. Benson is a director of the Company and a Portfolio Manager for
      Progressive Capital Management Corp., an affiliate of the Progressive
      Entities, which beneficially own 8,950,212 shares of the Company's Common
      Stock.

(10)  Mr. Donlan is a director of the Company and a Co-manager of the 1818 Fund
      which beneficially owns 8,730,714 shares of the Company's Common Stock,
      including 10,000 shares that he may purchase pursuant to stock options
      granted him under the 1996 Plan.

(10)  Includes 1,028,661 shares of the Company's Common Stock Mr. Stein may
      purchase pursuant to stock options granted him under the 1996 Plan.





                                     - 68 -
<PAGE>   69

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

GENERAL

     The Company, from time to time, has entered into transactions with certain
of its principals and stockholders and entities in which they have an interest.
The Company believes that each such transaction has been on terms no less
favorable to the Company than could have been obtained in a transaction with an
independent third party.

FIRST UNION

Lending

     Securitization Program. During Fiscal 1999 through February 23, 2000, the
Company funded its purchases of loans primarily through a two-step asset
securitization program consisting of (i) the securitized warehousing of all of
its loans through daily sales to a bankruptcy-remote master trust financed by a
$85,000,000 revolving credit facility with First Union, followed by (ii) the
transfer of such warehoused loans from time to time by the Master Trust to a
discrete trust, thereby creating renewed availability of capital from the Master
Trust. On February 23, 2000, funding availability under the Master Trust was
terminated by agreement between the Company and First Union. See Note 14 of
Notes to Financial Statement- Subsequent Events. First Union was the sole holder
of the Class B Certificates until such certificates were paid in full on April
5, 2000. See Note 14 of Notes to Financial Statement- Subsequent Events.
Placement Agent and Underwriting

     First Union Capital Markets Corp. ("FUCMC"), a wholly owned subsidiary of
First Union Corporation, served as placement agent for the Company's Senior
Subordinated Notes. FUCMC has also privately placed and acted as underwriter for
public offerings of asset-backed securities of the Company in connection with
the Company's securitization transactions and may act as placement agent or
underwriter for the Company's future securitization and financing activities.

Registration Rights

     Pursuant to a registration rights agreement with the Company, the First
Union Partner was granted certain rights with respect to the registration under
the Securities Act of Common Stock distributed to it by the Partnership.

     Under the registration rights agreement, the First Union Partner can, in
certain circumstances, require the Company to effect up to two registrations of
any or all of the First Union Partner's share of Common Stock. The Company is
not required to honor such request to register shares of Common Stock if the
request is made within 90 days of a firm commitment underwritten public offering
or before the expiration of any lock-up period required by the underwriters in
connection therewith.

     In addition, if the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company, in certain
circumstances the First Union Partner can exercise piggy-back registration
rights to request participation in the offering. The Company is not required to
honor in full any such request to register shares of Common Stock if such
request would reduce the number or amount of securities to be issued by the
Company in any such offering to an amount which, in the opinion of the Board of
Directors, is below that which is necessary to accomplish the purposes of such
offering and in the best interests of the Company. Furthermore, if the
contemplated offering is to be an underwritten offering and the underwriter
delivers a written opinion that marketing considerations require a limitation on
the number of securities to be sold, then the First Union Partner's piggy-back
registration rights will be reduced pro rata to the extent necessary to comply
with the underwriter's recommendations.

First Union Partner

     The First Union Partner is a limited partner of the Partnership (see
footnote (2) to Principal Stockholders).

First Union Strategic Alliance

     In March 1999, First Union announced publicly that it was exiting the
indirect auto finance business due to realigned business strategies. As a
result, the Company's referral agreement, which established a loan origination
alliance with First Union, has been terminated. The Company continued the
relationships with Dealers established by the alliance. The Company is not,
however, obligated to continue to pay to First Union referral fees related to
business obtained through those dealers.




                                     - 69 -
<PAGE>   70


SENIOR SUBORDINATED NOTES

General

     In December 1997, the Company completed the private placement of $10
million in Common Stock and $40 million principal amount of Senior Subordinated
Notes with detachable warrants (the "December Private Placement"). The private
placement of the $10 million in Common Stock resulted in the issuance of 761,905
shares of the Company's Common Stock to the 1818 Fund, and 1,142,857 shares of
the Company's Common Stock to Progressive. The Senior Subordinated Notes, which
mature in seven years, bear interest at 11.875% per annum for the first three
years, and increase to 12.875% in year four, 13.875% in year five and 14.875% in
years six and seven. The Senior Subordinated Notes and warrants were purchased
by the 1818 Fund, Progressive and ManuLife. In March 1998, the Company completed
a private placement (the "March Private Placement") of $20 million principal
amount of Senior Subordinated Notes to SFHY with detachable warrants under terms
similar to that of the December Private Placement. In connection with the
December Private Placement and the March Private Placement, the Company issued
an aggregate of 1,632,594 detachable warrants with a ten year life, exercisable
into Common Stock of the Company at $0.01 per share.

Registration Rights

     Pursuant to a registration rights agreement, the Company has granted the
1818 Fund, Progressive, ManuLife, FSA and others certain rights with respect to
the registration under the Securities Act of Common Stock held by each. Under
the registration rights agreement, the other entities can, in certain
circumstances, require the Company to effect up to two registrations of any or
all of their shares of Common Stock. The Company is not required to honor such
request to register shares of Common Stock if the request is made within 90 days
of a firm commitment underwritten public offering or before the expiration of
any lock-up period required by the underwriters in connection therewith.

     In addition, if the Company proposes to file a registration statement
(other than a Registration Statement on Form S-4 or S-8 or any successor forms
to such Forms) under the Securities Act with respect to an offering by the
Company, in certain circumstances such parties, among others, can exercise
incidental registration rights to request participation in the offering. The
Company is not required to honor any such request to register shares of Common
Stock if, in an underwritten offering, the underwriter(s) have advised the
Company in writing that the number of shares requested to be registered exceeds
the number of securities that can be sold in such offering within an acceptable
price range.

JUNIOR SUBORDINATED NOTES

     During 1994, Gary L. Shapiro, Edgar A. Otto and Stephen L. Gurba loaned
$1,525,000, $3,675,000 and $123,733, respectively, to the Company. During 1995,
Messrs. Shapiro and Otto loaned $539,000 and $342,000, respectively, to the
Company. During 1995, Nova Financial Corporation and Nova Corporation, each of
which is a privately-held corporation controlled by Messrs. Shapiro and Otto,
loaned $100,000 and $1,115,000, respectively, to the Company. During 1996, Nova
Corporation loaned $700,000 to the Company. All of such loans were made on a
junior subordinated basis and in exchange for the Junior Subordinated Notes.
Each of the Junior Subordinated Notes bears interest at a rate of 8.0% per annum
payable quarterly in arrears and matures on December 20, 2004. During 1996, the
Company repaid $511,000 and $461,000 to Messrs. Shapiro and Otto, respectively.
In January 1997, a portion of the Company's proceeds from its initial public
offering were used to repay $2,594,186, $1,302,131, $1,122,361, $90,018 and
$72,754 to Mr. Otto, Nova Corporation, Mr. Shapiro, Mr. Gurba and Nova Financial
Corporation, respectively. During January and April 1998, the Company paid the
Junior Subordinated Noteholders interest totaling $77,406. No payments of
principal or interest have been paid since that date. As of December 31, 1998,
the Company owed approximately $2.1 million (including $117,000 of accrued and
unpaid interest) on the Junior Subordinated Notes. The Company believes that the
terms of each of the Junior Subordinated Notes are as favorable as could have
been obtained from an unaffiliated third party.

MANAGEMENT AND SERVICE AGREEMENTS

     The Company was previously party to a management agreement and a service
agreement pursuant to which NFC provided operational, financial, legal,
accounting, management, advisory and other administrative services relating to
the management, business operations, assets and interests of the Company. These
agreements were terminated in June 1998. Amounts paid to NFC pursuant to such
agreements were $289,000, $884,000 and $603,000 in 1998, 1997 and 1996,
respectively. Gary L. Shapiro, the former Chairman and Chief Executive Officer
of the Company is the Chairman and Chief Executive Officer and a principal owner
of NFC. Keith B. Stein, Chairman of the Board and Chief Executive Officer of the
Company, was formerly a managing director of NFC.




                                     - 70 -
<PAGE>   71

     The General Partner holds a 1% interest in the Partnership. A majority of
the outstanding capital stock of the General Partner is owned collectively by
Messrs. Shapiro and Otto. The limited partners of the Partnership include, among
others, S Associates, O Associates, the First Union Partner, Keith B. Stein, Roy
E. Tipton, William G. Magro and Kevin G. Adams. Messrs. Stein and Magro hold
minimal minority limited partner interests of the Partnership. Mr. Shapiro, who
was formerly Chairman of the Board and Chief Executive Officer of the Company,
is the trustee of a trust that owns all of the outstanding capital stock of the
general partner of S Associates. Mr. Otto owns all of the outstanding capital
stock of the general partner of O Associates. The remaining limited partners of
the Partnership hold the balance of the limited partner economic interests.

INDEBTEDNESS OF MANAGEMENT

     In 1997, the Company loaned Mr. Magro $100,000, pending the sale of his
home residence in Palm Beach County in connection with his relocation to
Jacksonville to manage the Company's financial services division. As part of Mr.
Magro's agreement to relocate to Jacksonville, the Company agreed to forgive all
or a portion of that loan based on the sale price of Mr. Magro's residence. Mr.
Magro sold his residence in March 1998 and paid the Company $59,146 towards the
principal owed on the $100,000 loan. Accordingly, the Company forgave $40,854 of
the loan in Fiscal 1998 and reimbursed Mr. Magro for his personal tax liability
associated with the forgiven loan amount in such year.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

Exhibits

Number   Description       Method of Filing

3.1      Certificate of Incorporation of the Company.(1)

3.1-1    Certificate of the Designations, Preferences and Rights of the Series A
         Preferred Stock of the Company.(3)

3.1-2    Amendment to the Company's Certificate of Incorporation. (5)*

3.2      By-laws of the Company.(1)

4.1      Specimen Certificate of Common Stock.(4)

4.2      Promissory Note, dated October 31, 1994, payable by National Auto
         Finance Company LP to the order of Gary L. Shapiro.(1)

4.2-1    Amended and Restated Promissory Note, dated as of January 3, 1997,
         payable by National Auto Finance LP to the order of Gary L. Shapiro.(3)

4.3      Promissory Note, dated October 6, 1994, payable by National Auto
         Finance Company LP to the order of Edgar A. Otto.(1)

4.3-1    Amended and Restated Promissory Note, dated as of January 3, 1997,
         payable by National Auto Finance Company LP to the order of Edgar A.
         Otto.(3)

4.4      Promissory Note, dated November 8, 1994, payable by National Auto
         Finance Company LP to the order of Stephen L. Gurba.(1)

4.4-1    Amended and Restated Promissory Note, dated as of January 3, 1997,
         payable by national Auto Finance Company LP to the order of Stephen L.
         Gurba.(3)

4.5      Promissory Note, dated March 27, 1995, payable by National Auto Finance
         Company LP to the order of Nova Financial Corporation.(1)

4.5-1    Amended and Restated Promissory Note, dated as of January 3, 1997,
         payable by National Auto Finance Company LP to the order of Nova
         Financial Corporation.(3)

4.6      Promissory Note, dated May 1, 1995, payable by National Auto Finance
         Company LP to the order of Nova Corporation.(1)





                                     - 71 -
<PAGE>   72

4.6-1    Amended and Restated Promissory Note, dated as of January 3, 1997,
         payable by National Auto Finance Company LP to the order of Nova
         Corporation.(3)

4.7      Securities Purchase Agreement (the "Securities Purchase Agreement") by
         and among National Auto Finance Company, Inc., The 1818 Mezzanine Fund,
         LP, PC Investment Company, Progressive Investment Company, Inc., and
         Manufacturers Life Insurance Company (U.S.A.) dated December 22,
         1997.(7)

4.7-1    Waiver and Amendment No. 1 to the Securities Purchase Agreement, dated
         March 27, 1998, by and among National Auto Finance Company, Inc., The
         1818 Mezzanine Fund, LP, PC Investment Company, Progressive Investment
         Company, Inc. and Manufacturers Life Insurance Company.(7)

4.8      Form of Senior Subordinated Promissory Note issued pursuant to the
         Securities Purchase Agreement.(7)

4.9      Form of Warrant to Purchase Shares of Common Stock of National Auto
         Finance Company, Inc. issued pursuant to the Securities Purchase
         Agreement.(7)

4.10     Agreement, dated March 27, 1998, by and between National Auto Finance
         Company, Inc. and The Structured Finance High Yield Fund, LLC.(7)

4.11     Senior Subordinated Promissory Note, dated March 27, 1998, executed by
         National Auto Finance Company, Inc. in favor of The Structured Finance
         High Yield Fund, LLC, in the amount of $20,000,000.00.(7)

4.12     Warrant, issued March 27, 1998, executed by National Auto Finance
         Company, Inc.(7)

10.1     Second Amended and Restated Agreement of Limited Partnership of
         National Auto Finance Company LP, dated as of September 1, 1995, by and
         among National Auto Finance Corporation, The S Associates Limited
         Partnership, The O Associates Limited Partnership, Stephen L. Gurba,
         Craig Schnee, Roy E. Tipton, Blane H. MacDonald, Michael B. Colley,
         Irwin I. Kent, William G. Magro, Kevin G. Adams, Kamala R. Chapman,
         Keith B. Stein, Colleen S. McMillen, Richard H. Steffer, Tim Rooney,
         Lynn Dunham-Sirota and IronBrand Capital, LLC.(1)

10.1-1   First Amendment to Second Amended and Restated Partnership Agreement,
         dated December 1, 1996.(3)

10.2     1996 Share Incentive Plan.(3)

10.2-1   Company's 1996 Share Incentive Plan, as amended.(5)*

10.3     401(k) Plan.(1)

10.4     Employment Agreement, dated as of July 1, 1996, between National Auto
         Finance Company, Inc. and William G. Magro.(3)

10.4-1   First Amendment to Employment Agreement, dated as of May 27, 1997,
         between National Auto Finance Company, Inc. and William G. Magro.(7)

10.5     [Intentionally Omitted]

10.5-1   [Intentionally Omitted]

10.6     [Intentionally Omitted]

10.7     [Intentionally Omitted]

10.8     Receivables Purchase Agreement, dated as of December 8, 1994, by and
         between National Auto Finance Company LP, as Seller, and NAFCO Funding
         Trust, as Purchaser.(1)

10.9     Promissory Note, dated December 8, 1994, payable by NAFCO Funding Trust
         to the order of National Auto Finance Company LP(1)




                                     - 72 -
<PAGE>   73

10.10    NAFCO Auto Receivables Master Trust Pooling and Administration
         Agreement, dated as of December 8, 1994, among NAFCO Funding Trust, as
         Transferor, National Auto Finance Company LP, as the Administrator, and
         Bankers Trust Company, as Trustee.(1)

10.10-1  Consent and Amendment, dated as of July 2, 1996, to NAFCO Auto
         Receivables Master Trust Pooling and Administration Agreement, dated as
         of December 8, 1994, among NAFCO Funding Trust, as Transferor, National
         Auto Finance Company LP, as the Administrator, and Bankers Trust
         Company, as Trustee.(7)

10.11    Series 1994-R, Class B Supplement, dated as of December 8, 1994, to the
         Pooling and Administration Agreement, dated as of December 8, 1994,
         among NAFCO Funding Trust, as Transferor, National Auto Finance Company
         LP, as the Administrator, and Bankers Trust Company, as Trustee.(1)

10.12    Trust Agreement, dated as of October 5, 1994, between National Auto
         Finance Corporation and Bankers Trust.(1)

10.13    First Amendment and Restated Trust Agreement of NAFCO Funding Trust,
         dated as of December 8, 1994, between National Auto Finance Company LP,
         as Depositor, The Chase Manhattan Bank (USA), as Owner Trustee and Gary
         L. Shapiro and Edgar A. Otto, as Co-Trustees.(1)

10.14    Amended and Restated Servicing Agreement, dated as of December 5, 1994,
         by and between World Omni Financial Corp. and National Auto Finance
         Company LP(1)

10.14-1  Amendment to Amended and Restated Servicing Agreement, dated as of
         September 6, 1995, by and among World Omni Financial Corp. and National
         Auto Finance Company LP(7)

10.14-2  Second Amendment to Amended and Restated Servicing Agreement, dated as
         of June 24, 1997, by and between Omni Financial Services of America,
         Inc., as assignee of World Omni Financial Corp., and National Auto
         Finance Company, Inc., as assignee of National Auto Finance Company
         LP(7)

10.14-3  Third Amendment to the Amended and Restated Servicing Agreement, dated
         as of September 12, 1997, by and between Omni Financial Services of
         America, Inc. and National Auto Finance Company, Inc.(7)

10.14-4  Fourth Amendment to the Amended and Restated Servicing Agreement, dated
         as of October 12, 1997, by and between Omni Financial Services of
         America, Inc.(7*

10.14-5  Supplement to the Amended and Restated Servicing Agreement, dated as of
         December 5, 1994, as amended as of October 1, 1995, between World Omni
         Financial Corp. ("WOFC"), as Servicer, and National Auto Finance
         Company LP, dated as of November 21, 1995 by and between Omni Financial
         Services of America, Inc., as assignee of WOFC ("Servicer") and
         NAFCO.(1)

10.14-6  Supplement to the Amended and Restated Servicing Agreement, dated as of
         December 5, 1994, as amended as of October 1, 1995, between World Omni
         Financial Corp. (WOFC) and National Auto Finance Company LP (NAFCO),
         dated as of November 13, 1996 by and between Omni Financial Services of
         America, Inc., as assignee of WOFC, and NAFCO.(2)

10.14-7  Supplement to Amended and Restated Servicing Agreement, December 5,
         1994, as amended as of October 1, 1995 and November 13, 1996, dated as
         of July 23, 1997, by and between Omni Financial Services of America,
         Inc. and National Auto Finance Company, Inc.(7)

10.14-8  Supplement to Amended and Restated Servicing Agreement, dated as of
         December 5, 1994, as amended as of October 1, 1995, June 24, 1997 and
         July 21, 1997 and supplemented as of November 21, 1995, November 13,
         1996, July 12, 1997 and September 19, 1997, by and between Omni
         Financial Services of America, Inc. and National Auto Finance Company,
         Inc.(7)

10.15    Certificate Purchase Agreement, dated as of December 8, 1994, among
         NAFI Funding Trust, National Auto Finance Company LP, as Initial
         Administrator and First Union National Bank of North Carolina.(1)

10.16    [Intentionally Omitted]

10.16-1  First Amendment of Management Agreement, dated as of January 1, 1996,
         by and between National Auto Finance Company LP, Auto Credit
         Clearinghouse LP and National Auto Finance Corporation.(1)




                                     - 73 -
<PAGE>   74

10.16-2  Second Amendment to Management Agreement, dated as of January 1, 1997,
         by and among National Auto Finance Corporation, National Auto Finance
         Company, Inc., National Auto Finance Company, LP and National Financial
         Companies LLC.(7)

10.17    [Intentionally Omitted]

10.17-1  First Amendment to Services Agreement, dated as of January 1, 1996, by
         and between National Auto Finance Corporation and National Financial
         Corporation.(1)

10.17-2  Second Amendment to Services Agreement, dated as of January 1, 1997, by
         and between National Auto Finance Corporation, National Auto Finance
         Company, Inc. and National Financial Companies LLC.(7)

10.18    Pooling and Servicing Agreement, dated as of October 1, 1995, by and
         among National Financial Auto Funding Trust, as Transferor, National
         Auto Finance Company LP, as Master Servicer, and Harris Trust and
         Savings Bank, as Trustee.(1)

10.19    Assignment Agreement, dated as of October 1, 1995, between Bankers
         Trust Company, as Trustee, and National Financial Auto Funding
         Trust.(1)

10.20    Transfer Agreement No. 1, dated as of October 1, 1995, between National
         Financial Auto Funding Trust and Harris Trust and Savings Bank.(1)

10.21    Insurance and Indemnity Agreement, dated as of November 21, 1995, among
         Financial Security Assurance, Inc., National Financial Auto Funding
         Trust and National Auto Finance Company LP(1)

10.22    Indemnification Agreement, dated as of November 21, 1995, among
         Financial Security Assurance Inc., National Financial Auto Funding
         Trust and First Union Capital Markets Corp.(1)

10.23    Master Spread Account Agreement, dated as of November 21, 1995, among
         National Financial Auto Funding Trust, Financial Security Assurance
         Inc. and Harris Trust and Savings Bank, as Trustee and as Collateral
         Agent.(1)

10.24    Financial Guaranty Insurance Policy (Policy No.: 50522-N), together
         with Endorsement No. 1 thereto, dated November 13, 1996, issued by
         Financial Security Assurance Inc. in favor of Harris Trust and Savings
         Bank, as trustee for the benefit of the Certificate Holders.(1)

10.25    Custodial Agreement, dated as of November 21, 1995, by and between Omni
         Financial Services of America, Inc., as custodian, and National Auto
         Finance Company LP, as Master Servicer.(1)

10.26    Amendment, dated as of November 21, 1995, to the First Amended and
         Restated Trust Agreement of NAFCO Funding Trust, dated as of December
         8, 1994, among National Auto Finance Company LP, as Depositor, The
         Chase Manhattan Bank (USA), as Owner Trustee, and Gary L. Shapiro,
         Edgar Otto A. and Andrew Stidd, as Co-Trustees.(1)

10.27    Form of Indemnification Agreement.(4)

10.28    Assignment and Assumption Agreement, dated as of October 7, 1996,
         between National Auto Finance Company, Inc. and National Auto Finance
         Company LP(1)

10.29    Pooling and Servicing Agreement, dated as of October 21, 1996, by and
         among National Financial Auto Funding Trust, as Transferor, National
         Auto Finance Company LP, as Servicer, and Harris Trust and Savings
         Bank, as Trustee.(2)

10.30    Purchase and Contribution Agreement, dated as of October 21, 1996, by
         and between National Auto Finance Company LP and National Financial
         Auto Funding Trust.(2)

10.31    Assignment Agreement, dated as of October 21, 1996, between Bankers
         Trust Company and National Financial Auto Funding Trust II.(2)

10.32    Master Spread Account Agreement, dated as of November 13, 1996, among
         National Financial Auto Funding Trust, Financial Security Assurance
         Inc. and Harris Trust and Savings Bank, as Trustee and Collateral
         Agent.(2)

10.33    Insurance and Indemnity Agreement, dated as of November 13, 1996, among
         Financial Security Assurance Inc., National Financial Auto Funding
         Trust and National Auto Finance Company LP(2)



                                     - 74 -
<PAGE>   75


10.34    Sale Agreement, dated as of October 21, 1996, by and between National
         Financial Auto Funding Trust and National Financial Auto Funding Trust
         II.(2)

10.35    Transfer Agreement No. 1, dated as of November 13, 1996, by National
         Financial Auto Funding Trust as Transferor to Harris Trust and Savings
         Bank, as Trustee, pursuant to a Pooling and Servicing Agreement, dated
         as of October 21, 1996.(2)

10.36    Form of Financial Guaranty Insurance Policy issued by Financial
         Security Assurance Inc.(2)

10.37    Lease Agreement, dated as of June 16, 1997, by and between CTC
         Investments II Limited and National Auto Finance Company, Inc.(7)

10.37-1  First Amendment to Lease Agreement dated June 16, 1997 by and between
         CTC Investments II Limited and National Auto Finance Company, Inc.
         dated October 1, 1997.(7)

10.38    Referral Agreement, dated as of April 15, 1996, by and between First
         Union National Bank of North Carolina and Auto Credit Clearinghouse
         LP(4)

10.39    Trust Agreement, dated as of July 21, 1997, between National Financial
         Auto Funding Trust and Wilmington Trust Company, as trustee.(7)

10.40    Indenture, dated as of June 29, 1997, by and between National Auto
         Finance 1997-1 Trust and Harris Trust and Savings Bank as Trustee.(7)

10.41    Sale and Servicing Agreement, dated as of June 29, 1997, by and among
         National Auto Finance 1997-1 Trust, as Seller, National Financial Auto
         Finance 1997-1 Trust, National Auto Finance Company, Inc. as Servicer,
         and Harris Trust and Savings Bank, as Trust Collateral Agent and
         Back-up Servicer.(7)

10.42    Financial Guaranty Insurance Policy, dated as of July 23, 1997,
         delivered by Financial Security Assurance, Inc.(7)

10.43    Purchase and Contribution Agreement, dated June 29, 1997, by and
         between National Auto Finance Company, Inc. and National Financial Auto
         Funding Trust.(7)

10.44    Sale Agreement, dated as of June 29, 1997, by and between National
         Financial Auto Funding Trust II and National Financial Auto Funding
         Trust.(7)

10.45    Indemnification Agreement, dated as of July 23, 1997, by and among
         Financial Security Assurance Inc., National Finance Auto Funding Trust
         and First Union Capital Markets Corp.(7)

10.46    Amendment No. 1 dated 1997, by and among National Financial Auto
         Funding Trust, Financial Security Assurance Inc., Harris Trust and
         Savings Bank, as collateral agent, and National Auto Finance Company,
         Inc. to Master Spread Account Agreement dated as of November 21, 1995
         and Master Spread Account Agreement dated as of November 13, 1996, in
         each case among National Financial Auto Funding Trust, Financial
         Security Assurance Inc. and Harris Trust and Savings Bank, as trustee
         and as collateral agent.(7)

10.47    Amendment No. 1 dated October 1, 1997, among Financial Security
         Assurance Inc., National Financial Auto Funding Trust and National Auto
         Finance Company, Inc. to Insurance and Indemnity Agreement dated as of
         November 21, 1995 and Insurance and Indemnity Agreement dated as of
         November 13, 1996 in each case among Financial Security Assurance Inc.,
         National Financial Auto Funding Trust and National Auto Finance
         Company, Inc.(7)

10.48    Amendment to First Amended and Restated Trust Agreement dated as of
         December 8, 1994 among National Auto Finance Company, Inc., the
         Trustee, and the Co-Trustees, and Section 10.03 of the Trust Agreement
         dated as of December 8, 1995 among National Auto Finance Company, Inc.,
         the Trustee and the Co-Trustees, made as of October 1, 1997 among
         National Auto Finance Company, Inc., The Chase Manhattan Bank Delaware,
         as Trustee of National Financial Auto Funding Trust II and National
         Financial Auto Funding Trust II and the co-trustee of such trusts.(7)

10.49    Investment Agreement dated as of October 1, 1997 by and between
         National Auto Finance Company, Inc. and FSA Portfolio Management,
         Inc.(7)




                                     - 75 -
<PAGE>   76

10.50    Revolving Credit Agreement dated as of September 29, 1997 among
         National Auto Finance Company, Inc. and BankBoston, N.A., for itself
         and as agent for the other lending institutions named therein.(7)

10.50-1  Amendment Agreement No. 1 to Revolving Credit Agreement dated October
         1, 1997 by and between National Auto Finance Company, Inc. and
         BankBoston, N.A. and the other lending institutions party thereto and
         BankBoston, N.A., as agent for itself and other banking
         institutions.(7)

10.50-2  Amendment Agreement No. 2 to Revolving Credit Agreement dated December
         19, 1997 by and between National Auto Finance Company, Inc. and
         BankBoston, N.A. and the other lending institutions party thereto and
         BankBoston, N.A., as agent for itself and other banking
         institutions.(7)

10.50-3  Amendment Agreement No. 3 to the Revolving Credit Agreement, dated
         March 19, 1998, by and among National Auto Finance Company, Inc.
         BankBoston, N.A. and the other lending institutions party thereto.(7)

10.50-4  Amendment Agreement No. 4 to the Revolving Credit Agreement, dated
         March 27, 1998, by and among National Auto Finance Company, Inc.
         BankBoston, N.A. and the other lending institutions party thereto.(7)

10.51    Trademark Collateral Security and Pledge Agreement dated as of
         September 29, 1997, between National Auto Finance Company, Inc. and
         BankBoston, N.A., for itself and other banking institutions.(7)

10.52    Pledge Agreement made as of September 29, 1997 by and among National
         Auto Finance Company, Inc., National Chartered Auto Corporation and
         BankBoston, N.A.(7)

10.53    Note dated as of September 29, 1997 payable by National Auto Finance
         Company, Inc. to BankBoston, N.A., as agent.(7)

10.54    [Intentionally Omitted]

10.55    [Intentionally Omitted]

10.56    [Intentionally Omitted]

10.57    Lease Agreement dated April 8, 1996, by and between CanPro Investments
         Ltd. and National Auto Financial Corporation or its assignee Auto
         Credit Clearinghouse.(7)

10.58    Software License, Support and Usage Agreement dated as of February 14,
         1997 by and between BNI, Inc. and National Auto Finance Company LP(7)

10.58-1  First Amendment to Software License, Support and Usage Agreement dated
         as of December 15, 1997 by and between BNI, Inc. and National Auto
         Finance Company LP(7)

10.59    Software Sublicense, Support and Usage Agreement dated as of February
         17, 1997, by and between Pinnacle Portfolio Services LLC and National
         Auto Finance Company, Inc.(7)

10.60    Consent and Amendment, dated as of September 25, 1997, between National
         Financial Auto Funding Trust, National Auto Finance Company, Inc.,
         First Union National Bank and Bankers Trust Company, as Trustee of
         National Financial Auto Receivables Master Trust.(7)

10.61    Security Agreement, dated as of September 29, 1997, between National
         Auto Finance Company, Inc. and BankBoston, N.A., as agent for itself
         and other banking institutions.(7)

10.62    [Intentionally Omitted.]

10.63    Amendment, dated as of September 25, 1997, to Pooling and Servicing
         Agreements, dated as of October 1, 1995 and October 21, 1996, each
         among National Financial Auto Funding Trust, National Auto Finance
         Company, Inc., as successor to National Auto Finance Company LP, and
         Harris Trust and Savings Bank, as trustee.(7)

10.64    Waiver letter of Financial Assurance Inc., dated as of September 25,
         1997, to National Auto Finance Company, Inc. and National Financial
         Auto Funding Trust.(7)



                                     - 76 -
<PAGE>   77

10.65    [Intentionally Omitted.]

10.66    Insurance and Indemnity Agreement, among Financial Security Assurance
         Inc., National Auto Finance 1997-1 Trust, National Financial Auto
         Funding Trust and National Auto Finance Company, Inc., dated as of July
         23, 1997.(7)

10.67    Master Spread Account Agreement, dated as July 23, 1997, among National
         Financial Auto Funding Trust, Financial Security Assurance Inc. and
         Harris Trust and Savings Bank, as Trustee and as Collateral Agent.(7)

10.68    Custodial Agreement, dated as of July 23, 1997, by and between Omni
         Financial Services of America, Inc., as custodian, and National Auto
         Finance Company, Inc., as servicer.(7)

10.69    $1.5 million Promissory Note, dated as of August 25, 1997, payable by
         National Auto Finance Company, Inc. to First Union National Bank.(7)

10.70    Security Agreement, dated as of August 25, 1997, delivered by National
         Auto Finance Company, Inc. to First Union National Bank.(7)

10.71    Loan Agreement, dated as of August 25, 1997, by and between First Union
         National Bank and National Auto Finance Company, Inc.(7)

10.72    Voting Agreement by and among The 1818 Mezzanine Fund, LP, PC
         Investment Company, Progressive Investment Company, Inc. and National
         Auto Finance Company, L.P dated December 22, 1997.(7)

10.73    Restated Registration Rights Agreement, dated March 27, 1998, by and
         among National Auto Finance Company, Inc. and Certain Investors.(7)

10.74    Junior Subordination Agreement, dated as of March 27, 1998, among
         BankBoston, N.A., The 1818 Mezzanine Fund, LP, PC Investment Company,
         Manufacturers Life Insurance Company (U.S.A.), Nova Financial
         Corporation, Nova Corporation, The Structured Finance High Yield Fund,
         LLC and National Auto Finance Company, Inc.(7)

10.75    Indenture, dated as of December 15, 1997, by and between National Auto
         Finance 1998-1 Trust and Harris Trust and Savings Bank at Trustee.(7)

10.76    Sale and Servicing Agreement, dated as of December 15, 1997, by and
         among National Auto Finance 1998-1 Trust, as Seller, National Financial
         Auto Finance 1998-1 Trust, National Auto Finance Company, Inc. as
         Servicer, and Harris Trust and Savings Bank, as Trust Collateral Agent
         and Back-up Servicer.(7)

10.77    Insurance and Indemnity Agreement, among Financial Security Assurance
         Inc., National Auto Finance 1998-1 Trust, National Financial Auto
         Funding Trust and National Auto Finance Company, Inc., dated as of
         January 20, 1998.(7)

10.78    Master Spread Account Agreement, dated as January 20, 1998, among
         National Financial Auto Funding Trust, Financial Security Assurance
         Inc. and Harris Trust and Savings Bank, as Trustee and as Collateral
         Agent.(7)

10.79    Custodial Agreement, dated as of January 20, 1998, by and between Omni
         Financial Services of America, Inc., as custodian, and National Auto
         Finance Company, Inc., as servicer.(7)

10.80    Sale Agreement, dated as of December 15, 1997, by and between National
         Financial Auto Funding Trust Il and National Financial Auto Funding
         Trust.(7)

10.81    Trust Agreement, dated as of December 15, 1997, between National
         Financial Auto Funding Trust and Wilmington Trust Company.(7)

10.82    Purchase and Contribution Agreement, dated December 15, 1997, by and
         between National Auto Finance Company, Inc. and National Financial Auto
         Funding Trust.(7)

10.83    Assignment Agreement, dated as of December 15, 1997, between Bankers
         Trust Company and National Financial Auto Funding Trust II.(7)

10.84    Indemnification Agreement, dated as of January 20, 1998, by and among
         Financial Security Assurance Inc., National Financial Auto Funding
         Trust and First Union Capital Markets Corp.(7)



                                     - 77 -
<PAGE>   78

10.85    Amendment, dated as of January 20, 1998, by and among National
         Financial Auto Funding Trust, Financial Security Assurance Inc., Harris
         Trust and Savings Bank, as collateral agent, and National Auto Finance
         Company, Inc. to Master Spread Account Agreement dated as of November
         21, 1995, Master Spread Account Agreement dated as of November 13,
         1996, and Master Spread Account Agreement dated as of July 23, 1997 in
         each case among National Financial Auto Funding Trust, Financial
         Security Assurance Inc. and Harris Trust and Savings Bank, as trustee
         and as collateral agent.(7)

10.86    Referral Agreement, dated as of February 26, 1998, by and between U.S.
         Bank, N.A. and Auto Credit Clearinghouse, a division of National Auto
         Finance Company, Inc.(7)

10.87    Restructuring Agreement, dated as of April 7, 1999 by and among the
         Company, National Auto Finance Company, L.P., National Auto Finance
         Corporation, The 1818 Mezzanine Fund, L.P., PC Investment Company,
         Progressive Investment Company, Inc. Manufacturers Life Insurance
         Company (U.S.A.), and The Structured Finance High Yield Fund, LLC.(6)

10.88    Revolving Credit, Term Loan and Security Agreement dated as of March
         31, 1999 by and among National Auto Funding Trust, the Company and
         First Union National Bank.(6)

10.89    Note Exchange Agreement dated as of April 7, 1999 by and among the
         Company, Nova Financial Corporation, Nova Corporation, Stephen L.
         Gurba, Edgar Otto and Gary L. Shapiro.(6)

10.90    Amended and Restated Junior Subordination Agreement, dated as of April
         7, 1999 among The 1818 Mezzanine Fund, L.P., PC Investment Company,
         Manufacturers Life Insurance Company (U.S.A.), The Structured Finance
         High Yield Fund, and others, and the Company.(6)

10.91    Release and Consent Not to Sue, dated as of April 7, 1999 by National
         Auto Finance Company L.P., National Auto Finance Corporation, Nova
         Financial Corporation, Nova Corporation, Gary L. Shapiro, Edgar A.
         Otto, and Stephen L. Gurba for itself or himself and on behalf of
         others, releasing the Company and others from certain claims, etc. (6)

10.92    Release dated as of April 7, 1999 by The 1818 Mezzanine Fund, L.P., PC
         Investment Company, Progressive Investment Company, Inc., Manufacturers
         Life Insurance Company (U.S.A.), and The Structured Finance High Yield
         Fund, LLC for itself and other named Releasors releasing the Company
         and other named Releasees. (6)

10.93    Amended and Restated Pooling and Administration Agreement, dated as of
         December 8, 1994 and restated in its entirety as of April 7, 1999 by
         and among National Financial Auto Funding Trust II, the Company and
         Bankers Trust Company.(6)

10.94    Amendment One to Back-up Servicing Agreement, dated as of March 31,
         1999 by and among CSC Logic/MSA LLP, the Company, First Union National
         Bank and Bankers Trust, as trustee and National Financial Auto Funding
         Trust II.(6)

10.95    Consent and Amendment, dated as of March 31, 1999 by and among National
         Financial Auto Funding Trust II, the Company, First Union National Bank
         and Bankers Trust Company, as trustee.(6)

10.96    Reissuance of Series 1994-R class B Certificate registered in the name
         of First Union National Bank as owner of a fractional undivided
         interest in the National Financial Auto Receivables Master Trust.(6)

10.97    Certificate Agreement, dated as of March 31, 1999 between National
         Chartered Auto Corporation and the Company.(6)

10.98    Consent and Amendment, dated as of March 31, 1999 to the Pooling and
         Servicing Agreement dated as of October 1, 1995, and the Pooling and
         Servicing Agreement, dated as of October 21, 1996 each among National
         Financial Auto Funding Trust, the Company, and Harris Trust and Savings
         Bank, as trustee. (6)

10.99    National Auto Finance Company, Inc. Owner Trustee and National
         Financial Auto Funding Trust Indenture Trustee Irrevocable Instruction
         Letter dated as of March 31, 1999 addressed to Wilmington Trust
         Company, as Owner Trustee, Harris Trust and Savings Bank, as Trustee,
         and Chase Manhattan Bank Delaware, as Trustee, each as trustee to
         various trusts.(6)

10.100   Amendment to Trust Agreement dated as of March 31, 1999 of the First
         Amended and Restated Trust Agreement dated as of December 8, 1994 among
         the Company, Chase Manhattan Bank Delaware, as Trustee and certain
         other Co-Trustees.(6)



                                     - 78 -
<PAGE>   79



10.101   Agreement for Monitoring and Back-up Servicing, dated as of March 31,
         1999 among the Company, CSC Logic/MSA LLP and Financial Security
         Assurance Inc.(6)

10.102   Amendment to Custodian Agreement, dated as of March 31, 1999 to the
         Custodian Agreement, dated as of October 15, 1998, by and among Harris
         Trust and Savings Bank as Custodian, the Company as Administrator and
         Harris Trust and Savings Bank as trustee of various trusts.(6)

10.103   Supplement to Back-up Servicing Agreement, dated as of March 31, 1999
         by and among National Auto Funding Trust, the Company and Harris Trust
         and Savings Bank to the Back-up Servicing Agreement dated as of March
         31, 1999.(6)

10.104   Agreement and Amendment, dated as of March 31, 1999 among Financial
         Security Assurance Inc., National Financial Auto Funding Trust, the
         Company, National Auto Finance 1997-1 Trust and National Auto Finance
         1998-1 Trust to Insurance and Indemnity Agreements dated as of November
         21, 1995, November 13, 1996, July 23, 1997 and January 20, 1998 in each
         case among Financial Security Assurance Inc., National Financial Auto
         Funding Trust and the Company and with respect to the Insurance and
         Indemnity Agreement dated as of July 23, 1997, also among National Auto
         Finance 1997-1 Trust and with respect to the Insurance and Indemnity
         Agreement dated as of January 20, 1998 also among National Auto Finance
         1998-1 Trust.(6)

10.105   Agreement and Amendment dated as of March 31, 1999 among Financial
         Security Assurance Inc., National Financial Auto Funding Trust, Harris
         Trust and Savings Bank, to Series 1996-1 Supplement, Series 1997-1
         Supplement and Series 1998-1 Supplement each dated as of March 31, 1998
         to the First Amended and Restated Master Spread Account Agreement dated
         as of March 31, 1998.(6)

10.106   Insurance and Indemnity Agreement, dated as of September 1, 1999 among
         Financial Security Assurance Inc., National Auto Finance 1999-1 Trust,
         National Financial Auto Funding Trust and the Company.(5)*

10.107   Indemnification Agreement, dated as of September 1, 1999 between
         Financial Security Assurance, Inc. and National Financial Auto Funding
         Trust.(5)*

10.108   Indenture, dated as of September 1, 1999, by and between National Auto
         Finance 1999-1 Trust and Harris Trust and Savings Bank as Trustee.(5)*

10.109   Sale and Servicing Agreement, dated as of September 1, 1999, by and
         among National Auto Finance 1999-1 Trust, as Seller, National Financial
         Auto Finance 1999-1 Trust, the Company as Servicer, and Harris Trust
         and Savings Bank as Trust Collateral Agent and Back-up Servicer.(5)*

10.110   Sale Agreement, dated as of September 1, 1999 between National
         Financial Auto Funding Trust II and National Financial Auto Funding
         Trust.(5)*

10.111   Custodial Agreement, dated as of September 1, 1999 between Harris Trust
         and Saving Bank as Custodian and as Trustee and Trust Collateral Agent
         and the Company.(5)*

10.112   Trust Agreement, dated as of September 1, 1999, between National Auto
         Funding Trust and Wilmington Trust Company as Owner Trustee.(5)*

10.113   Amended and Restated Trust Agreement dated as of September 1, 1999
         between National Financial Auto Funding Trust and Wilmington Trust
         Company as Owner Trustee.(5)*

10.114   Assignment Agreement dated as of September 1, 1999, between Bankers
         Trust Company and National Auto Financial Funding Trust II.(5)*

10.115   Series 1999-1 Supplement dated as of September 1, 1999 to the First
         Amended and Restated Master Spread Account Agreement dated as of March
         31, 1998 among National Financial Auto Funding Trust, Financial
         Security Assurance, Inc., and Harris Trust and Savings Bank, as Trustee
         and Collateral Agent.(5)*

10.116   Agreement for Monitoring and Back-up Servicing, dated as of September
         1, 1999, among the Company, CSC Logic/MSA LLP d/b/a Loan Servicing
         Enterprise and Financial Security Assurance.(5)*

10.117   Supplement to Back-up Servicing Agreement, dated as of September 1,
         1999 among National Financial Auto Funding Trust, the Company and
         Harris Trust and Savings Bank to the Back-up Servicing Agreement dated
         as of March 31, 1998.(5)*



                                     - 79 -
<PAGE>   80

10.118   Amendment Number 1 to the Amended and Restated Pooling and
         Administration Agreement, dated as of May 1999, among National
         Financial Auto Funding Trust II, the Company and Bankers Trust Company
         as Trustee.(5)*

10.119   Amendment Number 2 to the Amended and Restated Pooling and
         Administration Agreement, dated as of September 21, 1999 among National
         Financial Auto Funding Trust II, the Company and Bankers Trust Company
         as Trustee.(5)*

10.120   Amendment Number 3 to the Amended and Restated Pooling and
         Administration Agreement dated as of September 24, 1999 among National
         Financial Auto Funding Trust II, the Company and Bankers Trust Company,
         as Trustee.(5)*

10.121   Referral Agreement, dated as of September 22, 1999, by and between the
         Company and Atlantic Coast Federal Credit Union.(5)*

10.122   First Amendment to Revolving Credit, Term Loan and Security Agreement,
         dated as of September 23, 1999 among National Financial Auto Funding
         Trust, the Company, and First Union National Bank.(5)*

10.123   Servicing Agreement, dated as of October 20, 1999, by and between the
         Company and Atlantic Coast Federal Credit Union.(5)*

10.124   Wavier, effective as of September 30, 1999 of The 1818 Mezzanine Fund,
         L.P., PC Investment Company, Progressive Investment Company, Inc.,
         Manufacturers Life Insurance Company (U.S.A.), and The Structured
         Finance High Yield Fund, L.L.C., for the benefit of the Company. (5)*

10.125   Contract Sale Agreement, dated as of February 4, 2000, by and between
         the Company and Nuvell Credit Corporation redesignated from Exhibit
         10.109 filed as an Exhibit to the Company's Form 8-K filed on February
         14, 2000.(5)*

10.126   Servicing Agreement, dated as of February 4, 2000, by and between the
         Company and Nuvell Credit Corporation redesignated from Exhibit 10.110
         filed as an Exhibit to the Company's Form 8-K filed on February 14,
         2000.(5)*

10.127   Amendment Number 4 to the Amended and Restated Pooling and
         Administration Agreement, dated as of February 22, 2000 among National
         Financial Auto Funding Trust II, the Company, and Bankers Trust Company
         as Trustee.(5)*

10.128   Second Amendment to Revolving Credit, Term Loan and Security Agreement,
         dated as of February 22, 2000 among National Financial Auto Funding
         Trust, the Company and First Union National Bank.(5)*

10.129   Letter Agreement with respect to the B Note Commitment Letter dated as
         of February 22, 2000 by and between First Union National Bank and the
         Company.(5)*

10.130   Wavier, effective as of December 31, 1999 of The 1818 Mezzanine Fund,
         L.P., PC Investment Company, Progressive Investment Company, Inc.,
         Manufacturers Life Insurance Company (U.S.A.), and The Structured
         Finance High Yield Fund, L.L.C., for the benefit of the Company. (5)*

10.131   First Amendment to Contract Sale Agreement effective as of February 29,
         2000, by and between the Company and Nuvell Credit Corporation. (5)*

10.132   Sale and Purchase Agreement dated as of March 30, 2000 by and between
         the Company as Guarantor, National Financial Auto Funding Trust II as
         Seller, and Nuvell Credit Corporation as Purchaser. (5)*

10.133   Amendment No. 1 to Sale and Purchase Agreement effective as of April 5,
         2000 by and between Nuvell Credit Corporation as Purchaser and National
         Financial Auto Funding Trust II as Seller and the Company as Guarantor.

10.134   Amendment No. 2 to Contract Sale Agreement and Amendment No. 1 to
         Servicing Agreement dated as of April 7, 2000 by and between the
         Company and Nuvell.

11.1     Earnings Per Share (5)

23.1     Consent of BDO Seidman, LLP (5)*

23.2     Consent of KPMG Peat Marwick LLP (5)*


                                     - 80 -
<PAGE>   81
23.3     Consent of KPMG Peat Marwick LLP(5)*
27.1     Financial Data Schedule (5)

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

* Filed in the form executed.

(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 333-13667) as filed with the Securities and Exchange
Commission on October 8, 1996.

(2) Incorporated by reference to the Company's Amendment No. 1 to Registration
Statement on Form S-1/A (Registration No. 333-13667) as filed with the
Securities and Exchange Commission on November 25, 1996.

(3) Incorporated by reference to the Company's Amendment No. 2 to Registration
Statement on Form S-1/A (Registration No. 333-13667) as filed with the
Securities and Exchange Commission on January 9, 1997.

(4) Incorporated by reference to the Company's Amendment No. 3 to Registration
Statement on Form S-1/A (Registration No. 333-13667) as filed with the
Securities and Exchange Commission on January 28, 1997.

(5) Filed herewith.

(6) Incorporated by reference to the Company's Form 10-K/A filed with the
Commission on August 24, 1999.

(7) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1997 filed with the Securities and Exchange Commission on May 1,
1998.

Reports on Form 8-K

On March 10, 1999, the Company filed a Form 8-K announcing that it had been
notified by the Nasdaq Stock Market Inc. that the Company's Common Stock has
been delisted from trading on the Nasdaq National Market, effective as of the
close of business on March 9, 1999. Nasdaq informed the Company that it has been
delisted for failure to comply with both the public float and minimum bid price
requirements.

On April 13, 1999, the Company filed a Form 8-K announcing it that it has
completed a financial restructuring of its Senior Subordinated and Junior
Subordinated Notes, resolved certain other issues with its Senior Subordinated
Noteholders and Junior Subordinated Noteholders, entered into several loan
facilities and arrangements with First Union National Bank, and modified certain
of the terms of the insurance guarantee arrangements with Financial Security
Assurance, the Company's bond insurer, related to the Company's securitized
asset-backed bonds.

On May 18, 1999, the Company filed an 8-K Form announcing the filing of its 1998
Annual Report on Form 10-K which reflected a loss of $33.7 million or $(3.73)
per share for the year ended December 31, 1998, as compared to a loss of $18.6
million or $(2.62) per share for the year ended December 31, 1997, and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, which
reflected a loss of $1.8 million or $(0.20) per share for the quarter as
compared to a loss of $5.2 million or $(0.57) per share for the quarter ended
March 31, 1998. The 1999 first quarter loss was primarily due to decreased
revenues resulting from the continued curtailment of origination volume in the
quarter.

On June 17, 1999, the Company filed a Form 8-K announcing Keith B. Stein had
been named Chairman of the Board, in addition to his role as Chief Executive
Officer of the Company and the promotions of William B. Magro to President, in
addition to his role as Chief Operating Officer. The Company also announced the
promotion of Brent Wombolt to Senior Vice President-Operations and Originations,
from Vice President and Frank Florio to Vice President- Management Information
Systems, from Assistant Vice President. The Company also announced that it
scheduled its annual meeting of the Company's stockholders for the year ended
December 31, 1998.




                                     - 81 -
<PAGE>   82


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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 FINANCE COMPANY, INC.


         Date: March 22, 2000          By: /s/ KEITH B. STEIN
                                           -------------------------------------
                                           Name:   Keith B. Stein
                                           Title:  Chairman of the Board and
                                                   Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>


<S>                                             <C>                                            <C>
/s/ Keith B. Stein                              Chief Executive Officer                        Date: March 22, 2000
------------------------------------              (principal executive officer)
     Keith B. Stein



/s/ Brian W. Thompson                           Vice President, Finance, and                   Date: March 22, 2000
------------------------------------              Accounting, Treasurer (principal
     Brian Thompson                               accounting and financial officer)



/s/ Joseph P. Donlan                            Director                                       Date: March 22, 2000
------------------------------------
     Joseph P. Donlan



/s/ Peter Offermann                             Director                                       Date: March 22, 2000
 -----------------------------------
     Peter Offermann



/s/ David W. Young                              Director                                       Date: March 22, 2000
------------------------------------
     David W. Young



/s/ David Benson                                Director                                       Date: March 17, 2000
-----------------------------------------
     David Benson



/s/ Evelyn Erb                                  Director                                       Date: March 17, 2000
-----------------------------------------
     Evelyn Erb



/s/ Robert R. Gould                             Director                                       Date: March 22, 2000
-----------------------------------------
Robert R. Gould
</TABLE>

                                     - 82 -
<PAGE>   83
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
-------        -----------
<S>            <C>
3.1-2          Amendment to the Company's Certificate of Incorporation.

10.2-1         Company's 1996 Share Incentive Plan, as amended.

10.106         Insurance and Indemnity Agreement, dated as of September 1, 1999
               among Financial Security Assurance Inc., National Auto Finance
               1999-1 Trust, National Financial Auto Funding Trust and the
               Company.

10.107         Indemnification Agreement, dated as of September 1, 1999 between
               Financial Security Assurance, Inc. and National Financial Auto
               Funding Trust.

10.108         Indenture, dated as of September 1, 1999, by and between
               National Auto Finance 1999-1 Trust and Harris Trust and Savings
               Bank as Trustee.

10.109         Sale and Servicing Agreement, dated as of September 1, 1999, by
               and among National Auto Finance 1999-1 Trust, as Seller, National
               Financial Auto Finance 1999-1 Trust, the Company as Servicer, and
               Harris Trust and Savings Bank as Trust Collateral Agent and
               Back-up Servicer.

10.110         Sale Agreement, dated as of September 1, 1999 between National
               Financial Auto Funding Trust II and National Financial Auto
               Funding Trust.

10.111         Custodial Agreement, dated as of September 1, 1999 between Harris
               Trust and Saving Bank as Custodian and as Trustee and Trust
               Collateral Agent and the Company.

10.112         Trust Agreement, dated as of September 1, 1999, between National
               Auto Funding Trust and Wilmington Trust Company as Owner Trustee.

10.113         Amended and Restated Trust Agreement dated as of September 1,
               1999 between National Financial Auto Funding Trust and Wilmington
               Trust Company as Owner Trustee.

10.114         Assignment Agreement dated as of September 1, 1999, between
               Bankers Trust Company and National Auto Financial Funding
               Trust II.

10.115         Series 1999-1 Supplement dated as of September 1, 1999 to the
               First Amended and Restated Master Spread Account Agreement dated
               as of March 31, 1998 among National Financial Auto Funding Trust,
               Financial Security Assurance, Inc., and Harris Trust and Savings
               Bank, as Trustee and Collateral Agent.

10.116         Agreement for Monitoring and Back-up Servicing, dated as of
               September 1, 1999, among the Company, CSC Logic/MSA LLP d/b/a
               Loan Servicing Enterprise and Financial Security Assurance.

10.117         Supplement to Back-up Servicing Agreement, dated as of
               September 1, 1999 among National Financial Auto Funding Trust,
               the Company and Harris Trust and Savings Bank to the Back-up
               Servicing Agreement dated as of March 31, 1998.

10.118         Amendment Number 1 to the Amended and Restated Pooling and
               Administration Agreement, dated as of May 1999, among National
               Financial Auto Funding Trust II, the Company and Bankers Trust
               Company as Trustee.

10.119         Amendment Number 2 to the Amended and Restated Pooling and
               Administration Agreement, dated as of September 21, 1999 among
               National Financial Auto Funding Trust II, the Company and Bankers
               Trust Company as Trustee.
</TABLE>
<PAGE>   84

<TABLE>
<S>            <C>
10.120         Amendment Number 3 to the Amended and Restated Pooling and
               Administration Agreement dated as of September 24, 1999 among
               National Financial Auto Funding Trust II, the Company and Bankers
               Trust Company, as Trustee.

10.121         Referral Agreement, dated as of September 22, 1999, by and
               between the Company and Atlantic Coast Federal Credit Union.

10.122         First Amendment to Revolving Credit, Term Loan and Security
               Agreement, dated as of September 23, 1999 among National
               Financial Auto Funding Trust, the Company, and First Union
               National Bank.

10.123         Servicing Agreement, dated as of October 20, 1999, by and
               between the Company and Atlantic Coast Federal Credit Union.

10.124         Wavier, effective as of September 30, 1999 of the 1818 Mezzanine
               Fund, L.P., PC Investment Company, Progressive Investment
               Company, Inc., Manufacturers Life Insurance Company (U.S.A.), and
               The Structured Finance High Yield Fund, L.L.C., for the benefit
               of the Company.

10.125         Contract Sale Agreement, dated as of February 4, 2000, by and
               between the Company and NuVell Credit Corporation redesignated
               from Exhibit 10.109 filed as an Exhibit to the Company's Form
               8-K filed on February 14, 2000.

10.126         Servicing Agreement, dated as of February 4, 2000, by and
               between the Company and NuVell Credit Corporation redesignated
               from Exhibit 10.110 filed as an Exhibit to the Company's
               Form 8-K filed on February 14, 2000.

10.127         Amendment Number 4 to the Amended and Restated Pooling and
               Administration Agreement, dated as of February 22, 2000 among
               National Financial Auto Funding Trust II, the Company, and
               Bankers Trust Company as Trustee.

10.128         Second Amendment to Revolving Credit, Term Loan and Security
               Agreement, dated as of February 22, 2000 among National Financial
               Auto Funding Trust, the Company and First Union National Bank.

10.129         Letter Agreement with respect to the B Note Commitment Letter
               dated as of February 22, 2000 by and between First Union National
               Bank and the Company.

10.130         Wavier, effective as of December 31, 1999 of the 1818 Mezzanine
               Fund, L.P., PC Investment Company, Progressive Investment
               Company, Inc., Manufacturers Life Insurance Company (U.S.A.), and
               The Structured Finance High Yield Fund, L.L.C., for the benefit
               of the Company.

10.131         First Amendment to Contract Sale Agreement effective as of
               February 29, 2000, by and between the Company and Nuvell Credit
               Corporation.

10.132         Sale and Purchase Agreement dated as of March 30, 2000 by and
               between the Company as Guarantor, National Financial Auto Funding
               Trust II as Seller, and Nuvell Credit Corporation as Purchaser.

10.133         Amendment No. 1 to Sale and Purchase Agreement effective as of
               April 5, 2000 by and between Nuvell Credit Corporation as
               Purchaser and National Financial Auto Funding Trust II as Seller
               and the Company as Guarantor.

10.134         Amendment No. 2 to Contract Sale Agreement and Amendment No. 1
               to Servicing Agreement dated as of April 7, 2000 by and Between
               the Company and Nuvell.

11.1           Earnings Per Share

23.1           Consent of BDO Seidman, LLP

23.2           Consent of KPMG Peat Marwick LLP

23.3           Consent of KPMG Peat Marwick LLP

27.1           Financial Data Schedule
</TABLE>