UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

(Mark One)

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

                   For the quarterly period ended June 30, 1997

                                       OR

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

                   For the transition period from          to 
                                                  --------    --------


                         Commission file number 0-22067


                       NATIONAL AUTO FINANCE COMPANY, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)



               DELAWARE                                      65-0688619
  --------------------------------------            ---------------------------
  (State or other jurisdiction of                          (IRS Employer
   incorporation or organization)                         Identification No.)



  621 N.W. 53rd  Street, Suite 200, Boca Raton, Florida          33487
  ------------------------------------------------------    ------------------
  (Address of principal executive offices)                     (Zip Code)


                                 (561) 997-2413
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


                                    No Change
         ---------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No __

There were 7,026,000  shares of common stock,  $.01 par value  outstanding as of
August 13, 1997.

                                       1

<PAGE>


                       NATIONAL AUTO FINANCE COMPANY, INC.

                               INDEX TO FORM 10-Q


                                                                            Page

  Part I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements (unaudited).............................4

                  Balance Sheet:
                      June 30, 1997 and December 31, 1996......................4

                  Statements of Income:
                      Three and Six Months Ended June 30, 1997 and 1996........5

                  Statement of Stockholders' Equity as of June 30, 1997........6

                  Statements of Cash Flows:
                      Six Months Ended June 30, 1997 and 1996..................7

                  Notes to Financial Statements................................9

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations...................................14

Part II.  OTHER INFORMATION

         Item 4.  Submission of Matters to a Vote of Security Holders.........24
       
         Item 6.  Exhibits and Reports on Form 8-K............................24

         SIGNATURE............................................................25

         EXHIBIT INDEX........................................................26

            Exhibit 11.  Computation of Earnings Per Common Share.............27

            Exhibit 27.  Financial Data Schedule..............................28

                                       2
<PAGE>
Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q or future filings by the Company
(as  defined   below)  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 or projected.

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.
                                       3
<PAGE>

--------------------------------------------------------------------------------
 Part I.
--------------------------------------------------------------------------------

Item 1. Financial Statements.

                       NATIONAL AUTO FINANCE COMPANY, INC.
                                  Balance Sheet
                        (unaudited, dollars in thousands)

<TABLE>
<CAPTION>

                                                                    June 30, 1997           December 31, 1996
                                                                 --------------------       -------------------
<S>
<C>                                                          <C>                        <C>  
Assets
------
Cash and cash equivalents                                     $                2,847     $               5,066
Investments and retained interest in
    securitizations                                                           35,922                    23,404
Loans, net                                                                     4,228                         -
Fixed assets, net                                                                690                       515
Deferred financing costs                                                       1,000                     1,849
Other assets                                                                   1,215                       367
                                                                 --------------------       -------------------
                                                                
          Total assets                                        $               45,902     $              31,201
                                                                 ====================       ===================
                                                                 ====================       ===================

Liabilities and Stockholders' equity
------------------------------------

Accounts payable and accrued expenses                         $                1,813     $               1,771
Due to National Auto Finance Corporation                                           -                       178
Deferred income taxes                                                          5,788                         -
Accrued interest payable--related parties                                         39                       144
Accrued interest payable--senior subordinated notes                              200                       339
Junior subordinated notes--related parties                                     2,012                     7,218
Senior subordinated notes                                                     12,000                    12,000
                                                                 --------------------       -------------------
                                                                 
          Total liabilities                                                   21,852                    21,650
                                                                 --------------------       -------------------
                                                                 
Stockholders' equity
Preferred stock series A - $1,000 par value;
    1,000,000 shares authorized; 2,295
    shares outstanding                                                         2,295                         -
Common stock - $0.01 par value; 20,000,000
    shares authorized; 7,026,000 shares
    outstanding                                                                   70                         -
Paid in capital                                                               20,220                         -
Retained earnings                                                              1,465                         -
Partners' capital                                                                  -                     9,551
                                                                 --------------------       -------------------
                                                                 
          Total stockholders' equity                                          24,050                     9,551
                                                                 --------------------       -------------------
                                                                 
          Total liabilities and stockholders' equity          $               45,902     $              31,201
                                                                 ====================       ===================
                                                                 
</TABLE>

See accompanying notes to the financial statements.

                                       4
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                           Statements of Income (Loss)
            (unaudited, dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                  Three Months       Three Months     Six Months        Six Months
                                                   Ended              Ended             Ended             Ended
                                                  June 30,            June 30,         June 30,          June 30,
                                                    1997              1996               1997              1996
                                                 -----------        ----------        -----------       -----------
                                                 
<S>                                           <C>                <C>               <C>               <C>  
Revenue:
    Gain on sales of loans                     $      5,293       $     2,531       $      9,835      $      4,628
    Deferred gain on sales of loans                     377               165                685               298
    Deferred servicing income                           468               187                862               328
    Deferred income from securitizations                129               160                266               327
    Interest income from cash investments               202                 3                369                 6  
    Other income                                         16                (2)                39                48
    Finance charges earned                               77                 -                 95                 -
                                                 -----------        ----------        -----------       -----------
                                                 
          Total revenue                               6,562             3,044             12,151             5,635
                                                 -----------        ----------        -----------       -----------
                                                 
Expenses:
    Interest expense                                    345               154                760               304
    Salaries and employee benefits                    1,622               841              2,921             1,502
    Direct loan acquisition expenses                    865               371              1,566               710
    Servicing costs                                     763               258              1,375               480
    Depreciation and amortization                       214                97                393               193
    Provision for credit losses                         236                 -                313                 -
    Other operating expenses                            800               457              1,476               778
                                                 -----------        ----------        -----------       -----------
                                                
          Total expenses                              4,845             2,178              8,804             3,967
                                                 -----------        ----------        -----------       -----------
                                                 
Income before income taxes                            1,717               866              3,347             1,668
Income taxes                                            658               327 (1)          1,289               628 (1)

Net income before taxes from
    reorganization of partnership                     1,059               539              2,058             1,040
Income taxes from reorganization of
    partnership                                           -                 -              4,500                 -
                                                 -----------        ----------        -----------       -----------
                                                 
          Net income (loss)                           1,059               539             (2,442)(2)         1,040
                                                 -----------        ----------        -----------       -----------
                                                
Less preferred stock dividends                           41                 -                 67                 -
                                                 
                                                 -----------        ----------        -----------       -----------
Net income (loss) available for common
    shareholders                               $      1,018       $       539       $     (2,509)     $      1,040
                                                 ===========        ==========        ===========       ===========
                                                 
Earnings (loss) per share                                                           $      (0.36)(2)
                                                                                      ===========
                                                                                     
Pro forma earnings per share                   $       0.15      $       0.08       $       0.29 (3)  $       0.15
                                                 ===========        ==========        ===========       ===========
                                                 
Weighted average shares and share equivalents         7,026                                6,976
                                                 ===========                          ===========
                                                 
Pro forma shares outstanding                                            6,726                                6,726
                                                                    ==========                          ===========
                                                                  
<FN>

(1) Pro forma  income taxes for the  three-month  period ended June 30, 1996 and
the six month  period ended June 30, 1996,  respectively,  calculated  as if the
Company had operated as a "C" corporation.

(2) Includes  the effects of a one-time,  non-cash  charge for  deferred  income
taxes arising from the  reorganization of the Company from a partnership form to
a  taxable  corporate  form in  connection  with the  Company's  initial  public
offering in January 1997.

(3)  Excludes the effect of the charge noted in (2) above.

</FN>
</TABLE>

See accompanying notes to the financial statements.

                                       5
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                        Statement of Stockholders' Equity
            For the period beginning January 29 through June 30, 1997
                        (unaudited, dollars in thousands)

<TABLE>
<CAPTION>


                                                    Preferred     Common       Paid in      Retained
                                                     Stock        Stock        Capital      Earnings       Total
                                                    ---------    ---------     ---------    ---------      --------
<S>                                              <C>          <C>           <C>          <C>           <C>
Reorganization of NAFI Partnership
    January 29, 1997                              $    2,295   $       42    $    7,739   $             $   10,076

Issuance of common stock to J.P. Morgan
    Investment Management in exchange for
    deferred interest on senior subordinated notes                      5           164                        169

Income taxes from reorganization
    of partnership                                                               (4,500)                    (4,500)

Issuance of 2,300,000 shares for the
    Offering, net of costs                                             23        16,817                     16,840

Dividends on preferred stock                                                                     (67)          (67)

Net income                                                                                     1,532         1,532
                                                    ---------    ---------     ---------    ---------     ---------
                                                    
Balance as of June 30, 1997                       $    2,295   $       70    $   20,220   $    1,465    $   24,050
                                                    =========    =========     =========    =========     =========
                                                    
</TABLE>

See accompanying notes to the financial statements.

                                       6
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                            Statements of Cash Flows
                        (unaudited, dollars in thousands)


<TABLE>
<CAPTION>

                                                                           Six Months Ended June 30,
                                                                           -------------------------
                                                     
                                                                              1997                1996
                                                                           ----------          ----------
<S> 
<C>                                                                 <C>                 <C>
Cash Flows from operating activities:
        Net income (loss)                                            $        (2,442)    $         1,668
Adjustments to reconcile net income (loss) to net cash used in
    operating activities:
        Gains on sales of loans                                               (9,835)             (4,628)
        Depreciation expense                                                      90                 192
        Provision for credit losses                                              313                   -
        Purchases of loans held for sale                                     (77,509)            (31,202)
        Proceeds from sale of loans                                           73,045              31,202
        Cash received from securitizations                                     5,804               2,075
        Deferred gains and income recognized from securitizations             (1,547)               (620)
        Amortization of deferred financing costs                                  74                  75
        Amortization of deferred placement costs                                 163                  57
        Amortization of deferred interest                                       (266)               (327)
        Amortization of prepaid expenses                                          95                  12
Changes in other assets and liabilities:
        Other assets                                                          (1,038)               (219)
        Accounts payable and accrued expenses                                      2                 217
        Accrued interest payable--related parties                               (105)                280
        Accrued interest payable--senior subordinated debt                        30                   -
        Income taxes                                                           5,788                   -
                                                                            ---------           --------- 

                Net cash used in operating activities                         (7,338)             (1,218)

Cash flows from investing activities:
        Fixed assets purchased                                                  (265)                (36)
        Net invested in National Auto Receivable Master Trust                 (6,819)                  -
                                                                            ---------           ---------

                Net cash used in investing activities                         (7,084)                (36)

Cash flows from financing activities:
        Proceeds from junior subordinated notes--related parties                   -                 590
        Payments of junior subordinated notes--related parties                (5,206)               (590)
        Payment of preferred stock dividends                                     (28)                  -
        Proceeds from initial public offering                                 17,615                   -
        Preferred equity partners' contributions                                   -                 849
        Due to National Auto Finance Corporation                                (178)                  -
                                                                            ---------           ---------

                Net cash provided by financing activities                     12,203                 849
                                                                            ---------           ---------

Net decrease in cash and cash equivalents                                     (2,219)               (405)

Cash and cash equivalents at beginning of period                               5,066                 824
                                                                            ---------           ---------

Cash and cash equivalents at end of period                           $         2,847     $           419
                                                                            =========           =========
</TABLE>
                                       7
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                      Statements of Cash Flows (Continued)
                        (unaudited, dollars in thousands)

<TABLE>
<CAPTION>

                                                                               Six Months Ended June 30,
                                                                           --------------------------------
                                                     
                                                                              1997                1996
<S>                                                                          --------            --------
<C>                                                                       <C>                  <C>

Non-cash financing activities:
        Offering costs deferred in 1996 transferred to paid-in capital     $     775            $      0
            in 1997
        Accrued preferred stock dividends                                         40                   0
        Conversion of accrued interest on  Senior Debt to Common Stock
            and paid-in capital                                                  169                   0
        Conversion of partners' capital to preferred stock                     2,295                   0
        Conversion of partnership capital to common stock and paid-in
            capital                                                            7,256                   0
        Deferred income taxes from reorganization included in net loss
            considered paid-in capital                                         4,500                   0
        Income earned in 1997 prior to reorganization included in paid-in
            capital                                                              525                   0

</TABLE>

See accompanying notes to the financial statements.

                                       8

<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                                  June 30, 1997
                                   (Unaudited)


(1)  Basis of Presentation

     The accompanying  unaudited interim financial statements have been prepared
     pursuant  to  the  rules  and  regulations  for  reporting  on  Form  10-Q.
     Accordingly,  certain  information  and  footnotes  required  by  generally
     accepted  accounting  principles for complete financial  statements are not
     included herein.  The interim statements should be read in conjunction with
     the  financial  statements  and notes  thereto  included in  National  Auto
     Finance Company,  Inc.'s (the "Company")  latest Annual Report on Form 10-K
     (capitalized  terms used  herein and not  defined  shall have the  meanings
     ascribed to them in such Form 10-K).  Statements  for 1996 periods  reflect
     the  financial   position  and  results  of  operations  of  the  Company's
     predecessors.

     Interim  statements are subject to possible  adjustments in connection with
     the annual audit of the Company's  accounts for the full year 1997; in the
     Company's  opinion,  all adjustments  necessary for a fair  presentation of
     these  interim  statements  have  been  included  and are of a  normal  and
     recurring  nature.  The results for the interim periods are not necessarily
     indicative  of  results  for a full  year.  Certain  amounts  in  the  1996
     financial  statements  have  been  reclassified  to  conform  with  current
     financial statement presentation.

     In conjunction with the reorganization from a partnership form to a taxable
     corporate  form,  the  Company  adopted  the  provisions  of  Statement  of
     Financial  Accounting  Standards  No. 109,  "Accounting  for Income  Taxes"
     ("SFAS No.  109").  Under the asset and  liability  method of SFAS No. 109,
     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
     liabilities  of a change in tax rates was recognized in income in the three
     month period ended March 31, 1997. The cumulative  effect of this change in
     accounting for income taxes was a non-cash charge of $4.5 million.

     In June 1996, the Financial  Accounting  Standards  Board  ("FASB")  issued
     Statement  of  Financial  Accounting  Standards  No. 125,  "Accounting  for
     Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
     Liabilities"  ("SFAS No. 125").  This  statement  specifies  when financial
     assets  and  liabilities  are to be  removed  from  an  entity's  financial
     statements,  the accounting for servicing assets and  liabilities,  and the
     accounting for assets that can be contractually  prepaid in such a way that
     the holder would not recover  substantially all of its recorded investment.
     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.  SFAS No.  125  requires  that the
     selling entity continue to carry retained  interests  relating to assets it
     no longer  recognizes.  Such  retained  interests are based on the relative
     fair values of the retained  interests of the subject assets at the date of
     transfer.  The Company  refers to such  retained  interests  as the "excess
     spread  receivable"  (the "Excess Spread  Receivable"  or "ESR").  Retained
     interests are recorded at fair value and periodically  measured in the same
     manner as  investments  classified  as available  for sale or trading under
     Statement of Financial  Accounting  Standards No. 115. Beginning January 1,
     1997,  the Company  adopted  SFAS No. 125.  The ESR is treated as a trading
     security  and is measured  quarterly  for  impairment  for each  individual
     securitization by (i) calculating the actual income received, net of actual
     losses, prepayments,  interest carrying costs and servicing costs, and (ii)
     comparing  this amount to the  original  ESR  forecast.  The  Company  then
     estimates the remaining  future net cash flows  anticipated,  and discounts
     such cash flows at a rate that the Company believes  represents the rate of
     return an  investor  would  require on such cash flows.  The  Company  then
     compares  this amount to the  remaining  ESR. Any  impairment to the ESR is
     recorded  as a charge  to  operations,  while  benefits  in excess of these
     originally  anticipated  are  deferred  until  actual  cash  flow  from the
     receivables is received.

     In  February  1997,  the FASB  issued  Statement  of  Financial  Accounting
     Standards No. 128,  "Earnings Per Share"("SFAS  No. 128").  SFAS No. 128 is
     effective for financial statements issued for periods ending after December
     15, 1997. SFAS No. 128  establishes  standards for computing and presenting
     earnings per  share("EPS"),  simplifies  the tandards  previously  found in
     Accounting Principles Board Opinion No. 15, "Earnings

                                       9
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                                  June 30, 1997
                                   (Unaudited)

     Per Share," and makes them comparable to international  EPS standards.  The
     Company will begin disclosing EPS in accordance with SFAS No. 128 beginning
     with the year ended December 31, 1997.

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
     No.130,  "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 is
     effective for fiscal years  beginning after December 15, 1997. SFAS No. 130
     establishes standards for reporting and display of comprehensive income and
     its components in a full set of general-purpose financial statements.  SFAS
     No. 130 requires that all items to be recognized under accounting standards
     as components of comprehensive  income be reported in a separate  financial
     statement.  Such statement will be presented by the Company  beginning with
     the quarter ended March 31, 1998.

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
     No.131,   "Disclosure   About   Segments  of  an  Enterprise   and  Related
     Information"  ("SFAS No.  131").  SFAS No. 131 is effective  for  financial
     statements  for periods  beginning  after  December 15, 1997.  SFAS No. 131
     establishes  standards for the way that public business  enterprises report
     information about operating segments, based upon how the enterprise defines
     such  segments.  The  Company  is  required  to  report  operating  segment
     information,  to the extent such segments are defined,  beginning  with the
     year ended December 31, 1998.

(2)  Investments and Retained Interests in Securitizations

     Investments and retained  interests in  securitizations  were as follows at
     June 30, 1997 and December 31, 1996:

<TABLE>
<CAPTION>
                                                                      June 30,          December 31,
                                                                        1997                1996
                                                                    --------------     ---------------

                                                                              (dollars in thousands)
<S>
<C>                                                              <C>                <C>
                Spread Accounts                                   $                  $
                                                                           14,559               8,221
                Excess Spread Receivable
                                                                           21,363              15,183
                                                                    --------------     ---------------
                                                                  $        35,922    $         23,404
                                                                    ==============     ===============
</TABLE>



     Spread accounts represent over-collateralization accounts of securitization
     facilities  designed to protect  securitization  investors  against  credit
     losses ("Spread  Accounts").  Funds in excess of specified  percentages are
     available   to  be  remitted   to  the   Company   over  the  life  of  the
     securitization.  For  each  securitization,  there  is no  recourse  to the
     Company beyond the amounts maintained in this account. The Company analyzes
     Spread Accounts quarterly to determine if impairment exists. Impairment, if
     any, is charged to operations.

     The ESR is established for each  securitization  and represents the present
     value of the gross interest income on the motor vehicle retail  installment
     sale contracts  ("Loans")  securitized less: (1) the pass-through  interest
     paid to the securitization  investors; (2) provisions for credit losses and
     prepayments over the life of the respective securitization;  and (3) normal
     servicing fees and recovery of the Spread Account.  The ESR consists of the
     gain  recognized  on the sale of  Loans  through  securitization,  deferred
     servicing  income,  deferred gain  attributable to the time value of money,
     and  deferred  costs of the  transactions.  Deferred  servicing  income  is
     recognized  as earned over the life of the related  Loans in  proportion to
     the  principal  paydown  of  the  Loans  outstanding.   The  deferred  gain
     attributable to the time value of money is recognized as earned in relation
     to the balance of  securitized  Loans  outstanding.  Deferred  costs of the
     securitizations  are amortized on a straight-line  basis over the estimated
     life of the securitization.  The ESR is reduced by the receipt of cash from
     the trusts and the amortization of the deferred gain and deferred servicing
     income.  Prepayment and loss experience  rates are based upon the nature of
     the  receivables  and  historical  information  available  to the  Company.
     Prepayment assumptions and credit loss provisions are periodically 

                                       10
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                                  June 30, 1997
                                   (Unaudited)


     reviewed  by  management  and  any  impairment  in the  ESR is  charged  to
     operations.Favorable  experience is recognized  prospectively  as realized.
     The ESR was as follows at June 30, 1997 and December 31, 1996:

<TABLE>
<CAPTION>

                                                                     June 30,         December 31,
                                                                       1997               1996
                                                                   --------------     --------------

                                                                            (dollars in thousands)
<S>
<C>                                                             <C>                <C>
               Gross ESR                                         $       29,484     $       20,697
               Deferred servicing income                                 (5,496)            (3,654)
               Deferred interest and gain on securitizations             (3,810)            (3,208)
               Deferred placement costs                                   1,185              1,348
                                                                   --------------     --------------

               ESR, Net                                          $        21,363    $       15,183
                                                                   ==============     ==============

</TABLE>

(3)  Securitization of Loans

     In  January  1995,  the  Company  began  using a  revolving  securitization
     facility  pursuant to which the Company sells its Loans on a daily basis to
     a  bankruptcy-remote  special purpose subsidiary trust ("Funding Trust I"),
     which in turn transfers such Loans to a bankruptcy-remote master trust (the
     "Master  Trust").  The Company  retains,  through  Funding Trust I, certain
     residual  interests in future  excess cash flows from the Master Trust (the
     Excess Spread  Receivable or ESR), in exchange for the transfer of Loans to
     the Master Trust.

     Periodically, the Master Trust refinances its Loans through the transfer of
     the  Loans  (and  the  Company's  retained  interest  or ESR)  to  separate
     permanent  trusts.  The  payment of the  principal  and  interest  on those
     securities  has been  insured  by a payment  guaranty  issued by  Financial
     Security Assurance, Inc. ("FSA"). The proceeds of the transactions are used
     by the Master Trust to repay the financing of the Master Trust.  The Master
     Trust then  commences  re-borrowing  to finance its purchase of  additional
     Loans from the Company through Funding Trust I.

     During the six months ended June 30, 1997 and 1996, the following  activity
     took place with respect to securitization:

<TABLE>
<CAPTION>

                                                                     June 30,            June 30,
                                                                       1997                1996
                                                                   --------------     ---------------

                                                                         (dollars in thousands)
               <S>
               <C>                                              <C>                <C>    

               Principal balance of Loans sold                   $        75,005     $        32,953
                                                                   ==============     ===============

               Gain on sales                                     $         9,835     $         4,628
                                                                   ==============     ===============

               Weighted average coupon rate on Loans
                 sold during the period                                   19.45%              18.80%
                                                                   ==============     ===============
</TABLE>
                                       11
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                                  June 30, 1997
                                   (Unaudited)


(4)  Junior Subordinated Notes

     During  1994,  1995  and  1996,  the  Company  received  loans  on a junior
     subordinated basis (the "Junior  Subordinated Notes") from principal equity
     holders  of  National  Auto  Finance  Company  L.P.,  a  Delaware   limited
     partnership  that  was  organized  in  October  1994  (the  "National  Auto
     Partnership") and certain  affiliates.  The Junior  Subordinated  Notes are
     payable on January  31,  2002,  and accrue  interest  at eight  percent per
     annum.  Interest  expense  recognized  for this debt for the periods ending
     June 30, 1997 and 1996 was $123,000 and $295,000, respectively.

(5)  Senior Subordinated Notes

     In August 1996,  the Company  completed a $12 million  senior  subordinated
     debt financing with J.P.  Morgan  Investment  Management,  Inc.,  acting on
     behalf of certain institutional investors (the "Morgan Group"), pursuant to
     which  $12  million  principal  amount of senior  subordinated  notes  (the
     "Senior  Subordinated  Notes"),  were  issued  to  the  Morgan  Group.  The
     principal amount of the Senior Subordinated Notes is due in August 2001 and
     carries a 10% coupon payable  quarterly.  Prior to the  consummation of the
     Company's  public  offering  (the  "Offering")  of 2,300,000  shares of the
     Company's  common  stock,  par value $.01 per share (the  "Common  Stock"),
     there was also an  additional  3%  deferred-interest  coupon  that  accrued
     interest  on a  compounded  basis and was payable in August  2006,  but was
     converted into 470,000 shares of the Common Stock upon the  consummation of
     the  Offering.  Through  January 29, 1997,  the date of the  Offering,  the
     Company accrued the additional 3% interest on the deferred-interest coupon,
     which amount totaled approximately $169,000 at January 29, 1997. On January
     29, 1997,  upon the conversion of such coupon to equity,  such amounts were
     accounted for as  paid-in-capital of the Company.  The Senior  Subordinated
     Notes generally prohibit the payment of dividends on Common Stock following
     consummation  of an initial public  offering of Common Stock so long as any
     amount remains  outstanding on such debt.  Interest expense  recognized for
     this debt for the period ended June 30, 1997 was $630,000.

(6)  Stock Option Plan

     In 1996,  the Board of Directors of the Company  adopted a share  incentive
     plan (the "1996 Share  Incentive  Plan").  The 1996 Share Incentive Plan is
     intended to provide  incentives  which will  attract,  retain and  motivate
     highly competent  persons,  each of whom will contribute to the success and
     future growth and  profitability of the Company,  as executive  management,
     employees  and  directors of the Company and of any parent or subsidiary of
     the Company,  by providing them the opportunity to acquire shares of Common
     Stock or to receive  monetary  payments  based on the value of such  shares
     pursuant to certain benefits contemplated by the 1996 Share Incentive Plan.
     Furthermore,  the 1996  Share  Incentive  plan is  intended  to  assist  in
     aligning the interests of the Company's executive management, employees and
     directors with those of its stockholders.

     The 1996 Share Incentive 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  500,000  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, spinoff,  combination of shares, exchange of shares,
     dividend   in-kind  or  other  like   change  in   capital   structure   or
     distribution).

     Through  the  second  quarter of 1997,  stock  options  with  respect to an
     aggregate  of 275,000  shares of Common Stock have been granted to thirteen
     key  employees  and two  directors  at the fair market value at the date of
     grant.  At  June  30,  1997,   exercise  of  such  options  was  considered
     anti-dilutive  to earnings per share,  thus such options are excluded  from
     the  calculation  of earnings per share.  All employee  stock  options vest
     one-third  immediately,  one-third  in 1998  and  one-third  in  1999,  and
     director stock options vest in 1998. All stock options expire 10 years from
     the date of grant.

                                       12
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                                  June 30, 1997
                                   (Unaudited)


(7)  Subsequent Events

     In July 1997, the National Auto Finance  1997-1 Trust (the "1997-1  Trust")
     was formed and the Master Trust refinanced  approximately  $73.5 million of
     its  receivables in a public offering of  asset-backed  securities  through
     their  transfer  by the  Master  Trust to the  1997-1  Trust,  as part of a
     permanent securitization ("Permanent Securitization"). Payment of principal
     of, and interest  on, the $66.9  million of the  securities  issued in that
     transaction  is  insured  by  payment  guarantees  issued by FSA,  and such
     securities  are rated AAA and Aaa by Standards & Poor's Rating  Service and
     Moody's  Investors  Service,  Inc.,  respectively.  The  proceeds  of  that
     Permanent Securitization transaction were used by the Master Trust to repay
     the  then-outstanding  balance of the variable  funding  (i.e.,  revolving)
     certificates  bearing interest at floating rates ("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.  The
     Company expects additional  Permanent  Securitizations to be consummated in
     the future in order to refinance  periodically  amounts  outstanding  under
     such Class B Certificates.

                                       13
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997

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

The  following   management's   discussion  and  analysis  provides  information
regarding  the  Company's  financial  condition as of June 30, 1997  compared to
December 31,  1996,  and its results of  operations  for the three and six month
periods ended June 30, 1997 and 1996. This management's  discussion and analysis
should be read in conjunction  with (i) the Company's  Financial  Statements and
the related notes and (ii) the Company's Annual Report on Form 10-K with respect
to the fiscal year ended December 31, 1996. 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 elsewhere in this report.

Overview

The Company is a specialized  consumer  finance company engaged in the purchase,
securitization   and  servicing  of  Loans  originated  by  automobile   dealers
("Dealers")  for  consumers  with  limited  financial  resources  or past credit
problems  ("Non-Prime  Consumers").  The Company acquires Loans principally from
manufacturer-franchised  Dealers in  connection  with their sale of new and used
automobiles.  The Company also acquires  seasoned  portfolios of such Loans from
banks and other finance companies.  Until the Company's Offering of Common Stock
on January 29, 1997, the Company operated as two limited partnerships.  As such,
the income tax  effects of all  earnings  or losses of the  Company  were passed
directly to the partners and no provision for income taxes was required.

The  Company's  plan of operation  for the  remainder of 1997 is to increase the
number of Loans that it purchases, securitizes and services by:

     1.   Utilizing its regional  salespersons  located in strategic  geographic
          areas to market  the  Company's  products  and  services  directly  to
          Dealers;

     2.   Continuing the  implementation of the strategic referral and marketing
          alliance  with First Union  National  Bank of North  Carolina  ("First
          Union") and certain of its national bank  affiliates (the "First Union
          Strategic Alliance"), including the expansion throughout First Union's
          indirect auto finance division ("FUSF"),  which conducts business with
          Dealers in seven southeastern states and the District of Columbia, and
          five northeastern states (the "Northeastern Franchise");

     3.   Establishing  strategic referral and marketing  alliances with several
          smaller financial institutions and Dealer groups; and

     4.   Strategically  purchasing  portfolios of Non-Prime Consumer Loans from
          third party  originators that meet the Company's  strict  underwriting
          criteria.

Historical Development and Growth

From the inception of the Company in October 1994 through  January 16, 1995, the
primary  source of revenue  for the  Company  was net  interest  income on Loans
purchased by the Company.  In January 1995,  the Company  began the  securitized
warehousing  of all of its  Loans  through  their  daily  sale  (the  "Revolving
Securitization")   to  the  Master  Trust.  The  Revolving   Securitization  was
implemented  effective  January 16, 1995. On that date,  the Company sold to the
Master  Trust  407 Loans  (approximately  $5  million  in  principal)  that were
purchased  by the  Company  from  October  12, 1994  through  January 16,  1995.
Thereafter,  the Company  commenced  selling Loans purchased by it to the Master
Trust on a daily basis.

Periodically,  the Master Trust refinances its Loans through the transfer of the
Loans to a separate permanent trust, which then securitizes the Loans (Permanent
Securitization).  The Company retains a residual  interest and a cash investment
in the  Master  Trust,  and the  various  Permanent  Securitizations,  which are
reflected  as  investments  and  retained  interest  in  securitizations  on the
Company's balance sheet. Since initiation of the Revolving  Securitization,  the
Company's

                                       14
<PAGE>
                    NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


earnings have been primarily attributable to the gains recognized on the sale of
Loans into the Master Trust.  For the six month period ended June 30, 1997, such
gains accounted for approximately 81% of the Company's revenues.

Components of Revenue and Expenses

Revenues.  The Company derives revenues  principally from the purchase and daily
sale of Loans to the Master Trust pursuant to the Revolving  Securitization.  In
determining its reported gain from these securitization  activities, the Company
adds the total interest payments due from borrowers and the dollar amount of the
discount  at which the Loans were  purchased  from  Dealers.  The  Company  then
deducts an  estimated  reserve for future Loan  losses,  prepayments,  borrowing
charges and servicing  costs,  and  discounts the remaining  cash flow at a rate
which management believes an investor would expect to receive on such cash flows
to its net present  value.  The resulting  amount is reported as gain on sale of
loans on the Company's income statement.

In  addition to interest  income  from Loans that were not  securitized  and the
interest return on cash investments, other revenues are earned primarily from:

     1.   Amortization  of the  deferred  servicing  revenues,  which offset the
          direct servicing expenses incurred by the Company;

     2.   Amortization  of the deferred gain of Loans  attributable  to the time
          value of money; and

     3.   Amortization    of   deferred   gains    attributable   to   Permanent
          Securitizations  that were  financed  at lower rates than were used in
          calculating  the gains on sales when the Loans were originally sold to
          the Master Trust.

Expenses.  The Company's  expenses  consist of interest and operating  expenses.
Interest expense is the interest incurred on notes to certain  affiliates of the
Company and notes to certain institutional investors. Operating expenses consist
primarily of personnel,  general and administrative and servicing  expenses,  in
addition to  depreciation  of capital  expenditures  for furniture and equipment
that is being recognized over five years on a straight-line basis.

Results of Operations

Where  applicable,  1996 amounts used for comparison  reflect  pro-forma  income
taxes  calculated as if the predecessor of the Company had operated as a taxable
entity for the comparable 1996 period.

Three month period  ended June 30,  1997,  as compared to the three month period
ended June 30, 1996.

Income  from  Operations.  The Company  reported  net income for the three month
period  ended June 30, 1997 of $1.1  million.  This is an  increase of 100%,  as
compared to pro forma net income of $539,000  for the three month  period  ended
June 30, 1996.

Gain on Sales of Loans.  The Company's Loan purchasing and servicing  activities
expanded  significantly  during the three month period  ended June 30, 1997,  as
compared to the three month period ended June 30,  1996.  The Company  purchased
2,290 or $31.3  million  of  principal  amount of Loans from  Dealers  and $12.5
million or 1,541 Loans were acquired through the Company's Portfolio Acquisition
Program  ("PAC")  during the three month period  ended June 30,  1997.  Of these
amounts,  $39.2 million or 90% were  subsequently sold to the Master Trust. This
compares to 1,453 or $18.0  million  principal  amount of Loans  purchased  from
Dealers  and  $311,000  or 33 Loans were  acquired  through PAC during the three
month period ended June 30, 1996, all of which were sold to the Master Trust.

For the three month period ended June 30, 1997, the Company recognized a gain on
securitization  of $3.9  million  from Loans  purchased  from  Dealers  and $1.4
million from PAC,  representing  a 109%  increase over the $2.5 million of gains
recognized  for the three month period ended June 30,  1996.  This  increase was
primarily the result of a 139% increase in the dollar volume of Loans  purchased
for the three month period  ended June 30, 1997,  as compared to the three month
period ended June 30, 1996.

                                       15
<PAGE>

                      NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


The table below sets forth certain  information  relating to the Company's  Loan
purchasing  activities,  including the specific  number and aggregate  principal
amount of Loans purchased and the aggregate amount funded to Dealers:

<TABLE>
<CAPTION>

                                                                                Three month period ended
                                                                                        June 30,
                                                                            ----------------------------------

                                                                                1997                1996
                                                                            --------------     ---------------
    <S>
    <C>                                                                  <C>                <C>
    Number of Loans purchased from Dealers during period
                                                                                    2,290               1,453
    Number of Loans purchased as portfolios (PAC)
                                                                                    1,541                  33
                                                                            --------------     ---------------
              Total number of Loans purchased                                       3,831               1,486
                                                                            ==============     ===============

                                                                                   (dollars in thousands)

    Principal balance of Loans purchased from Dealers during period
                                                                          $        31,269    $         18,031
    Principal balance of Loans purchased as portfolios (PAC)
                                                                                   12,508                 311
                                                                            --------------     ---------------
              Total balance of Loans purchased                            $                  $
                                                                                   43,777              18,342
                                                                            ==============     ===============

    Amount funded (1)                                                     $        42,600              17,332
                                                                            ==============     ===============

 <FN>
  (1)    Amount  funded  represents  the price at which the Company  purchases a
         Loan from a Dealer or other seller (i.e., the amount actually paid to a
         Dealer  or  other  seller),  calculated  as the  principal  of the Loan
         purchased less a negotiated discount.
</FN>
</TABLE>

Loan Loss  Provision  and  Reserves.  The  Company  periodically  evaluates  and
adjusts, if necessary, the assumptions used in its calculation of gains on sales
of Loans. The Company's gain on sale of Loans  calculation  assumes estimates of
potential charge-offs from the Loan portfolio  securitized.  For the three month
period ended June 30, 1997, the provision for Loan losses  associated with sales
of loans to the Master  Trust was  approximately  $3.3  million,  or 7.8% of the
amount funded, as compared to approximately $1.1 million,  or 6.3% of the amount
funded for the three month period ended June 30, 1996.

The  Company's  gain on sale of Loans  calculation  also  assumes  estimates  of
potential prepayments from the Loan portfolio  securitized.  For the three month
period ended June 30, 1997, the provision for Loan  prepayments  associated with
sales of Loans to the Master Trust was approximately  $4.8 million,  or 11.3% of
the amount funded,  as compared to approximately  $2.4 million,  or 13.6% of the
amount funded, for the three month period ended June 30, 1996.

The Company's total reserves (loss and prepayment)  applied to its Excess Spread
Receivable  as of June 30,  1997 were  $19.6  million  or 12.5% of net  serviced
receivables.  An increase in losses and/or prepayments or acceleration of losses
and  prepayments  above levels provided for would result in reduced cash flow to
the Company and a possible write-down of the ESR and the Spread Accounts.

Other Income.  The Company generated  approximately $1.3 million of other income
for the three month period ended June 30, 1997,  as compared to $513,000 for the
three month period ended June 30, 1996.  The principal  sources of the Company's
other  income  were  $377,000  of  amortized  deferred  gain on sales of  Loans,
$468,000 of servicing income, and $295,000 of interest and miscellaneous  income
for the three  month  period  ended June 30,  1997,  as  compared  to  $165,000,
$187,000,  and $1,000,  respectively,  for the three month period ended June 30,
1996.  Deferred income from  securitizations  of $129,000 was recognized for the
three month period  ended June 30,  1997,  as compared to $160,000 for the three
month period ended June 30, 1996.  Deferred  income  results from the  Permanent
Securitizations that were accomplished at lower borrowing rates than the Company
assumed in calculating its original gain on the sale of such Loans to the Master
Trust.

                                       16
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997

Operating Expenses.  The Company reported operating expenses of $4.8 million for
the three month period ended June 30, 1997,  as compared to  approximately  $2.2
million for the three month period ended June 30, 1996. These expenses consisted
primarily of  subordinated  note  interest,  and  personnel,  loan  acquisition,
portfolio servicing, and other corporate operating expenses. Operating expenses,
as a percentage of Loans purchased,  decreased from 11.9% as of June 30, 1996 to
11% as of June 30, 1997.  Management currently expects that operating costs will
rise  throughout  the remainder of fiscal year 1997 as the result of anticipated
growth in the number of Loans  purchased  and serviced by the  Company,  and the
hiring of  additional  personnel in  connection  with the expansion of the First
Union  Strategic  Alliance  to  FUSF's  Northeastern   Franchise.  In  addition,
operating  costs will also increase as the Company  implements  its own in-house
servicing  center in  Jacksonville,  Florida.  The Company has already  hired 33
employees in its in-house  collections  department (14 as of June 30, 1997), and
expects to hire more employees by the end of this year for both  collections and
servicing of Loans. The Company intends to assume  responsibility for collecting
all of its Loans by  approximately  October 1, 1997,  and hopes to take over all
servicing of its Loans by the end of fiscal year 1997.  To that end, the Company
has leased  37,000 square feet of space in  Jacksonville  to house its servicing
center,  and is  temporarily  leasing  approximately  3,000 square feet of space
until the  permanent  space is ready for  occupancy.  Such  increased  operating
expenses may decrease the Company's  operating margins and the Company's overall
profitability.

Personnel  expenses  for the  three  month  period  ended  June  30,  1997  were
approximately $1.6 million, as compared to approximately  $841,000 for the three
month  period  ended  June  30,  1996,  decreasing  to 3.7%  from  4.6% of Loans
purchased for the quarter.  Personnel expenses  consisted  primarily of salaries
and wages,  performance  incentives,  employee benefits,  and payroll taxes. The
Company's number of full-time  employees  increased from 57 as of June 30, 1996,
to 103 as of June 30, 1997.

Corporate operating expenses for the three month period ended June 30, 1997 were
approximately  $800,000,  as compared to  approximately  $457,000  for the three
month  period  ended  June  30,  1996,  decreasing  to 1.8%  from  2.5% of Loans
purchased   for   the   quarter.   These   expenses   consisted   primarily   of
telecommunications,   travel,   professional  fees,   insurance  expenses,   and
management information systems expenses.

Servicing expenses for the three month period ended June 30, 1997 were $763,000,
as  compared  to  $258,000  for the three  month  period  ended  June 30,  1996.
Servicing  expenses  consist  primarily  of a  monthly  fee  paid to an  outside
servicer,  Omni Financial  Services of America ("World  Omni"),  for each active
Loan.  Servicing  fees paid to World Omni for the three month  period ended June
30, 1997 were $638,000, as compared to $212,000 for the three month period ended
June 30, 1996.  The increase in expenses  primarily  reflected the growth in the
amount of Loans  purchased  and serviced by the  Company.  The  Company's  total
serviced Loan portfolio as of June 30, 1997 was approximately $157.1 million, or
14,392 outstanding Loans, as compared to approximately  $66.4 million,  or 5,774
outstanding Loans as of June 30, 1996.

Interest expense for the three month period ended June 30, 1997 was $345,000, as
compared  to $154,000  for the three  month  period  ended June 30,  1996.  This
increase  is a result of the  interest  expense  incurred  with  respect  to the
Company's Senior  Subordinated  Notes and related Deferred  Additional  Interest
Notes. The Senior  Subordinated  Notes bear interest at a rate of 10% per annum.
The Company's Junior Subordinated Notes bear interest at a rate of 8% per annum.

Six month period ended June 30, 1997,  as compared to the six month period ended
June 30, 1996.

Income from Operations. The Company reported net income for the six month period
ended June 30, 1997 of $2.0 million,  before a one time non-cash deferred income
tax charge to earnings of $4.5  million,  arising in the first  quarter of 1997,
that reflects a deferred income tax liability arising from the reorganization of
the Company's  business from a partnership  form to a taxable  corporate form in
connection  with the Company's  Offering in January 1997. This is an increase of
100%,  as  compared  to pro forma net income of $1.0  million  for the six month
period ended June 30, 1996.

Gain on Sales of Loans.  The Company's Loan purchasing and servicing  operations
expanded  significantly  during the six month  period  ended June 30,  1997,  as
compared to the six month  period  ended June 30,  1996.  The Company  purchased
4,407 or $59.2  million  of  principal  amount of Loans from  Dealers  and $20.3
million or 2,302 Loans were acquired

                                       17
<PAGE>

                      NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


through the Company's Portfolio  Acquisition Program during the six month period
ended June 30, 1997. Of these  amounts,  $75.0 million or 94% were  subsequently
sold to the Master  Trust.  This compares to 2,638 or $32.6 million of principal
amount of Loans purchased from Dealers and $311,000 or 33 Loans acquired through
PAC during the six month period  ended June 30, 1996,  all of which were sold to
the Master Trust.

For the six month period ended June 30, 1997,  the Company  recognized a gain on
securitization  of $7.6  million  from Loans  purchased  from  Dealers  and $2.2
million from PAC, representing a combined 113% increase over the $4.6 million of
gains recognized for the six month period ended June 30, 1996. This increase was
primarily the result of a 141% increase in the dollar volume of Loans  purchased
for the six month  period  ended June 30,  1997,  as  compared  to the six month
period ended June 30, 1996.

The table below set forth certain  information  relating to the  Company's  Loan
purchasing  activities,  including the specific  number and aggregate  principal
amount of Loans purchased and the aggregate amount funded to Dealers:

<TABLE>
<CAPTION>

                                                                                 Six month period ended
                                                                                       June 30,
                                                                            ----------------------------------

                                                                                1997               1996
                                                                            --------------     --------------
<S> 
<C>                                                                       <C>                <C>        
    Number of Loans purchased from Dealers during period
                                                                                    4,407              2,638
    Number of Loans purchased as portfolios (PAC)
                                                                                    2,302                 33
                                                                            --------------     --------------
              Total number of Loans purchased
                                                                                    6,709              2,671
                                                                            ==============     ==============
       
                                                                                 (dollars in thousands)

    Principal balance of Loans purchased from Dealers during period       $        59,279    $        32,642
    Principal balance of Loans purchased as portfolio (PAC)                        20,270                311
                                                                            --------------     --------------

              Total balance of Loans purchased                            $        79,549    $        32,953
                                                                            ==============     ==============

    Amount funded (1)                                                     $        77,509    $        31,202
                                                                            ==============     ==============
<FN>
   (1)  Amount funded  represents  the price at which the Company  purchases a
        Loan from a Dealer or other seller (i.e.,  the amount actually paid to
        a Dealer or other  seller),  calculated  as the  principal of the Loan
        purchased less a negotiated discount.
</FN>
</TABLE>


Loan Loss Provision and Reserves.  For the six month period ended June 30, 1997,
the provision for Loan losses associated with sales of loans to the Master Trust
was  approximately  $5.7 million,  or 7.3% of the amount funded,  as compared to
approximately  $2.0  million,  or 6.3% of the amount  funded,  for the six month
period ended June 30, 1996.

For the six month period ended June 30, 1997, the provision for Loan prepayments
associated  with  sales of Loans to the  Master  Trust  was  approximately  $9.4
million,  or 12.1% of the amount  funded,  as  compared  to  approximately  $4.2
million,  or 13.4% of the amount funded, for the six month period ended June 30,
1996.

                                       18
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


Other Income.  The Company generated  approximately $2.3 million of other income
for the six month period ended June 30, 1997, as compare to $1.0 million for the
six month ended June 30, 1996.  The  principal  sources of the  Company's  other
income were $685,000 of amortized  deferred gain,  $862,000 of servicing income,
and $503,000 of interest and miscellaneous income for the six month period ended
June 30, 1997, as compared to $298,000, $328,000, and $54,000, respectively, for
the six month period ended June 30, 1996.  Deferred income from  securitizations
of $266,000 was  recognized  for the six month  period  ended June 30, 1997,  as
compared to $327,000 for the six month period ended June 30, 1996.

Operating Expenses.  The Company reported operating expenses of $8.8 million for
the six month period  ended June 30,  1997,  as compared to $4.0 million for the
six month period  ended June 30, 1996.  These  expenses  consisted  primarily of
subordinated  note  interest,   and  personnel,   Loan  acquisition,   portfolio
servicing,  and other corporate  operating expenses.  Operating  expenses,  as a
percentage of Loans purchased,  decreased from 12% as of June 30, 1996 to 11% as
of June 30, 1997.

Personnel   expenses  for  the  six  month  period  ended  June  30,  1997  were
approximately  $2.9 million,  as compared to approximately  $1.5 million for the
six month  period  ended June 30,  1996,  decreasing  to 3.7% from 4.5% of Loans
purchased for the year.

Corporate  operating  expenses for the six month period ended June 30, 1997 were
approximately  $1.5 million,  as compared to approximately  $778,000 for the six
month  period  ended  June  30,  1996,  decreasing  to 1.8%  from  2.4% of Loans
purchased for the year.

Servicing  expenses  for the six  month  period  ended  June 30,  1997 were $1.4
million as compared to $480,000  for the six month  period  ended June 30, 1996.
This  represents  a  0.34%  increase  in  annualized  servicing  expenses  as  a
percentage of Loans serviced, from 1.44% as of June 30, 1996 to 1.75% as of June
30, 1997.  Servicing fees paid to World Omni for the six month period ended June
30, 1997 were $1.1  million as compared  to  $395,000  for the six month  period
ended June 30, 1996. The increase in expenses primarily  reflected the growth in
the amount of Loans purchased and serviced by the Company.

Interest  expense for the six month period ended June 30, 1997 was $760,000,  as
compared to $304,000 for the six month period ended June 30, 1996. This increase
is a result of the  interest  expense  incurred  with  respect to the  Company's
Senior Subordinated Notes and related Deferred Additional Interest Notes.

Financial Condition

As of June 30, 1997, the Company had total assets of $46.0 million,  as compared
to $31.2  million as of December 31, 1996. At the six months ended June 30, 1997
and December 31, 1996,  these assets consisted  primarily of cash,  subordinated
securities,  investments and retained  interests in securitization  trusts,  and
Loans held for sale, net of allowances for credit losses.

As of June  30,  1997,  the  Company  had cash  and  cash  equivalents  totaling
approximately $2.8 million.  As of such date, the Company also had approximately
$3.0 million in cash balances held in restricted  bank accounts,  representing a
portion of the credit  enhancement for the securitization  trusts,  which amount
was  included in the total  amount of the  Company's  investments  and  retained
interests in securitizations as of such date.

As of June 30, 1997, the Company retained  approximately $21.3 million of Excess
Spread  Receivables and  approximately  $14.6 million of Spread Accounts.  These
assets  represented  78% of the total assets of the Company as of such date. The
value of these  assets  would be reduced in the event of a material  increase in
the Loan loss and prepayment experience relative to the amounts estimated by the
Company  for such  items at the  time of the  sale of the  related  Loans to the
Master Trust.

As of June  30,  1997,  the  principal  amount  owed by the  Company  on  Junior
Subordinated  Notes was  approximately  $2.0 million,  which bear interest at an
annual rate of 8%.

                                       19
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


Loan Loss and Delinquency Experience

The  Company  regularly  reviews  the timing of losses and  prepayments  and the
adequacy of loss and  prepayment  reserves  related to  securitized  Loans.  The
reserve  assumptions used for calculations of gains on sales of loans are set at
levels  considered to be sufficient to cover the cash flow impact to the Company
of expected  future  losses and  prepayments  on Loans.  Changes in reserves are
based directly on the dollar value of the Loans transferred to the Master Trust,
historical  loss and  prepayment  experience  and, to a lesser  extent,  current
economic conditions and other factors that management deems relevant.

The Securitization Trusts' charge-off policy is based upon a Loan-by-Loan review
of delinquent  accounts.  A trust  generally  charges off a Loan at the time its
related  collateral  is  liquidated,  although  certain Loans may be charged off
sooner if management determines them to be uncollectable.

The following table summarizes the Trusts' Loan losses and liquidation  recovery
experience from the inception of the Company:
<TABLE>
<CAPTION>


                                                                     June 30, 1997       December 31, 1996
                                                                   -----------------     -----------------

                                                                          (dollars in thousands)
<S>
<C>                                                             <C>                   <C>

      Aggregate number of Loans purchased                                   17,382                10,675
      Aggregate principal balance of Loans purchased             $         214,290     $         134,773
      Principal balance of outstanding Loans                     $         157,111     $         102,852
      Number of outstanding Loans                                           14,392                 9,063

      Gross charge-off principal balance                         $          14,946     $           7,760
      Liquidation recoveries                                                (7,583)               (4,232)
                                                                   -----------------     ----------------
      Net charge-offs                                            $           7,363     $           3,528
                                                                   =================     ================
      Principal balance of Loans related to vehicles held in
          inventory                                              $           2,919     $           2,266
</TABLE>
                                       20
<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


A Loan is considered 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 due date on the fifth  day  following  the due  date.  The
following  table   summarizes  the   delinquency   experience  with  respect  to
outstanding Loans sold to the Master Trust:



<TABLE>
<CAPTION>


                                                                     June 30, 1997       December 31, 1996
                                                                   -----------------     -----------------

                                                                          (dollars in thousands)
<S>
<C>                                                              <C>                   <C> 
      Principal balance outstanding                               $          157,111    $          102,852
      Period of delinquency
          31 to 60 days                                           $           10,232    $            6,104
          61 to 90 days                                           $            3,191    $            1,596
          91 days or more                                         $            2,420    $              487
                                                                    ================     =================
                Total delinquencies                               $           15,843    $            8,187
                                                                    ================     =================

      Total delinquencies as a percentage of the
         current principal balance                                            10.08%                 7.95%
                                                                    ================     =================

</TABLE>

Since October 1994, the Company has maintained, at its own expense, supplemental
vendor's single interest  insurance that protects the Company's interest in Loan
collateral   against  uninsured  physical  damage  (including  total  loss)  and
instances where neither the vehicle nor the borrower can be found.

The Company monitors historical loss experience on an overall portfolio and on a
"static pool" basis.  Loans 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 then compared to the estimates for the net loss reserve for each
pool that were  established  at the pool's  inception  and  adjustments  for any
additional  losses will be reflected in the current period earnings.  As of June
30, 1997, no such additional loss adjustments have been made.

                                       21

<PAGE>

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997

The  following  table  summarizes  the  vintage  static  pools of the  Company's
portfolio  for all Loans  purchased  by the Company from  inception  through the
period ending March 31, 1997, and includes loss data through June 30, 1997:

<TABLE>
<CAPTION>

         Losses Through 6/97
         Loans Purchased        
         Through 3/97           4Q        1Q         2Q         3Q         4Q         1Q         2Q         3Q         4Q         1Q
         -------------------  1994      1995       1995       1995       1995       1996       1996       1996       1996       1997
                              ----      ----       ----       ----       ----       ----       ----       ----       ----       ----
                   Totals
                ------------
<S>         <C>         <C>       <C>       <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Original
  Number 
  of Loans        13,553       300       795        920      1,003        868      1,185      1,486      1,866      2,252      2,878

Number of
 Active 
 Loans            10,623       158       402        500        645        594        828      1,155      1,552      2,015      2,774

Original 
 Amount
 Financed    170,546,706 3,819,645 9,704,263 11,237,718 13,674,781 11,378,599 14,611,677 18,341,044 23,201,321 28,804,973 35,772,705

Principal 
 Amount          
 Outstanding 114,572,706 1,266,230 3,016,157  4,046,276  6,272,519  5,978,476  8,338,435 11,968,108 16,994,942 23,847,149 32,844,413

Cumulative 
Net Loss %         4.32%     9.07%     9.15%      8.66%      7.10%      6.65%      5.80%      6.00%      3.65%      1.89%      0.23%

                                4Q        1Q         2Q         3Q         4Q         1Q         2Q         3Q         4Q         1Q
                              1994      1995       1995       1995       1995       1996       1996       1996       1996       1997
                              ----      ----       ----       ----       ----       ----       ----       ----       ----       ----

 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%      0.00%      0.05%      0.00%      0.00%      0.04%      0.00%      0.00%
 4                           0.00%     0.00%      0.00%      0.03%      0.17%      0.00%      0.00%      0.04%      0.01%      0.02%
 5                           0.00%     0.07%      0.10%      0.19%      0.21%      0.10%      0.10%      0.16%      0.00%      0.06%
 6                           0.05%     0.14%      0.27%      0.43%      0.70%      0.39%      0.32%      0.45%      0.25%      0.23%
 7                           0.05%     0.24%      0.67%      0.88%      0.96%      0.60%      0.64%      0.79%      0.61%
 8                           0.31%     0.86%      1.42%      1.24%      1.05%      0.80%      1.14%      1.06%      1.21%
 9                           0.47%     1.34%      1.98%      2.18%      1.57%      1.38%      1.73%      1.92%      1.89%
 10                          0.51%     1.70%      2.40%      2.35%      2.28%      1.81%      2.70%      2.59%
 11                          1.08%     1.73%      2.62%      2.70%      2.40%      2.00%      3.29%      3.36%
 12                          1.36%     2.52%      3.14%      3.11%      3.08%      2.43%      4.34%      3.65%
 13                          1.75%     3.04%      3.37%      3.60%      3.48%      3.35%      5.19%
 14                          1.72%     3.39%      3.71%      3.58%      3.69%      3.60%      5.58%
 15                          3.12%     3.90%      3.99%      4.13%      4.24%      4.42%      6.00%
 16                          3.21%     4.20%      4.27%      4.60%      4.58%      4.71%
 17                          3.80%     4.52%      4.49%      4.98%      5.36%      5.38%
 18                          4.45%     4.70%      5.01%      5.14%      5.52%      5.80%
 19                          4.55%     4.94%      5.35%      5.49%      6.09%
 20                          4.91%     5.18%      5.75%      4.89%      6.43%
 21                          4.91%     5.77%      6.13%      6.46%      6.65%
 22                          5.05%     5.75%      6.84%      6.76%
 23                          5.05%     6.24%      7.44%      7.02%
 24                          5.79%     6.34%      7.75%      7.10%
 25                          5.78%     7.01%      8.28%
 26                          6.20%     7.30%      8.52%
 27                          6.80%     7.65%      8.66%
 28                          7.15%     8.00%
 29                          7.49%     9.02%
 30                          8.06%     9.15%
 31                          8.23%
 32                          9.07%

</TABLE>

Liquidity and Capital Resources

General

Since  inception,  the Company has funded its  operations  and the growth of its
Loan purchasing  activities  primarily through six principal sources of capital:
(i) cash flows from  operating  activities;  (ii) proceeds  from  securitization
transactions;  (iii) cash flows from  servicing  fees;  (iv)  proceeds  from the
issuance of senior  subordinated debt to institutional  investors;  (v) proceeds
from  the  issuance  of  junior  subordinated  debt to,  and  from  the  capital
contributions of, certain affiliates of the Company;  and (vi) proceeds from the
Offering.

Net cash used in  operating  activities  was $7.3  million  during the six month
period ended June 30, 1997, compared to net cash used of $1.2 million during the
six month period ended June 30, 1996.  Cash used for purchasing  Loans was $77.5
million,  an increase of $46.3 million,  or 148%,  over cash used for purchasing
Loans in the prior year's first six month period. Cash provided from the sale of
Loans to the Master Trust was $73.0 million,  an increase of $41.8  million,  or
134%, over cash provided from the sale of loans to the Master Trust in the prior
year's first six month period.

                                       22
<PAGE>


                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                                  June 30, 1997


The Company's securitization financing activities are capital-intensive and will
require  significant  additional  capital to fund the Company's  required equity
commitment to the Revolving  Securitization  facility and related securitization
expenses as the Company's Loan  purchasing  activities  grow in the future.  The
Company has used the proceeds of the Offering,  the Senior  Subordinated  Notes,
and the Junior  Subordinated  Notes to fund,  among other things,  the Company's
required equity commitment to the Revolving Securitizations.

The Company has  experienced an  acceleration  in the use of its cash during the
second quarter of 1997 and to date in excess of the cash requirements previously
projected  by the  Company.  This  acceleration  is due, in large  part,  to six
factors:  (1) a doubling of the  Company's  PAC volume for this fiscal year from
the originally-projected  $20 million to the presently-projected  $39.3 million;
(2) a greater than expected increase in the volume of Company-originated  Loans;
(3)  less  than  projected  dealer  discounts;  (4)  the  implementation  of the
Company's   in-house   servicing  center  and  the  costs  associated  with  the
corresponding  overlap of functions between that service center and World Omni's
service center;  (5) an increase in the enhancement rate required as part of the
1997-1 Trust; and (6) a change in the dynamic credit support requirements of the
Company's securitization facilities has resulted in and may in the future result
in additional  capital of the Company being maintained in the Spread Accounts of
two of the  Permanent  Securitizations.  The net effect of those six  factors is
that the Company will require in the fourth quarter of 1997  additional  capital
to fund its  operations.  To that end, the Company is actively  seeking to raise
additional   capital  in  an  amount  sufficient  to  meet  the  Company's  cash
requirements  and to fund  operations  through  the  end of  fiscal  year  1998,
assuming the Company completes additional Permanent Securitizations.

During the six month period ended June 30, 1997, cash used for initial  deposits
to Spread Accounts was $6.8 million. Cash distributed to the Company from Spread
Accounts  for the six month  period  ended June 30,  1997 was $5.8  million,  an
increase of $3.7 million, or 180%, over cash distributed from securitizations in
the prior year's period.  Changes in the  distributions  from the various Spread
Accounts are impacted by the  relative  size and  seasoning of the pools of sold
Loans that make up the Company's servicing portfolio.

The Company's management team possesses significant  servicing,  collections and
related management information systems expertise,  which will assist the Company
in establishing its own internal servicing operation.  As previously  discussed,
the  Company  has  begun the  process  of  implementing  an  in-house  servicing
operation.  The  Company  has  established  a budget  of $3.9  million  for such
operation in 1997.

                                       23
<PAGE>
                
--------------------------------------------------------------------------------
Part II - Other Information
--------------------------------------------------------------------------------

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

     (a)  On June 20, 1997,  an annual  meeting  (the  "Annual  Meeting") of the
          Company's stockholders was held.

     (b)  At the  Annual  Meeting,  Keith B.  Stein  and  Peter  Offermann  were
          re-elected  to the  Company's  Board of  Directors.  Further,  Gary L.
          Shapiro,  Roy E. Tipton and Morgan M. Schuessler continued to serve as
          members of the Company's Board of Directors.  As previously  reported,
          on June 16, 1997,  Edgar A. Otto resigned as a member of the Company's
          Board of Directors, and the Board of Directors, in accordance with the
          Company's  by-laws,  appointed Stephen Gurba to the Company's Board of
          Directors to fill the vacancy left by Mr.  Otto's  departure.  

     (c)  The  matters  voted  upon  at the  Annual  Meeting  included:  (1) the
          election of Keith B. Stein and Peter  Offermann to the Company's Board
          of Directors  for terms of three  years;  and (2) a proposal to ratify
          the appointment of KPMG Peat Marwick LLP ("KPMG"),  independent public
          accountants,  as the  auditors for the Company for fiscal year 1997. A
          total of  6,845,544  shares  were  represented  by proxy at the Annual
          Meeting,  representing 97.4% of the 7,026,000 shares eligible to vote.
          6,835,269 votes were cast in favor of electing both Keith B. Stein and
          Peter Offermann as directors, 10,275 votes were withheld, and no votes
          were cast against  them.  Additionally,  6,831,944  votes were cast in
          favor of the  ratification  of KPMG as the Company's  auditors,  9,400
          votes were cast against, and 4,200 votes were abstained.

     (d)  Not applicable.

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

         (a)   Exhibits

              Number       Description                  Method of Filing

              11           Computation of Earnings      Filed with this document
                           Per Common Share

              27           Financial Data Schedule      Filed with this document

         (b)   Reports on Form 8-K

               On April 29, 1997,  the Company filed a Form 8-K  announcing  its
               earnings for the first quarter of 1997.

               On June 24, 1997, the Company filed a Form 8-K announcing that:

                 1. Morgan  M.  Schuessler  was  named a member  of its Board of
                    Directors;

                 2. Jacksonville,  Florida  was  selected  as the  site  for the
                    Company's loan servicing divisional headquarters; and

                 3. At the Company's  Annual Meeting on June 20, 1997, (a) Keith
                    B.  Stein  and  Peter   Offermann  were  re-elected  to  the
                    Company's Board of Directors,  (b) the Company  accepted the
                    resignation  of  Edgar  Otto as a  member  of its  Board  of
                    Directors,  and (c) Stephen Gurba was unanimously  appointed
                    to the Company's Board of Directors to fill the vacancy left
                    by Mr. Otto's resignation.

               No other reports on Form 8-K were filed in the second  quarter of
               1997.

               On July 31, 1997,  the Company  filed a Form 8-K  announcing  its
               earnings for the second quarter of 1997.

                                       24
<PAGE>



                                   SIGNATURES



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



                                   NATIONAL AUTO FINANCE COMPANY, INC.


Date:  August 14, 1997             /s/ Keith B. Stein
                                   -----------------------------------
                                   Keith B. Stein
                                   Vice Chairman and Treasurer

Date:  August 14, 1997             /s/ Kevin G. Adams
                                   -----------------------------------
                                   Kevin G. Adams
                                   Vice President and Chief Financial Officer

                                       25


<PAGE>



                                  EXHIBIT INDEX



Exhibit
Number                Description
-------               -----------   

11                    Computation of Earnings Per Common Share

27                    Financial Data Schedule

                                       26