<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

(Mark One)

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

                For the quarterly period ended September 30, 1999

                                       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.)



10302 Deerwood Park Blvd., Suite 100, Jacksonville, Florida        32256
-----------------------------------------------------------      ----------
         (Address of principal executive offices)                (Zip Code)


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



     ---------------------------------------------------------------------
     (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 [ ]


                                      -1-
<PAGE>   2

                       NATIONAL AUTO FINANCE COMPANY, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
                                                                                                         PAGE
                                                                                                         ----
<S>                                                                                                      <C>
PART 1. FINANCIAL INFORMATION
     Item 1.    Financial Statements (unaudited)
                     Balance Sheets as of September 30, 1999 and December 31, 1998:                        4
                     Statements of Operations for the Three and Nine Months
                         Ended September 30, 1999 and 1998:                                                5
                     Statements of Cash Flows for the Nine Months Ended September 30, 1999
                         and 1998:                                                                         6
                     Notes to Financial Statements:                                                        7
     Item 2.    Management's Discussion and Analysis of Financial Condition and
                     Results of Operations:                                                               11

PART II. OTHER INFORMATION

     Item 1.    Legal Proceedings                                                                         23
     Item 2.    Changes in Securities                                                                     24
     Item 6.    Exhibits and Reports on Form 8-K:                                                         25

     SIGNATURES:                                                                                          26

     EXHIBIT INDEX:                                                                                       27

       Exhibit 3.1-2  (i) Amendment to the Company's Certificate of Incorporation:                        28
       Exhibit 11.    Computation of Earnings Per Common Share:                                           30
       Exhibit 27.    Financial Data Schedule:                                                            31
       Exhibit 99.1   Company's 1996 Share Incentive Plan, as amended:                                    32
       Exhibit 99.2   Press Release announcing Company's second quarter, 1999 results:                    38
</TABLE>


                                      -2-
<PAGE>   3

FORWARD-LOOKING STATEMENTS

When used in this Quarterly Report on Form 10-Q or future filings by the Company
(as hereinafter defined) 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," "intend," "foresee," "expected",
"project" or similar expressions are intended to identify "forward-looking
statements." 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, competitive and
regulatory factors, and changes in generally accepted accounting principles
could affect the Company's actual and/or reported financial performance and
could cause the Company's actual and/or reported results for future periods to
differ materially from those anticipated by any forward-looking statement. The
Company does not undertake and specifically disclaims any obligation to update
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.


                                      -3-

<PAGE>   4

PART I

ITEM I. FINANCIAL STATEMENTS

                       NATIONAL AUTO FINANCE COMPANY, INC.
                                 Balance Sheets
                    September 30, 1999 and December 31, 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                         September 30,
                                                                             1999        December 31,
                                                                         (unaudited)         1998
                                                                         -------------   ------------
<S>                                                                      <C>             <C>
ASSETS:

Cash and cash equivalents                                                $      4,650    $      9,540
Retained interest in securitizations, at estimated fair value (Note 2)         35,623          34,117
Furniture, fixtures and equipment, net                                          3,496           3,277
Deferred financing costs (Note 4)                                               4,360           2,759
Other assets                                                                    1,204           1,039
                                                                         ------------    ------------
      TOTAL ASSETS                                                       $     49,333    $     50,732
                                                                         ============    ============

LIABILITIES:

Accounts payable and accrued expenses                                    $      1,238    $      2,444
Accrued interest payable-related parties                                          958             117
Junior Subordinated Notes-related parties (Notes 3 and 4)                       2,138           1,940
Senior Subordinated Notes (Notes 3 and 4)                                      55,211          53,578
Notes payable                                                                     670           1,017
                                                                         ------------    ------------
                                                                               60,215          59,096
                                                                         ------------    ------------

COMMITMENTS AND CONTINGENCIES

MANDATORY REDEEMABLE PREFERRED STOCK series A-$0.01 par value;
       $1,000 stated value; 1,000,000 shares authorized; 2,295
       shares outstanding; redeemable in January 2005, stated at
       redemption value                                                         2,536           2,415


CAPITAL DEFICIT:

Common Stock -$0.01 par value; 44,000,000 shares authorized;
       17,280,762 and 9,030,762 shares outstanding, respectively
       (Note 4)                                                                   173              90

Paid-in-capital (Note 4)                                                       38,285          36,261

Accumulated deficit                                                           (51,876)        (47,130)
                                                                         ------------    ------------
    TOTAL CAPITAL DEFICIT                                                     (13,418)        (10,779)
                                                                         ------------    ------------
    TOTAL LIABILITIES, MANDATORY REDEEMABLE PREFERRED STOCK AND
    CAPITAL DEFICIT                                                      $     49,333    $     50,732
                                                                         ============    ============
</TABLE>


See accompanying notes to the financial statements.


                                      -4-
<PAGE>   5

                       NATIONAL AUTO FINANCE COMPANY, INC.
                      Statements of Operations (unaudited)
         For the Three and Nine Months Ended September 30, 1999 and 1998
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      Three Months Ended             Nine Months Ended
                                                         September 30                   September 30
                                                  --------------------------      --------------------------
                                                     1999            1998            1999            1998
                                                  ----------      ----------      ----------      ----------
<S>                                               <C>             <C>             <C>             <C>
REVENUE:
   Securitization related income (Note 2)         $    3,071      $   (1,439)     $    7,579      $       15
   Servicing income                                    1,356           1,972           4,215           4,887
   Interest income                                       319             555           1,134           1,850
   Other income                                          128              45             570             201
                                                  ----------      ----------      ----------      ----------
     Total revenue                                     4,874           1,133          13,498           6,953
                                                  ----------      ----------      ----------      ----------

EXPENSES:
   Servicing expenses                                    818             894           2,432           5,524
   Interest expense                                    2,127           2,107           6,336           5,750
   Salaries and employee benefits                      1,520           2,301           3,744           5,603
   Direct loan acquisition expenses                      386             188           1,083           1,411
   Depreciation expense                                  310             245             755             664
   Other operating expenses                             1076           1,008           3,974           3,033
                                                  ----------      ----------      ----------      ----------
     Total expenses                                    6,237           6,743          18,324          21,985
                                                  ----------      ----------      ----------      ----------
Net loss                                              (1,363)         (5,610)         (4,826)        (15,032)
Preferred stock dividends                                 40              40             120             120
                                                  ----------      ----------      ----------      ----------
Loss attributed to common shareholders            $   (1,403)     $   (5,650)     $   (4,946)     $  (15,152)
                                                  ==========      ==========      ==========      ==========
PER SHARE DATA:
Loss per common share - basic and diluted         $     (.08)     $    (0.63)     $    (0.34)     $    (1.68)
                                                  ==========      ==========      ==========      ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted                                     17,281           9,031          14,347           9,031
                                                  ==========      ==========      ==========      ==========
</TABLE>


See accompanying notes to the financial statements.


                                      -5-
<PAGE>   6

                       NATIONAL AUTO FINANCE COMPANY, INC.
                      Statements of Cash Flows (unaudited)
              For the Nine Months Ended September 30, 1999 and 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                             Nine Months Ended
                                                                                September 30,
                                                                          ------------------------
                                                                             1999          1998
                                                                          ----------    ----------
<S>                                                                       <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                  $   (4,826)   $  (15,032)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
   Securitization related income                                              (7,579)          (59)
   Depreciation expense                                                          517           483
   Purchases of loans held for sale                                          (45,147)      (84,176)
   Proceeds from transfer of loans to Master Trust                            45,147        84,176
   Cash flows from Retained Interest released to Company                      14,253         8,748
   Cash deposits to Spread Accounts                                           (6,378)      (23,700)
   Amortization and write-off of deferred financing costs                        626           422
   Amortization of warrants                                                      803           768
   Changes in other assets and liabilities:
     Other assets                                                             (1,966)        1,038
     Accounts payable and accrued expenses                                    (1,206)       (1,296)
     Accrued interest payable-related parties                                    842         1,006
                                                                          ----------    ----------
Net cash used in operating activities                                         (4,914)      (27,583)
                                                                          ----------    ----------
CASH FLOWS (USED) INVESTING ACTIVITIES:
   Fixed assets purchased                                                       (656)       (1,937)
                                                                          ----------    ----------
Net cash used in investing activities                                           (656)       (1,937)
                                                                          ----------    ----------
CASH FLOWS (USED) FINANCING ACTIVITIES:
   Proceeds from Senior Subordinated notes                                       831        19,220
   Proceeds from Junior Subordinated notes                                       197          --
   Principal payments on notes                                                  (348)         (474)
   Payment of Mandatory Redeemable Preferred Stock dividends                    --             (80)
                                                                          ----------    ----------
   Net cash provided by financing activities                                     680        18,666
                                                                          ----------    ----------
   Net decrease in cash and cash equivalents                                  (4,890)      (10,854)
   Cash and cash equivalents at beginning of period                            9,540        26,467
                                                                          ----------    ----------
   Cash and cash equivalents at end of period                             $    4,650    $   15,613
                                                                          ==========    ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid for interest                                                 $    3,668    $    3,929
                                                                          ==========    ==========
NON-CASH FINANCING ACTIVITIES:
   Accrued mandatory redeemable preferred stock dividends                        120           120

   Issuance of 593,671 warrants in conjunction with Senior Subordinated
     notes considered paid-in-capital                                           --           2,004

   Issuance of 8,250,000 shares of Common Stock to Senior Subordinated
   Noteholders (Note 4)                                                        2,228          --
</TABLE>


See accompanying notes to the financial statements.


                                      -6-
<PAGE>   7

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                               September 30, 1999
                                   (unaudited)


(1)   BASIS OF PRESENTATION

      The accompanying unaudited interim financial statements at September 30,
      1999 and 1998 and for the three and nine months ended September 30, 1999
      and 1998 have been prepared pursuant to the rules and regulations of the
      Securities and Exchange Commission. 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 the Company's 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).

      Interim statements are subject to possible adjustments in connection with
      the annual audit of the Company's accounts for the full year 1999; 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 1998
      financial statements have been reclassified to conform with current
      financial statement presentation.


(2)   RETAINED INTEREST IN SECURITIZATIONS

      Retained Interest in Securitizations were $35.6 and $34.1 million at
      September 30, 1999 and December 31, 1998, respectively.

      Assumptions used to value the Retained Interests in Securitizations at
      September 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                            September 30,    December 31,
                                                                1999             1998
                                                            ------------     ------------
<S>                                                         <C>              <C>
      Weighted average cumulative net loss rate                  14.00%        14.00%
      Weighted average cumulative prepayment rate                23.21%        21.40%
      Discount rate                                              14.00%        14.00%
      Level of required Cash Spread Account                   8% to 11%        11.00%
      Rate of interest on Cash Spread Account                     4.85%         4.85%
      Weighted average interest rate on Loans                    18.92%        18.67%
      Weighted average yield on bonds and notes
        held by securitization investors                          6.64%         6.12%
</TABLE>

      The Company has historically funded loans primarily through an asset
      securitization program consisting of (i) the securitized warehousing of
      all of its Loans through their daily sale ("Revolving Securitization") to
      a bankruptcy-remote master trust ("Master Trust") pursuant to the
      Revolving Securitization, followed by (ii) the transfer of such warehoused
      Loans from time to time by the Master Trust to a discrete trust
      ("Permanent Securitizations"), thereby creating additional availability of
      capital from the Master Trust, to purchase Loans.


                                      -7-
<PAGE>   8

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                               September 30, 1999
                                   (unaudited)

      Specifically, pursuant to the Revolving Securitization, the Company sells
      Loans that it has purchased from Dealers on a daily basis to a
      special-purpose subsidiary, which then sells the Loans to the Master Trust
      in exchange for cash and certain residual interests in future excess cash
      flows from the Master Trust. The Master Trust, to date, has issued two
      classes of investor certificates: "Class B Certificates," which are
      variable funding (i.e., revolving) certificates bearing interest at
      floating rates, and "Class C Certificates," representing a portion of the
      residual interest of the Company's special-purpose subsidiary in future
      excess cash flows from the Master Trust after required payments to the
      holders of the Class B Certificates, deposits of funds to a restricted
      cash account as a reserve for future Loan losses which provides additional
      credit enhancement for the holders of the Class B Certificates and payment
      of certain other expenses and obligations of the Master Trust. First Union
      currently owns 100% of the outstanding Class B Certificates and the
      Company indirectly owns 100% of the Class C Certificates. Collectively,
      the Cash Spread Accounts and the Class C Certificate portion of Loan
      principal (Over-Collateralization Accounts), are held by the Company to
      collateralize the Master Trust. The Spread Accounts and Excess Spread
      Receivables ("ESR") are reflected collectively on the balance sheet as
      "Retained Interest in Securitizations."

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

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

      Under the financing structures the Company has used to date for its
      securitizations, certain excess cash flows generated by the Loans are
      retained in the Cash Spread Accounts within the securitization trusts to
      provide liquidity and credit enhancement. While the specific terms and
      mechanics of the Cash Spread Accounts can vary depending on each
      transaction, the Company's agreements with FSA, the financial guaranty
      insurer that has provided credit enhancements in connection with the
      Company's securitizations, generally provide that the Company is not
      entitled to receive any excess cash flows unless the level of certain
      Spread Account balances, comprised of cash and the Overcollateralization
      Accounts, have been attained and/or the delinquency or losses related to
      the Loans in the pool are below certain predetermined levels.
      Additionally, effective as of the Restructuring date (See Note 4 - Recent
      Events), the Company is required to maintain a minimum equity position in
      the Revolving Securitization of 24.0% of the net serviced receivables in
      the Master Trust, or 3.0 times net losses, whichever is greater. This
      minimum equity position currently consists of cash invested by the Company
      and overcollateralization in the form of the discount from the face amount
      of a Loan at which the Company is willing to purchase the Loan from an
      automobile dealer ("Dealer Discount") related to the principal balance of
      Loans. As of September 30, 1999 and 1998, the Company had a 24.00% and
      14.00% minimum equity position investment in the Revolving Securitization.
      See Note 4 - Comprehensive Financial Restructuring.


                                       -8-

<PAGE>   9

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                               September 30, 1999
                                   (unaudited)


      Since the completion of the Restructuring, under the terms of the
      Company's insurance agreements with FSA, upon the occurrence of a
      Permanent Securitization failing to meet portfolio performance tests (an
      "Insurance Agreement Event of Default"), the Company would be in default
      under such insurance agreements. Upon an Insurance Agreement Event of
      Default, FSA may: (i) permanently suspend distributions of cash flow to
      the Company from the related securitization trust and all other
      FSA-insured trusts until the asset-backed securities have been paid in
      full; (ii) capture all excess cash flows from performing FSA-insured
      trusts; (iii) increase its premiums; and (iv) replace the Company as
      servicer with respect to all FSA-insured trusts. See Note 4 -
      Comprehensive Financial Restructuring.

      The Company's right to service the Loans sold in FSA-insured
      securitizations is generally subject to the discretion of FSA.
      Accordingly, there can be no assurance that the Company will continue as
      servicer for such Loans and receive related servicing fees. Additionally,
      there can be no assurance that there will not be Insurance Agreement
      Events of Default in the future, or if such events of default occur,
      waivers will be available. If the Company's Servicing Portfolio does not
      meet such performance requirements, the future carrying value of the
      Company's Retained Interest in Securitizations would be materially
      impacted in a negative manner. In addition, any increase in limitations on
      cash flow available to the Company from Permanent Securitization trusts,
      the Company's inability to obtain any necessary waivers from FSA or the
      termination of servicing arrangements could materially adversely affect
      the Company's financial condition, results of operations and cash flows.
      See Note 4 - Comprehensive Financial Restructuring.

      During the nine months ended September 30, 1999 and 1998, the following
      activity took place with respect to securitizations:

<TABLE>
<CAPTION>
                                                                                    September 30,
                                                                                   1999       1998
                                                                                 --------   --------
                                                                                (dollars in thousands)
<S>                                                                              <C>        <C>
      Principal balance of Loans purchased                                       $ 47,422   $ 87,118
                                                                                 ========   ========
      Weighted average coupon rate on Loans purchased during the period             18.88%     19.35%
                                                                                 ========   ========
</TABLE>

(3)   DEBT

      The balance of the Senior Subordinated Notes payable was $55.2 and $53.6
      million as of September 30, 1999 and December 31, 1998, respectively. Such
      amounts are shown net of discounts of $5.6 million and $6.4 million. The
      principal amount of the aggregate $60.8 million of Senior Subordinated
      Notes is due in December 2004 and bears interest at 11.875% per annum
      until December 21, 2000, 12.875% per annum for the period from December
      22, 2000 until December 21, 2001, 13.875% per annum for the period from
      December 22, 2001 until December 21, 2002, and 14.875% per annum
      thereafter, with interest payable quarterly.

      The Senior Subordinated Notes were issued in two separate private
      placements, the first of which occurred in December 1997 in the principal
      amount of $40 million (the "December Private Placement") and the second of
      which occurred in March 1998 in the principal amount of $20 million (the
      "March Private Placement"). Convertible Senior Subordinated Promissory
      Notes in the principle amount of approximately $800,000 were issued on


                                      -9-
<PAGE>   10

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                               September 30, 1999
                                   (unaudited)


      July 1, 1999 in lieu of the payment of cash interest. See Note 4 -
      Comprehensive Financial Restructuring for a discussion of the impact of
      the comprehensive financial restructuring on the Senior Subordinated Debt.

(4)   COMPREHENSIVE FINANCIAL RESTRUCTURING

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

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

      The agreements and transactions with First Union provide for and include,
      among other things: (1) the extension of the Master Trust warehouse line
      for an additional two years (through March 31, 2001) and an increase in
      the amount the Master Trust may borrow under such facility from $75
      million to $85 million; the interest rate for this facility is established
      at LIBOR + 1.5%; (2) the commitment by First Union to purchase up to $20
      million of subordinated asset-backed debt securities in connection with
      the Company's securitizations; the interest rate for this commitment is
      established at LIBOR + 5%; (3) a revolving credit facility enabling the
      Company to borrow up to $8 million for working capital purposes, secured
      by the Company's Residual Interest in Securitizations; the interest rate
      for this facility is established at LIBOR + 5%; and (4) waiver of
      violations of certain covenants with respect to the Master Trust,
      specifically, the covenant that the Master Trust maintain certain interest
      rate hedging agreements and covenants related to allowable repossession
      and recovery limits.

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


                                      -10-
<PAGE>   11

                       NATIONAL AUTO FINANCE COMPANY, INC.
                          Notes to Financial Statements
                               September 30, 1999
                                   (unaudited)

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

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

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 September 30, 1999 compared to
December 31, 1998 and its results of operations for the three and nine months
ended September 30, 1999 and 1998. This management's discussion and analysis
should be read in conjunction with (i) the Company's Financial Statements and
the related notes included elsewhere herein and (ii) the Company's Annual Report
on Form 10-K with respect to the fiscal year ended December 31, 1998. 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.

OVERALL

      The Company is a specialty consumer finance company engaged in the
business of purchasing, financing, securitizing and servicing non-prime
automobile Loans.

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

      Revenues. Pursuant to Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities" ("SFAS No. 125"), the Company periodically measures the fair


                                      -11-
<PAGE>   12
value of its Retained Interest in Securitizations based upon the performance of
its Loan portfolio. As a result, during the fourth quarter of fiscal 1998 the
Company increased the cumulative net loss estimate from 12.88% applied during
and as of the first, second and third quarters of fiscal year 1998 to 14.00% for
the year ended December 31, 1998 and during and as of the first, second and
third quarters of fiscal year 1999. The increase in the cumulative net loss
estimate results primarily from an increase in default rates expected to be
experienced over the life of the Loans, lower expected recovery rates on the
underlying collateral and changes in loss timing, compared to the rates of such
items estimated in earlier periods. These factors were impacted significantly as
a result of the Company's conversion of its Loan servicing to an internal system
in June of 1998. Performance trends during the first three quarters of 1999
indicate the negative impact of the immediate post conversion period has
stabilized. These changes are a significant factor in the securitization income
realized by the Company for the nine months ended September 30, 1999. See
"Results of Operations."

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

      Distributions of Cash from Securitizations. When the Company securitizes
Loans, it is required to establish and maintain credit enhancements on a
trust-specific basis to support the timely payment of interest and principal on
the notes issued to investors by such securitization trusts. Credit enhancements
include, among other things, funding and maintaining the Cash Spread Accounts
and maintaining the Over-Collateralization Accounts. The Cash Spread Accounts
are funded through initial cash deposits by the Company, plus a portion of the
excess cash flows from the Loans (that is, the difference between cash received
by the relevant trust and its interest and principal payments on the
asset-backed securities and trust expenses). Once the funds in the Cash Spread
Accounts meet specified levels (which may be increased if the performance of the
relevant Loan pool deteriorates), any subsequent excess cash flows thereafter
will be released to the Company on a monthly basis. Any remaining cash in the
Cash Spread Accounts after the asset-backed securities have been paid in full
also will be released to the Company. The amount of excess cash available for
distribution to the Company will be affected by the Servicing Portfolio's actual
loss and prepayment experience. See Note 2 of the Notes to Financial Statements
- Retained Interest in Securitizations.

The table below sets forth certain information relating to the Company's
securitization activities during the three and nine month periods ended
September 30:

<TABLE>
<CAPTION>
                                               Three months ending        Nine months ending
                                                   September 30,             September 30,
                                                1999         1998          1999         1998
                                              --------     --------      --------     --------
<S>                                           <C>          <C>           <C>          <C>
                                               (dollars in thousands, except number of loans)

Number of Loans purchased...............         1,350          308         3,430        6,972
Principal balance of Loans purchased....      $ 19,830     $  3,404      $ 49,014     $ 87,118
Principal amount of Loans funded (1)....      $ 18,929     $  3,072      $ 45,147     $ 84,176
Securitization related income...........      $  3,071     $ (1,439)     $  7,579     $     15
Servicing income........................      $  1,356     $  1,972      $  4,215     $  4,887
</TABLE>

(1) Amount funded represents the price at which the Company purchases a Loan
from a Dealer or Third-Party Originator (i.e., the amount actually paid to a
Dealer or Third-Party Originator), calculated as the principal of the Loan
purchased less the Dealer Discount. No loans were purchased from Third Party
Originators during the three months ended September 30, 1999.


                                      -12-
<PAGE>   13

RESULTS OF OPERATIONS

          THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE
MONTH PERIOD ENDED SEPTEMBER 30, 1998.

Income from Operations

      The Company reported a net loss of $1.4 million attributed to common
stockholders for the three-month period ended September 30, 1999 compared to a
net loss of $5.7 million attributed to common stockholders for the three month
period ended September 30, 1998.

Securitization Related Income

      For the three month periods ended September 30, 1999 and 1998, the Company
recognized securitization related income (loss) of $3.1 million and $(1.4)
million, respectively.

The Company's Loan purchasing volume increased during the three month period
ended September 30, 1999 compared to the three month period ended September 30,
1998. The Company purchased 1350 Loans, having a principal balance of $19.8
million, during the three month period ended September 30, 1999, compared to 308
Loans, having a principal balance of $3.4 million, for the three months ended
September 30, 1998. The Company's loan purchasing volume had decreased
significantly during the second half of 1998 and early months of 1999 as the
Restructuring was being completed. See Note 4 of the Notes to Financial
Statements - Comprehensive Financial Restructuring. Since that time, the Company
is re-establishing its loan purchasing volume at a deliberate pace with emphasis
on more stringent credit and collateral standards. Included in reported
securitization related income of $3.1 million for the three month period ended
September 30, 1999 was $750,000 related to an increase in the valuation of the
Retained Interest in Securitizations. The adjustment resulted from a decrease in
estimated securitization costs accrued for future securitizations.

Servicing Income

      The Company receives a servicing fee in cash of approximately 4.0% of the
principal amount of the Loans sold to the Master Trust and 2.0% to 3.0% for the
principal amount of the Loans subsequently sold to the Permanent
Securitizations, which typically offsets actual servicing expenses incurred by
the Company. This income is recognized as received. Servicing income for the
three month periods ended September 30, 1999 and 1998 was $1.4 million and $2.0
million, respectively.

Total Expenses

      The Company reported total expenses for the three-month periods ended
September 30, 1999 and 1998 of $6.2 million and $6.7 million, respectively.
These expenses consisted primarily of salaries and employee benefits, servicing
expense and interest expense on long-term indebtedness, including the Senior
Subordinated Notes.

Servicing expenses for the three month periods ended September 30, 1999 and 1998
were $818,000 and $894,000, respectively. The decrease in servicing expense is
attributed to the reduction in the outstanding servicing portfolio. The
Company's average outstanding Servicing Portfolio was $191.3 million,
representing 20,353 outstanding Loans as of September 30, 1999, and $235.3
million, representing 23,189 outstanding Loans, as of September 30, 1998.
Culminating on June 19, 1998, the Company converted its Servicing Portfolio
computer data from its outside servicer's computer systems to an internal
system. As a result, the Company has been performing all collection functions
with respect to its Servicing Portfolio since June 19, 1998.

Salaries and employee benefits for the three month periods ended September 30,
1999 and 1998 were $1.5 million and $2.3 million, respectively. These expenses
were lower during the three months ended September 30, 1999 as compared to the
three months ended September 30, 1998 due to the Company stabilizing its
staffing levels during the three months ended September 30, 1999. During the
three months ended September 30, 1998, the Company incurred duplicative salaries
and benefits expenses associated with its servicing conversion and phased move
of sales, originations and corporate support staff from Boca Raton, Florida to
Jacksonville, Florida.


                                      -13-
<PAGE>   14

Interest expense for the three-month periods ended September 30, 1999 and 1998
was $2.1 million and $2.1 million, respectively. These interest expenses
resulted from the long-term debt balance of the Company, including interest paid
on the outstanding Senior Subordinated Notes.

Other operating expenses for the three-month periods ended September 30, 1999
and 1998 was $1.1 million and $1.0 million, respectively.

NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1998.

Income from Operations

      The Company reported a net loss of $4.9 million attributed to common
stockholders for the nine month period ended September 30, 1999 compared to a
net loss of $15.2 million attributed to common stockholders for the nine month
period ended September 30, 1998.

Securitization Related Income

      For the nine month periods ended September 30, 1999 and 1998, the Company
recognized securitization related income of $7.6 million and approximately
$15,000, respectively.

The Company's Loan purchasing volume decreased during the nine month period
ended September 30, 1999 compared to the nine month period ended September 30,
1998. The Company purchased 3,430 Loans, having a principal balance of $49.0
million, during the nine month period ended September 30, 1999, compared to
6,972 Loans, having a principal balance of $87.1 million, for the nine months
ended September 30, 1998. The Company's loan purchasing volume had decreased
significantly during the second half of 1998 and early months of 1999 as the
Restructuring was being completed. See Note 4 of the Notes to Financial
Statements - Comprehensive Financial Restructuring. Since that time, the Company
is re-establishing its loan purchasing volume at a deliberate pace with emphasis
on more stringent credit and collateral standards. Included in reported
securitization related income of $7.6 million for the nine month period ended
September 30, 1999 was approximately $2.1 million related to an increase in the
valuation of the Retained Interest in Securitizations. The adjustment resulted
from lower defaults rates and securitization fees during the nine months ended
September 30, 1999 than previously estimated. Notwithstanding higher loan
purchasing volume during the nine months ended September 30, 1998 as compared to
the nine months ended September 30, 1999, securitization income during the nine
months ended September 30, 1998 was lower due to the first time application of a
14.0% discount rate to cash deposits as part of the evaluation of the Retained
Interest in Securitizations. The resulting adjustment reduced securitization
income for that period.

Servicing Income

      The Company receives a servicing fee in cash of approximately 4.0% of the
principal amount of the Loans sold to the Master Trust and 2.0 to 3.0% for the
principal amount of the Loans subsequently sold to the Permanent
Securitizations, which typically offsets actual servicing expenses incurred by
the Company. This income is recognized as received. Servicing income for the
nine month periods ended September 30, 1999 and 1998 was $4.2 million and $4.9
million, respectively.

Total Expenses

      The Company reported total expenses for the nine-month periods ended
September 30, 1999 and 1998 of $18.3 million and $22 million, respectively.
These expenses consisted primarily of salaries and employee benefits, servicing
expense, interest expense on long-term indebtedness, including the Company's
Senior Subordinated Notes and other operating expenses.

Servicing expenses for the nine month periods ended September 30, 1999 and 1998
were $2.4 and $5.5 million, respectively. Servicing expenses were significantly
lower during the nine months ended September 30, 1999 as compared to the nine
month's ended September 30, 1998 due to the Company incurring both internal
servicing expenses and external servicing expenses paid as fees to an outside
servicing vendor during a transitional phase during which the Company
implemented a transition from such external servicer to in-house servicing. Such
transition period, as discussed below, occurred during the


                                      -14-

<PAGE>   15

nine months ended September 30, 1998 and up to the conversion date of June 19,
1998. Additionally, the Company further stabilized its servicing expense
structure during the nine months ended September 30, 1999. The Company's average
outstanding Servicing Portfolio was $197.6 million, representing 20,935
outstanding Loans as of September 30, 1999, and $242.8 million, representing
23,189 outstanding Loans, as of September 30, 1998. Culminating on June 19,
1998, the Company converted its Servicing Portfolio computer data from its
outside servicer's computer systems to an internal system. As a result, the
Company has been performing all collection functions through its own servicing
system with respect to its Servicing Portfolio since June 19, 1998.

Salaries and employee benefits for the nine month periods ended September 30,
1999 and 1998 were $3.7 million and $5.6 million, respectively. These expenses
were lower during the nine months ended September 30, 1999 as compared to the
nine months ended September 30, 1998 due to the Company stabilizing its staffing
levels during the nine months ended September 30, 1999. During the nine months
ended September 30, 1998, the Company incurred duplicative salaries and benefits
expenses associated with its servicing conversion and phased move of sales,
originations and corporate support staff from Boca Raton, Florida to
Jacksonville, Florida.

Interest expense for the nine-month periods ended September 30, 1999 and 1998
was $6.3 million and $5.8 million, respectively. This interest expense resulted
from the higher outstanding long-term debt balance of the Company, including
interest paid on the outstanding Senior Subordinated Notes.

Other operating expenses for the nine-month periods ended September 30, 1999 and
1998 was $4.0 million and $3.0 million, respectively. The increase in other
operating expenses was due to approximately $900,000 of restructuring legal and
professional expenses incurred by the Company during the nine months ended
September 30, 1999 associated with the Company's Restructuring.


LOAN LOSS AND DELINQUENCY EXPERIENCE

      Loan losses and Loan prepayments are continuously monitored on an overall
portfolio and month-of-purchase static pool basis. Pursuant to the requirements
of SFAS No. 125, the Company reviews its actual Loan loss experience in
conjunction with its quarterly estimated valuation of its Retained Interest in
Securitizations. Charge-off of Loans are based upon an account-by-account review
of delinquent Loans by the Company. The Company's securitized trusts generally
charge off a Loan at the time its related collateral is liquidated, although
certain Loans may be charged off sooner if management deems them to be
uncollectible. The following table summarizes the Company's loan loss
experience:

<TABLE>
<CAPTION>
                                                           As of and for the nine
                                                           months of September 30,
                                                             1999           1998
                                                          -----------    -----------
                                                               (in thousands)

<S>                                                       <C>            <C>
Average Servicing Portfolio during period...........      $   197,600    $   242,811
                                                          -----------    -----------
Gross charge-offs...................................           23,699         21,115
Liquidation proceeds from repossessed assets........           10,226          8,215
                                                          -----------    -----------
Net charge-offs.....................................      $    13,473    $    12,900
                                                          ===========    ===========
Net charge-offs as a percentage of average Servicing
    Portfolio (annualized)..........................              9.1%           7.1%
                                                          ===========    ===========
</TABLE>

The Company believes that the system conversion and resulting servicing
disruption was largely responsible for the increase in net charge-offs as a
percentage of the Servicing Portfolio for the nine months ended September 30,
1999 as compared to the nine months ended September 30, 1998. After conversion,
the Company experienced an increase in the delinquency of its portfolio that
occurred in or about August 1998. Since initiating collections on its own
internal servicing system in June 1998, the resulting percentage of the
outstanding principal balance of Loans that were more than 30 days past due
decreased to approximately 7.65% of the Company's Servicing Portfolio as of
December 31, 1998, from a high of 11.5% as of July 31, 1998, and was
approximately 8.33% as of September 30, 1999.



                                      -15-
<PAGE>   16

The securitization income the Company recognizes from the sale of Loans to the
Master Trust, and the cash flow from its securitizations are substantially
dependent on the Servicing Portfolio's delinquency and loss performance.
Increase in delinquencies and losses may result in: (i) increased capital and/or
credit enhancement requirements for securitizations; (ii) reductions in cash
flow to the Company; and (iii) additional violations of Permanent Securitization
performance tests. Consequently, the Company's failure to effectively service
and collect the Servicing Portfolio could have a material adverse effect on the
Company's financial condition, results of operations and cash flows. See Note 2
to the Financial Statements - Retained Interest in Securitizations.

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

<TABLE>
<CAPTION>
                                                            As of September 30,
                                                           1999            1998
                                                       -----------     -----------
                                                           (dollars in thousands)
<S>                                                    <C>             <C>
Servicing Portfolio.................................   $   186,993     $   233,214
                                                       -----------     -----------

Period of delinquency:

   31 to 60 days....................................   $    10,358     $    15,143
   61 to 90 days....................................         2,953           4,908
   91 days or more..................................         2,423           3,577
                                                       -----------     -----------
Total delinquencies.................................   $    15,734     $    23,628
                                                       ===========     ===========
Total delinquencies as a percentage of the
   Servicing Portfolio..............................          8.33%          10.11%
Principal balance of Loans related to repossession
   inventory........................................   $     1,928     $     5,482
Repossession inventory as a percentage of the ending
   Servicing Portfolio..............................          1.03%           2.30%
</TABLE>

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

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



                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.)


                                      -16-
<PAGE>   17

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                               September 30, 1999

The following table summarizes the vintage static pools of the Company's
Servicing Portfolio for all Loans purchased by the Company from inception
through the period ended September 30, 1999, and includes cumulative net loss
data through September 30, 1999:

<TABLE>
        *  4Q 94     1Q 95      2Q 95    3Q 95     4Q 95       1Q 96      2Q 96    3Q 96     4Q 96    1Q 97
<S>        <C>       <C>        <C>      <C>       <C>         <C>        <C>      <C>       <C>      <C>
        1   0.00%     0.00%      0.00%    0.00%     0.00%       0.00%      0.00%    0.00%     0.00%    0.00%
        2   0.00%     0.00%      0.00%    0.00%     0.00%       0.00%      0.00%    0.00%     0.00%    0.00%
        3   0.00%     0.00%      0.00%    0.06%     0.05%       0.00%      0.00%    0.04%     0.00%    0.00%
        4   0.05%     0.04%      0.00%    0.12%     0.25%       0.09%      0.03%    0.04%     0.01%    0.04%
        5   0.31%     0.14%      0.29%    0.41%     0.48%       0.26%      0.28%    0.33%     0.07%    0.25%
        6   0.47%     0.30%      0.92%    0.78%     0.86%       0.49%      0.62%    0.70%     0.69%    0.70%
        7   0.51%     0.71%      1.62%    1.64%     1.27%       0.90%      1.10%    1.18%     1.25%    1.43%
        8   1.08%     1.25%      2.02%    2.02%     1.67%       1.23%      2.06%    1.71%     1.85%    1.94%
        9   1.36%     1.55%      2.39%    2.42%     2.25%       1.95%      2.70%    2.68%     2.50%    2.60%
       10   1.75%     2.13%      2.71%    2.60%     2.46%       2.14%      3.37%    3.31%     3.27%    3.08%
       11   1.72%     2.49%      3.30%    3.02%     2.84%       2.72%      4.29%    3.88%     3.77%    3.51%
       12   3.12%     3.09%      3.39%    3.58%     3.33%       3.26%      5.20%    4.34%     4.12%    3.87%
       13   3.21%     3.64%      3.71%    3.91%     3.97%       3.74%      5.55%    5.08%     4.57%    4.49%
       14   3.80%     4.04%      4.21%    4.03%     4.28%       4.18%      6.13%    5.53%     4.97%    5.08%
       15   4.45%     4.25%      4.31%    4.51%     5.07%       4.90%      6.52%    6.01%     5.46%    5.65%
       16   4.55%     4.33%      4.53%    4.87%     5.09%       5.11%      6.78%    6.57%     5.94%    6.34%
       17   4.91%     4.88%      4.92%    5.27%     5.65%       6.16%      7.16%    6.85%     6.40%    6.82%
       18   4.91%     4.98%      5.54%    5.62%     5.96%       6.59%      7.67%    7.35%     7.17%    7.39%
       19   5.05%     5.28%      5.96%    6.16%     6.61%       7.01%      8.00%    8.14%     7.78%    7.79%
       20   5.05%     5.80%      6.18%    6.63%     6.78%       7.28%      8.14%    8.59%     8.25%    8.05%
       21   5.79%     5.89%      6.55%    6.75%     7.15%       7.56%      8.66%    9.12%     8.66%    8.40%
       22   5.78%     6.33%      7.35%    6.87%     7.42%       8.00%      9.09%    9.75%     9.05%    8.78%
       23   6.20%     6.46%      7.88%    7.44%     7.99%       8.25%      9.81%   10.03%     9.23%    9.28%
       24   6.80%     6.91%      8.30%    7.93%     8.21%       8.36%     10.17%   10.36%     9.43%    9.67%
       25   6.99%     7.48%      8.59%    8.37%     8.49%       8.85%     10.68%   10.88%     9.67%   10.12%
       26   7.49%     7.58%      8.66%    8.54%     8.77%       9.01%     11.22%   11.13%    10.02%   10.52%
       27   8.06%     8.20%      9.16%    8.70%     8.98%       9.36%     11.50%   11.40%    10.35%   10.83%
       28   8.23%     8.76%      9.34%    8.82%     9.35%       9.57%     11.54%   11.72%    10.80%   11.36%
       29   9.07%     9.49%      9.35%    8.89%     9.97%       9.84%     11.71%   11.86%    11.25%   11.68%
       30   9.17%     9.54%      9.39%    9.21%    10.16%      10.09%     11.88%   12.19%    11.42%   12.18%
       31   9.71%     9.81%      9.82%    9.84%    10.61%      10.37%     12.56%   12.32%    11.78%   12.52%
       32   9.99%    10.08%      9.75%   10.11%    10.74%      10.48%     12.78%   12.58%    11.89%
       33  10.47%    10.19%     10.06%   10.26%    11.09%      10.61%     12.85%   12.76%    12.19%
       34  11.44%    10.28%     10.53%   10.67%    11.28%      10.83%     13.10%   12.93%    12.48%
       35  11.48%    10.63%     10.52%   10.85%    11.33%      11.15%     13.38%   13.14%
       36  11.81%    10.66%     10.72%   10.89%    11.51%      11.20%     13.51%   13.33%
       37  11.86%    10.83%     10.93%   11.15%    11.70%      11.36%     13.77%   13.60%
       38  11.85%    11.01%     11.10%   11.21%    11.93%      11.48%     14.15%
       39  12.37%    11.20%     11.17%   11.37%    11.94%      11.79%     14.23%
       40  12.42%    11.48%     11.19%   11.46%    11.98%      11.88%     14.57%
       41  12.42%    11.63%     11.22%   11.84%    12.01%      11.99%
       42  12.57%    11.95%     11.26%   11.87%    12.09%      12.19%
       43  12.56%    12.00%     11.55%   12.07%    12.32%      12.34%
       44  12.71%    12.04%     11.54%   12.09%    12.40%
       45  12.68%    12.08%     11.74%   12.24%    12.50%
       46  12.75%    12.12%     11.82%   12.22%    12.50%
       47  12.79%    12.21%     12.04%   12.33%
       48  12.97%    12.31%     11.99%   12.43%
       49  12.97%    12.27%     12.00%   12.42%
       50  13.10%    12.73%     11.96%
       51  13.09%    12.51%     12.16%
       52  13.15%    12.61%     12.28%
       53  13.17%    12.66%
       54  13.07%    12.72%
       55  13.08%    12.68%
       56  13.15%
</TABLE>

* - Month of origination.


                                      -17-
<PAGE>   18

                       NATIONAL AUTO FINANCE COMPANY, INC.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
                               September 30, 1999

<TABLE>
        *     2Q 97   3Q 97   4Q 97   1Q 98   2Q 98   3Q 98    4Q 98   1Q 99   2Q 99   3Q 99
<S>           <C>     <C>     <C>     <C>     <C>     <C>      <C>     <C>     <C>     <C>
        1      0.00%   0.00%   0.00%   0.00%   0.00%   0.00%    0.00%   0.00%   0.00%   0.00%
        2      0.00%   0.00%   0.00%   0.00%   0.00%   0.00%    0.00%   0.00%   0.00%
        3      0.00%   0.02%   0.00%   0.00%   0.00%   0.00%    0.00%   0.00%   0.00%
        4      0.22%   0.04%   0.01%   0.02%   0.00%   0.00%    0.07%   0.00%   0.18%
        5      0.66%   0.18%   0.14%   0.08%   0.13%   0.01%    0.16%   0.08%
        6      1.31%   0.42%   0.42%   0.29%   0.35%   0.81%    0.56%   0.46%
        7      2.11%   0.88%   0.74%   0.61%   0.72%   0.94%    0.99%   0.93%
        8      2.56%   1.21%   1.29%   0.84%   0.82%   2.10%    1.41%
        9      2.99%   1.60%   1.68%   1.16%   1.62%   2.40%    1.88%
       10      3.71%   2.30%   2.09%   1.78%   2.03%   2.79%    2.09%
       11      4.28%   2.78%   2.41%   2.28%   2.76%   3.20%
       12      5.05%   3.45%   2.76%   2.76%   3.09%   4.06%
       13      5.91%   3.87%   3.25%   3.25%   3.83%   4.26%
       14      6.50%   4.18%   3.68%   3.67%   4.39%
       15      6.96%   4.54%   4.14%   4.24%   5.09%
       16      7.42%   5.24%   4.68%   4.83%   5.56%
       17      7.63%   5.74%   5.02%   5.13%
       18      7.93%   6.28%   5.42%   5.57%
       19      8.48%   6.91%   5.93%   6.01%
       20      9.01%   7.45%   6.28%
       21      9.28%   7.88%   6.84%
       22      9.73%   8.40%   7.19%
       23     10.00%   8.73%
       24     10.30%   9.12%
       25     10.79%   9.55%
       26     11.04%
       27     11.35%
       28     11.75%
</TABLE>

* - Month of origination.


                                      -18-


<PAGE>   19

LIQUIDITY AND CAPITAL RESOURCES

    General

      Since inception, the Company has funded its operations and the growth of
its Loan purchasing activities primarily through five sources of capital: (i)
proceeds from securitization transactions; (ii) cash flows from servicing fees;
(iii) proceeds from the issuance of indebtedness; (iv) capital contributions of
certain affiliates of the Company; and (v) proceeds from the Company's Initial
Public Offering and subsequent private sales of Common Stock.

The Company's primary uses of cash are to fund: (i) Spread Accounts; (ii)
securitizations; (iii) Loan purchases; (iv) debt service; (v) issuance costs of
asset securitizations; and (vi) operating expenses.

Net cash used in operating activities decreased by $22.6 million to $4.9 million
for the nine month period ended September 30, 1999 from $27.5 million for the
nine month period ended September 30, 1998, principally due to reduced
origination volume and a resulting reduction in credit enhancement requirements
of the Company's securitization facilities, release of previously trapped excess
cash spread from the trusts due to agreements with FSA, reduction in interest
paid on Senior Subordinated Notes (See Note 4 - Comprehensive Financial
Restructuring) and the reduced net loss from operations as discussed in "Results
of Operations".

Net cash provided by (used in) financing activities decreased by $18.0 million
to $680,000 for the nine month period ended September 30, 1999 from $18.7
million for the nine month period ended September 30, 1998. Net cash provided by
financing activities for the nine month period ended September 30, 1998 was
primarily the result of the proceeds received from the March Private Placement
of $20 million of Senior Subordinated Notes.

During the nine month period ended September 30, 1999, the Company was required
to maintain a minimum equity position in the Master Trust of 19.0% to 24.0% of
the net serviced receivables or 3.0 times net losses, whichever was greater.
This minimum equity position consists of cash invested by the Company and
over-collateralization in the form of the Company owning certain interests in
the principal balance of Loans.

As of September 30, 1999, the Company retained approximately $35.6 million of
Retained Interest in Securitizations, representing 72.2% of the total assets of
the Company. The value of these assets, representing the net present value of
future cash flows to the Company, would be reduced in the event of a future
material increase in the Loan loss or prepayment experience relative to the
amounts previously estimated by the Company.

As of September 30, 1999, the principal amount owed by the Company on the Senior
Subordinated Notes was $60.8 million and the principal amount owed by the
Company on the Junior Subordinated Notes was approximately $2.1 million. The
Senior Subordinated Notes, which mature on December 2004, bear interest at
11.875% per annum until December 22, 2000, 12.875% per annum for the period from
December 22, 2000 until December 21, 2001, 13.875% per annum for the period from
December 22, 2001 until December 21, 2002, and 14.875% per annum thereafter,
with interest payable quarterly. See Note 3 of the Notes to Financial Statements
for further discussion of the Company's various debt facilities. See also Note 4
of the Notes to Financial Statements - Comprehensive Financial Restructuring.

Senior Subordinated Notes

       On April 7, 1999, the Company completed a comprehensive financial
restructuring (the "Restructuring"), including its Senior Subordinated Notes and
resolved certain other issues with its Senior Subordinated Noteholders. More
specifically, the agreements and transactions with the Senior Subordinated
Noteholders provide for and include, among other things: (1) the waiver of the
past defaults and breaches of covenants, representations and warranties, if any,
made in connection with the Senior Subordinated Notes; (2) the elimination of
the previously existing Net Worth Covenant; (3) the establishment of a new
covenant requiring that on a quarterly basis, the Company's net return on assets
invested in Loan receivables, expressed as a percentage, exceed pre-established
quarterly goals (the "Return on Assets Covenant"); the first quarterly
measurement period for this covenant begins as of the quarter ending September
30, 1999; (4) the granting to the Company of the option to pay during the
two-year period ending March 31, 2001 fifty percent (50%) of the interest owed
on the Senior Subordinated Notes (and the interest on such interest) through the
issuance of the Convertible Senior Subordinated Notes; (5) the issuance to the
Senior Subordinated Noteholders of 7,071,429 shares of Common Stock as
consideration for the waivers and amendments


                                      -19-
<PAGE>   20

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

First Union

      Under the Revolving Securitization, the Company sells Loans that it has
purchased from Dealers on a daily basis to a special-purpose subsidiary, which
then sells the Loans to the Master Trust in exchange for cash and certain
residual interests in future excess cash flows from the Master Trust. The Master
Trust, to date, has issued two classes of investor certificates: "Class B
Certificates," which are variable funding (i.e., revolving) certificates bearing
interest at floating rates, and "Class C Certificates," representing a portion
of the residual interest of the Company's special-purpose subsidiary in future
excess cash flows from the Master Trust after required payments to the holders
of the Class B Certificates, deposits of funds to a restricted cash account as a
reserve for future Loan losses which provides additional credit enhancement for
the holders of the Class B Certificates and payment of certain other expenses
and obligations of the Master Trust. First Union currently owns 100% of the
outstanding Class B Certificates. Collectively, the restricted cash account and
the Class C Certificate portion of Loan principal (Over-Collateralization
Accounts, which are held by the Company) that collateralize the Master Trust are
the components of the Spread Accounts. The Spread Accounts and ESRs are
reflected collectively on the balance sheet as "Retained Interest in
Securitizations."

Periodically the Master Trust transfers Loans and Spread Account balances to
Permanent Securitizations in exchange for cash, which is used to repay the Class
B Certificates. Debt securities representing interests in the Permanent
Securitizations are sold to third-party investors, who are repaid from cash
flows from the Loan receivables in the applicable Permanent Securitization.
Excess Spread Receivables and return of Spread Accounts attributable to such
Loans flow from the Permanent Securitization to the Company to the extent such
funds are available. Pursuant to the Restructuring described above, the Company
entered into several loan facilities and arrangements with First Union . As
described in Note 4 of Notes to the Financial Statements - Comprehensive
Financial Restructuring, the restructured agreements with First Union provide
for and include, among other things: (1) the extension of the Company's
warehouse line for an additional two years (through March 31, 2001) and an
increase in the amount the Company may borrow under such facility from $75
million to $85 million; (2) the commitment by First Union to purchase up to $20
million of subordinated asset-backed debt securities in connection with the
Company's securitizations; and (3) a revolving credit facility enabling the
Company to borrow up to $8 million for working capital purposes secured by the
Company's Retained Interest in Securitizations.

FSA

      The Company's future liquidity and financial condition, and its ability to
finance the growth of its business and to repay or refinance its indebtedness,
will depend substantially on distributions of excess cash flow from the Master
Trust and Permanent Securitization trusts. The Company's agreements with FSA
provide that each Permanent Securitization trust must maintain specified levels
of cash in its Cash Spread Account during the life of the trust. These spread
accounts are funded initially out of beginning deposits and are funded
thereafter with excess cash flow from the Loan pool. During each month, excess
cash flow available to the Company from all Permanent Securitization trusts is
first used to replenish any Cash Spread Account deficiencies and then is
distributed to the Company. The timing and amount of distributions of excess
cash from securitization trusts varies based on a number of factors, including
loan delinquencies, defaults and net losses, the rate of disposition of
repossession inventory and recovery rates, the age of Loans in the portfolio,
prepayment experience and required spread account levels.

Under the financing structures the Company has used to date for its
securitizations, certain excess cash flows generated by the Loans are retained
in the Spread Accounts within the securitization trusts to provide liquidity and
credit enhancement. While the specific terms and mechanics of the Spread
Accounts can vary depending on each transaction, the Company's agreements with
FSA, the financial guaranty insurer that has provided credit enhancements in
connection with the Company's securitizations, generally provide that the
Company is not entitled to receive any excess cash flows unless the level of
certain Spread Account balances, comprised of cash and an interest in the
principal balance of the Loans in the trust


                                      -20-
<PAGE>   21

(the "Over-Collateralization Accounts"), have been attained and/or the
delinquency or losses related to the Loans in the pool are below certain
predetermined levels.

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

Pursuant to the Restructuring, certain of the terms of the insurance guarantee
arrangements with FSA were modified. The agreements and transactions with FSA
provide for and include, among other things: (1) the resetting of the cash
spread accounts in each of the Company's then existing term asset-backed
securitizations that have been guaranteed by FSA to 11% of the outstanding
principal balance of the receivables in each of such securitizations for the
remaining term of such securitizations; (2) the elimination of all portfolio
performance maintenance requirements that, if otherwise violated, would have
resulted in the trapping of cash flows to over fund such cash spread accounts;
(3) the resetting of the portfolio performance requirements that, if violated,
would constitute a default under the insurance guaranty agreements issued by
FSA, to levels that are commensurate to the Company's expected future portfolio
performance in each of such securitizations; and (4) the waiver of all past
breaches and defaults of portfolio performance requirements, the result of which
is to enable the Company to resume the receipt of excess cash flow under each of
the Company's term asset-backed securitizations that have been guaranteed by
FSA. As a result of amended agreements with FSA entered into on April 7, 1999,
going forward the Company will be subject to only Insurance Agreement default
tests as shown below. The following table shows the performance tests (three
month rolling average) as of September 30, 1999:

<TABLE>
<CAPTION>
                                   Delinquency Test             Default Test             Loss Test
                                ----------------------        -----------------     -------------------
                                Actual       Insurance        Actual  Insurance     Actual    Insurance
                                ------       ---------        ------  ---------     ------    ---------
<S>                             <C>          <C>              <C>     <C>           <C>       <C>
         95-1                   10.18%         12.00%          6.11%    25.00%       6.51%      14.00%
         96-1                   10.76%         12.00%         13.58%    25.00%       6.21%      14.00%
         97-1                   10.60%         12.00%         12.40%    25.00%       3.10%      14.00%
         98-1                    9.87%         12.00%         10.57%    25.00%       4.27%      13.00%
         99-1                    3.86%         12.00%             0%    25.00%        .23%      13.00%
</TABLE>

The Company's right to service the Loans sold in FSA-insured securitizations is
generally subject to the discretion of FSA. Accordingly, there can be no
assurance that the Company will continue as servicer for such Loans and receive
related servicing fees. Additionally, there can be no assurance that there will
not be additional Insurance Agreement Events of Default in the future, or, if
such events of default occur, waivers will be available. If the Company's
Servicing Portfolio does not meet such performance requirements, the future
carrying value of the Company's Retained Interest in Securitizations would be
materially impacted in a negative manner. In addition, any increase in
limitations on cash flow available to the Company from Permanent Securitization
trusts, the Company's inability to obtain any necessary waivers from FSA or the
termination of servicing arrangements could materially adversely affect the
Company's financial condition, results of operations and cash flows. See Note 4
of the Notes to Financial Statements - Comprehensive Financial Restructuring.

Going Concern

      Since 1997, the Company has suffered significant losses from operations
and has a capital deficiency as of September 30, 1999. Such matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in the following
paragraph.

The Company's business requires substantial cash to support the funding of Cash
Spread Accounts for its securitizations, issuance costs of its securitizations,
operating expenses, tax payments, debt service and other cash requirements.
These cash requirements increase as the number of Loans purchased and serviced
by the Company increase. Historically, the Company has operated on a negative
operating cash flow basis and its negative operating cash flow is expected to
continue for the foreseeable future. The Company has funded its negative
operating cash flows principally through borrowings under its secured financing
facilities, issuances of subordinated debt and sales of equity securities.


                                      -21-

<PAGE>   22
As discussed in Note 4 to the Financial Statements - Comprehensive Financial
Restructuring, on April 7, 1999, the Company completed a comprehensive financial
restructuring. As the result of the Restructuring, (1) the Company may pay 50%
of its interest expense on its Senior Subordinated Notes over the two-year
period ending March 31, 2001 by issuing additional Senior Subordinated notes,
thereby reducing its cash requirements, a reduction from $7.1 million in 1998 to
$3.6 million over the four quarters ending March 31, 2000; (2) the Company may
defer all cash interest payments on its Junior Subordinated Notes until January
31, 2002; (3) the Company's receipt of excess cash flows from its first four
Permanent Securitization Trusts insured by FSA and from its Master Trust has
resumed; as of March 31, 1999, the minimum equity position has increased to
19.0% of net serviced receivables relative to the requirements of the
restructure of the Master Trust Facility, and assuming no further Insurance
Agreement Events of Default under certain amended agreements with FSA (which
were amended to reset the portfolio performance requirements to levels that are
commensurate to the Company's expected future portfolio performance in each of
such securitizations), such excess cash flows will continue to be received by
the Company; (as of September 24, 1999, pursuant to amended agreements with FSA
relative to the 99-1 Securitization (See Note 2- Retained Interest in
Securitizations), the minimum equity position has increased to 24%); (4) the
Company will be able to fund a portion of the subordinated credit enhancements
required for its future securitizations through the sale of up to $20 million of
subordinated asset-backed securities to First Union; and (5) the Company may
borrow up to $8 million for working capital purposes under its new two-year
working capital facility with First Union, secured by its ESRs, limited by a
borrowing base formula that currently would let the Company borrow approximately
$4.4 million. Further, the Company's business plan for the next two years
contemplates an increase in overall revenue and cash flow over 1998 through the
gradual but steady increase in loan origination volume, the sale of ancillary
Loan products (such as GAP insurance, which covers exposure to uninsured losses,
and warranty products), the aggressive collection of late fees and deficiency
balances, and increased servicing fees through the servicing of a larger owned
portfolio as well as third-party servicing. Although there can be no assurance
that the Company will successfully execute this business plan, both the
Restructuring and the business plan were designed and implemented to enable the
Company, among other things to increase its cash flow and stabilize its
financial condition. The Company recognizes the need to raise additional capital
and has initiated an effort to pursue this process.

In conjunction with the Company's comprehensive financial restructuring, the
Senior Subordinated Noteholders waived the previously existing Net Worth
Covenant and established the Return on Assets Covenant requiring that, on a
quarterly basis, the Company's net return on assets invested in loan
receivables, expressed as a percentage, exceed pre-established quarterly goals
(the first quarterly measurement period (the "Measurement Period") for such
covenant began as of the quarter ended September 30, 1999). The Company failed
to comply with the Return on Assets Covenant for the Measurement Period ended
September 30, 1999. The Senior Subordinated Noteholders waived compliance with
such covenant for such Measurement Period.

INFLATION

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

YEAR 2000

      The year 2000 issue pertains to whether the Company's or its vendors'
computer systems will properly recognize date sensitive information when the
year changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or fail.

      The Company has implemented a project plan for achieving year 2000
readiness. An inventory of critical hardware and software has been completed and
information technology components were assessed. This assessment included major
suppliers and business partners, however, the Company does not rely on any
single supplier or partner to conduct business. Additionally, the Company
engaged an independent systems firm to evaluate year 2000 readiness. The review
was completed during the three months ended June 30, 1999 and no material
weaknesses were identified in the resulting report issued by the independent
systems' firm. The Company converted its general accounting system to a Y2K
Compliant system during August 1999.


                                      -22-
<PAGE>   23

      The Company presently believes that the year 2000 issue will not pose
operational problems for the Company. However, if systems modifications and
conversions are necessary, and are not made, or are not completed in a timely
manner, the year 2000 issue could have a material impact on the operations of
the Company. In addition, there can be no assurance that unforeseen problems in
the Company's computer systems, or the systems of the third parties on which the
Company rely, would not have an adverse effect on the Company's systems or
operations.


                           PART II - Other Information

ITEM 1. LEGAL PROCEEDINGS

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

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

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

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

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

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


                                      -23-

<PAGE>   24

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

     Litigation is subject to many uncertainties, and it is possible that the
above action could be decided unfavorably. In addition, the Company may enter
into discussions in an attempt to settle the pending litigation if it is in the
best interests of the Company's stockholders to do so. Management is presently
unable to make a meaningful estimate of the amount or range of loss that could
result from an unfavorable outcome or settlement of the pending litigation. It
is possible that the Company's business, volume, results of operations, cash
flows or financial position could be materially affected by an unfavorable
outcome or settlement of the pending litigation.


ITEM 2. CHANGES IN SECURITIES.

    (a) Market Information.

           N/A

    (b) Recent sales of unregistered securities.

     The Progressive Investment Company, Inc. ("Progressive"), PC Investment
Company ("PCI"), an affiliate of Progressive, The 1818 Mezzanine Fund, L.P. (the
"1818 Fund"), The Structured Finance High Yield Fund, LLC ("SFHY"), and
Manufacturers Life Insurance Company (U.S.A.) ("ManuLife") (collectively, the
"Senior Subordinated Noteholders"), may be deemed to have acquired control of
the Company as a result of the issuance to them of an additional aggregate of
8,250,000 shares of Common Stock. (See Note 4 to the Financial Statements -
Comprehensive Financial Restructuring). Following the Restructuring, the Senior
Subordinated Noteholders held of record an aggregate of 10,174,762 shares of the
Company's outstanding Common Stock and beneficially owned an aggregate of
17,155,689 shares of the Company's Common Stock, representing approximately
85.7% of the Company's issued and outstanding Common Stock (assuming the
issuance of stock in respect of certain warrants, options and Convertible Senior
Subordinated Promissory Notes, held by such Senior Subordinated Noteholders).
National Auto Finance Company, L.P., a Delaware limited partnership (the
"Partnership"), by and through National Auto Finance Corporation, the general
partner of the Partnership (the "General Partner") and certain of the
Partnership's limited partners, Nova Financial Corporation, Nova Corporation,
Stephen L. Gurba, Edgar A. Otto and Gary L. Shapiro, as part of the
Restructuring, granted to the Board designees of the Senior Subordinated
Noteholders an irrevocable proxy to vote the 4,230,000 shares of Common Stock
held by the Partnership in all matters as to which such shares are entitled to
vote. Representatives of the Senior Subordinated Noteholders currently
constitute four members of the Company's seven-member Board of Directors.


ITEM 2.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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

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

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

(1)  Amendment to Certificate of Incorporation.


                                      -24-

<PAGE>   25

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

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

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

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

<TABLE>
<CAPTION>
         Class II
     ---------------
<S>                                 <C>                      <C>
     Joseph P. Donlan               11,154,411               53,775
     David W. Young                 11,154,411               53,775
</TABLE>

(3)  AMENDMENT TO THE 1996 SHARE INCENTIVE PLAN.

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

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

(4)  APPOINTMENT OF INDEPENDENT AUDITORS.

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

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

ITEM 5.  OTHER INFORMATION  (NONE.)

ITEM 6.  EXHIBIT AND REPORTS ON FORM 8-K

         (a) Exhibits

<TABLE>
<CAPTION>
             Number      Description                                                            Method of Filing
             ------      -----------                                                        ------------------------
             <S>         <C>                                                                <C>
             3.1-2       (i) Amendment to Company's Certificate of Incorporation            Filed with this document
             11          Computation of Earnings Per Common Share                           Filed with this document
             27          Financial Data Schedule                                            Filed with this document
             99.1        Company's 1996 Share Incentive Plan, as amended.                   Filed with this document
             99.2        Press Release announcing Company's second quarter, 1999 results.   Filed with this document
</TABLE>

         (b) Reports on Form 8-K

             There were no reports filed on Form 8-K during the third quarter of
             1999.


                                      -25-

<PAGE>   26

                                   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.
                                      (Registrant)

Date: November 15, 1999               By: Keith B. Stein
                                          --------------------------------------
                                          Chairman of the Board and
                                          Chief Executive Officer

Date: November 15, 1999               By: Brian Thompson
                                          --------------------------------------
                                          Vice President - Finance and
                                          Accounting, Treasurer


                                      -26-
<PAGE>   27

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION                                                           PAGE
---------      -----------                                                           ----
<S>            <C>                                                                   <C>
3.1-2          (i)  Admendment to the Company's Certificate of Incorporation:        28

11             Computation of Earnings per Share:                                    30

27             Financial Data Schedule:                                              31

99.1           Company's 1996 Share Incentive Plan, as amended:                      32

99.2           Press Release announcing Company's second quarter, 1999 results:      38
</TABLE>


                                      -27-