<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:        DECEMBER 31, 1996
                                           ---------------------------------
                                       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           0-22026
                                     --------------------------

                                 RENT-WAY, INC.
                                 --------------
             (Exact name of registrant as specified in its charter)

              PENNSYLVANIA                              25-1407782
              ------------                              ----------
       (State or other jurisdiction                   (I.R.S. Employer
            of incorporation)                        Identification No.)

                 3230 WEST LAKE ROAD, ERIE, PENNSYLVANIA 16505
                 ---------------------------------------------
                    (Address of principal executive offices)

                                 (814) 836-0618
                                 --------------
                        (Registrant's telephone number)

           Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X     No
    -----      -----

           Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

    CLASS                             OUTSTANDING AS OF DECEMBER 31, 1996
------------                          -----------------------------------
Common Stock                                        6,593,876


<PAGE>   2


                                 RENT-WAY, INC.

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----
<S>        <C>                                                                  <C>
PART I     FINANCIAL INFORMATION
           Item 1.  Financial Statements:

                    Balance Sheets as of December 31, 1996 and
                    September 30, 1996                                             3

                    Statements of Income, Three Months
                    Ended December 31, 1996 and 1995                               4

                    Statements of Cash Flows, Three Months Ended
                    December 31,1996 and 1995                                      5

                    Notes to Financial Statements                                  6

           Item 2.  Management's Discussion and Analysis
                    of Financial Condition and Results of Operations               9

PART II    OTHER INFORMATION
           Item 6.  Exhibits and Reports on Form 8-K                              13

           SIGNATURES
</TABLE>

                                       2

<PAGE>   3

                                 RENT-WAY, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              FOR THE PERIOD ENDED
                                                                                      DECEMBER 31,             SEPTEMBER 30,
                                                                                          1996                     1996
                                                                                       (UNAUDITED)               (AUDITED)
                                                                                       -----------               ---------
<S>                                                                                 <C>                     <C>
ASSETS

Cash                                                                                    $   218,388             $   179,425
Prepaid expenses                                                                          1,668,548               1,266,087
Rental merchandise, net                                                                  21,091,472              17,862,420
Deferred income taxes                                                                     1,473,522               1,473,522
Property and equipment, net                                                               4,890,310               4,616,362
Goodwill, net                                                                            21,774,297              21,866,806
Deferred financing costs, net                                                               590,326                 377,232
Prepaid consulting fee                                                                      997,024               1,041,667
Other assets                                                                              1,511,904               1,290,217
                                                                                        -----------             -----------
        Total assets                                                                    $54,215,791             $49,973,738
                                                                                        ===========             ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                                                                        $ 1,414,894             $ 1,746,797
Other liabilities                                                                         1,678,732               2,181,899
Income taxes payable                                                                      1,261,992               1,226,590
Debt                                                                                     18,213,090              12,979,075
                                                                                        -----------             -----------
        Total liabilities                                                                22,568,708              18,134,361

Commitments and Contingencies                                                                    --                      --

Redeemable preferred stock, Series A, without par value; 
30,000 shares authorized; 11,207 shares issued and
outstanding at September 30, 1996 (See Note 6)                                                   --               1,120,700

SHAREHOLDERS' EQUITY:

Common stock, without par value; 10,000,000 shares
     authorized; 6,593,876 and 6,659,180 shares issued and
     outstanding, respectively                                                           28,187,400              27,907,225
Preferred stock, without par value; 970,000 shares authorized                                    --                      --
Retained earnings                                                                         3,459,683               2,811,452
                                                                                        -----------             -----------
        Total shareholders' equity                                                       31,647,083              30,718,677
                                                                                        -----------             -----------
        Total liabilities and shareholders' equity                                      $54,215,791             $49,973,738
                                                                                        ===========             ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       3

<PAGE>   4

                                 RENT-WAY, INC.

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                           FOR THE THREE MONTHS ENDED
                                                                                                  DECEMBER 31,

                                                                                           1996                    1995
                                                                                       (UNAUDITED)             (UNAUDITED)
                                                                                       -----------             -----------
<S>                                                                                 <C>                     <C>
REVENUES:
Rental revenue                                                                          $13,689,843             $10,185,217
Other revenue                                                                             1,974,055               1,628,827
                                                                                        -----------             -----------
       Total revenues                                                                    15,663,898              11,814,044

COSTS AND OPERATING EXPENSES:
Depreciation and amortization:
    Rental merchandise                                                                    3,700,681               3,079,532
    Property and equipment                                                                  276,125                 167,189
    Amortization of goodwill                                                                306,212                 224,495
Salaries and wages                                                                        4,368,970               2,932,086
Advertising                                                                                 823,374                 609,133
Occupancy                                                                                 1,034,984                 797,342
Other operating expenses                                                                  3,016,066               2,504,280
                                                                                        -----------             -----------
        Total costs and operating expenses                                               13,526,412              10,314,057
                                                                                        -----------             -----------

        Operating income                                                                  2,137,486               1,499,987

OTHER INCOME (EXPENSE):
Interest expense                                                                           (375,496)               (515,151)
Interest income                                                                                 505                  16,770
Other expense, net                                                                           (2,071)                 (1,563)
                                                                                        -----------             -----------
       Income before income taxes and extraordinary item                                  1,760,424               1,000,043

Income tax expense                                                                          811,033                 460,020
                                                                                        -----------             -----------

       Income before extraordinary item                                                     949,391                 540,023

Extraordinary item                                                                         (269,017)                     --
                                                                                        -----------             -----------

       Net income                                                                           680,374                 540,023

Redeemable preferred stock, gain on redemption (dividends)                                  280,175                 (48,521)
                                                                                        -----------             -----------

       Earnings applicable to common shares                                             $   960,549             $   491,502
                                                                                        ===========             ===========
EARNINGS PER COMMON SHARE (NOTE 2):
       Primary                                                                          $      0.14             $      0.10
                                                                                        ===========             ===========
       Fully diluted                                                                    $      0.14             $      0.10
                                                                                        ===========             ===========

Weighted average number of shares outstanding:
       Primary                                                                            7,026,327               4,828,503
                                                                                        ===========             ===========

       Fully diluted                                                                      7,026,327               4,828,503
                                                                                        ===========             ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       4

<PAGE>   5

                                 RENT-WAY, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           FOR THE THREE MONTHS ENDED
                                                                                                  DECEMBER 31,

                                                                                           1996                   1995
                                                                                       (UNAUDITED)             (UNAUDITED)
                                                                                       -----------             ----------- 
<S>                                                                                 <C>                     <C>
OPERATING ACTIVITIES:
Net income                                                                              $   680,374             $   540,023
Adjustments to reconcile net income
to net cash (used in) operating activities:

    Depreciation and amortization                                                         4,283,018               3,471,216
    Deferred income taxes                                                                        --                 (10,000)
    Extraordinary item                                                                      269,017                      --
Changes in assets and liabilities:
    Prepaid expenses                                                                       (402,461)                101,439
    Rental merchandise                                                                   (6,929,733)             (5,680,072)
    Prepaid consulting fees                                                                  44,643                  44,428
    Other assets                                                                           (221,687)                 98,793
    Accounts payable                                                                       (331,903)               (265,311)
    Income taxes payable                                                                    214,747                 424,226
    Other current liabilities                                                              (503,167)               (121,385)
                                                                                        -----------             -----------
                  Net cash (used in) operating activities                                (2,897,152)             (1,396,643)

INVESTING ACTIVITIES:
    Purchase of businesses                                                                 (213,703)               (124,326)
    Purchases of property and equipment                                                    (550,073)               (650,313)
                                                                                        -----------             -----------
                  Net cash (used in) investing activities                                  (763,776)               (774,639)

FINANCING ACTIVITIES:
    Principal payments on capital lease obligation                                               --                 (10,787)
    Proceeds from borrowings                                                             13,177,032               1,794,60
    Payments on borrowings including early extinguishment                                (8,067,607)               (325,618)
    Deferred finance costs                                                                 (536,866)                     --
    Redeemable preferred stock dividend                                                     (32,143)                (37,431)
    Redeemable preferred stock redemption                                                  (840,525)                     --
    Loan to related party                                                                        --                  (8,033)
                                                                                        -----------             -----------
                  Net cash provided by financing activities                               3,699,891               1,412,740
                                                                                        -----------             -----------
                  Increase (decrease) in cash                                                38,963                (758,542)

Cash at beginning of period                                                                 179,425                 959,721
                                                                                        -----------             -----------

Cash at end of period                                                                   $   218,388             $   201,179
                                                                                        ===========             ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for:
        Interest                                                                        $   302,007             $   460,752
       Income taxes                                                                              --             $    45,175
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       5

<PAGE>   6

                                 RENT-WAY, INC.

                         NOTES TO FINANCIAL STATEMENTS

                                  (unaudited)

1.    BASIS OF PRESENTATION:

      Rent-Way, Inc., (the "Company" or "Rent-Way") is a corporation organized
      under the laws of the Commonwealth of Pennsylvania. The Company operates
      a chain of rental-purchase stores that rent durable household products
      such as home entertainment equipment, furniture, and major appliances and
      jewelry to consumers on a weekly or monthly basis. The accompanying
      unaudited condensed financial statements have been prepared in accordance
      with the instructions to Form 10-Q, and therefore, do not include all
      information and notes necessary for a fair presentation of financial
      position, results of operations and cash flows in conformity with
      generally accepted accounting principles. In the opinion of management,
      all adjustments (consisting solely of normal recurring adjustments),
      which are necessary for a fair statement of the financial position,
      results of operations and cash flows of the Company have been made. The
      results of operations for the interim periods are not necessarily
      indicative of the results for the full year.

      Certain amounts in the 1995 financial statements have been reclassified to
      conform to the 1996 presentation. As a result of meeting specified
      criteria the Company is now filing under regulation S-K, where previously
      it had been reporting under regulation S-B.

      These financial statements and the notes thereto should be read in
      conjunction with the Company's audited financial statements included in
      its Annual Report on Form 10-KSB for the fiscal year ended September 30,
      1996.

2.    EARNINGS PER COMMON SHARE:

      Primary and fully diluted earnings per common share are computed based on
      net income after preferred stock dividend requirements and the redemption
      of redeemable preferred stock on a discounted basis. The weighted average
      number of common shares outstanding during each period is adjusted to give
      effect to stock options and warrants considered to be dilutive common
      stock equivalents. Additionally, fully diluted weighted average number of
      shares outstanding are adjusted to give effect to convertible debt deemed
      to be another potentially dilutive security.

3.    ACQUISITIONS:

      On July 25, 1996 the Company acquired all the outstanding shares of
      Diamond Leasing Corporation ("DLC"); a chain of 11 rental-purchase
      stores operating in Delaware, Maryland and Pennsylvania with annual
      revenues of approximately $7.0 million in exchange for consideration
      consisting of 20,358 (unregistered shares subject to the provisions of
      Rule 144 of the Securities and Exchange Act) shares of the Company's
      common stock and $4,102,296 in cash. Pursuant to the terms of the
      acquisition, $325,000 of the purchase price was placed in escrow subject
      to the terms of the escrow agreement. The escrow agreement provides that
      $175,000 will be held pending completion of a financial audit of DLC and
      $150,000 will be held for a three year period from the date of closing.
      The acquisition was accounted for using the purchase method of
      accounting. DLC's assets and liabilities were recorded at their
      estimated fair values as of the acquisition date. The fair values of
      rental merchandise and certain liabilities, and the final purchase price
      will be finalized upon the completion of certain additional procedures.
      The excess of the acquisition costs over the fair value of the assets
      acquired ("goodwill") of $4,440,715 is being amortized on a
      straight-line basis over twenty years. The total cost of the net assets
      acquired was $4,289,796 ($187,500 in common stock and $4,102,296 in
      cash) and consisted of assets of $7,253,619 less liabilities assumed of
      $2,363,136 and acquisition costs of $600,687. Assets acquired (at
      estimated fair value) other than goodwill consisted principally of
      rental merchandise of $1,359,808, property and equipment of $310,850,
      non-compete agreements of $300,000 and deferred tax assets of $744,808.
      Liabilities assumed (at estimated fair value) consisted principally of
      trade accounts payable of $582,693 and bank debt of $1,446,238. The
      Statement of Income for the three months ended December 31, 1996
      includes the operations of DLC for the entire period.

<PAGE>   7
                                 RENT-WAY, INC.

                   NOTES TO FINANCIAL STATEMENTS, (Continued)

                                        (unaudited)

3.    ACQUISITIONS, Continued

      During fiscal year 1996, the Company also purchased from 5 separate
      entities the rental merchandise and contracts of 21 stores in Maryland,
      New York, Pennsylvania, Virginia and the District of Columbia with
      combined annual revenues of approximately $4.2 million. The Company paid
      cash in exchange for such assets and each acquisition was recorded using
      the purchase method of accounting. The acquired assets were recorded at
      their estimated fair value at the date of acquisition. The excess of the
      purchase price over the fair value of the assets acquired ("goodwill") of
      $3,041,984 is being amortized on a straight line basis over twenty years.
      The total cost of the net assets acquired was $3,763,250 and consisted of
      assets of $3,906,984 less liabilities assumed of $44,814 and acquisition
      costs of $98,920. The Statement of Income for the three months ended
      December 31, 1996 includes the operating results for these stores for the
      entire period.

      On July 21, 1995, the Company acquired McKenzie Leasing Corporation
      ("MLC"), a privately owned 45 store rental-purchase chain with annual
      revenues of approximately $22.0 million. The Company acquired all of the
      common stock of MLC in exchange for 581,688 (unregistered shares subject
      to the provisions of Rule 144 of the Securities and Exchange Act and a
      shareholder agreement) shares of the Company's common stock, a stock
      option to purchase 115,812 shares of the Company's common stock at $9.28
      per share and $2,750,000 of redeemable preferred stock. The 115,812 stock
      options are 100% exercisable and expire five years from the date of
      grant.  Of the common stock issued, 356,688 shares were delivered to the
      former shareholders of MLC and 225,000 were placed in escrow. In October
      1996, 65,657 of the escrowed shares were returned to the Company and
      159,343 were released to the former MLC shareholders. The allocation of
      the shares released from escrow was based on the daily average market
      price of $13.08 per share for the twenty trading days preceding October
      1, 1996. The acquisition was accounted for using the purchase method of
      accounting.  MLC's assets and liabilities were recorded at their
      estimated fair values as of the acquisition date. The excess of the
      acquisition cost over the fair value of the net liabilities assumed
      ("goodwill") of $11,113,233 is being amortized on a straight-line basis
      over twenty years. The total cost of the net assets acquired was
      $6,469,293 ($3,684,024 in common stock and $2,750,000 in redeemable
      preferred stock and $35,269 in cash) and consisted of assets of
      $16,670,501 less liabilities assumed of $8,726,921 and acquisition
      expenses of $1,474,287. The estimate of the total cost of the acquisition
      may be adjusted based on the resolution of certain contingencies.

4.    CONTINGENCIES:

      The Company is subject to legal proceedings and claims in the ordinary
      course of its business that have not been finally adjudicated. Certain
      of these cases have resulted in contingent liabilities ranging from
      $500,000 to $2,530,000. The majority of such claims are, in the opinion
      of management, covered by insurance policies and therefore should not
      have a material effect on the results of operations or financial
      position of the Company.

      Additional claims exist in the range of $765,475 to $3,390,000 for
      which management believes it has meritorious defenses but for which the
      likelihood of an unfavorable outcome is currently not determinable. In
      management's opinion, each of these claims will either be indemnified
      by the former shareholders of MLC or covered by insurance policies and
      therefore will not have a material effect on the results of operations
      or financial condition of the Company.


                                       7

<PAGE>   8

                                 RENT-WAY, INC.

                   NOTES TO FINANCIAL STATEMENTS, (Continued)

                                  (unaudited)

5.      DEBT:

        On November 22, 1996, the Company entered into a new collateralized
        revolving credit facility (the "new facility") with a syndicate of
        banks led by National City Bank of Pennsylvania, providing for loans or
        letters of credit up to $40.0 million. The syndicate is composed of
        four banks, with National City Bank of Pennsylvania, LaSalle National
        Bank, and Harris Trust and Savings Bank committed for an equal ratable
        share of 27.25%, of the loans made under the new facility and Heller
        Financial, Inc. committed for an 18.25% ratable share. The new facility
        replaces the Company's prior $15.0 million Secured Credit Agreement
        with First Source Financial LLP. Of the $40.0 million available under
        the new facility, approximately $7.0 million was used to refinance
        existing senior indebtedness with the balance available for store
        acquisitions.  The new facility expires on November 22, 1999.

        Under the new facility the Company may borrow funds at either the
        prime-rate plus 0.5% or the euro-rate plus 2.75%. Borrowings under the
        euro-rate option require the Company to select a fixed interest period
        during which the euro-rate is applicable with the borrowed amount not
        to be repaid prior to the last day of the selected interest period. In
        addition, borrowing tranche's under the euro-rate option must be in
        integral multiples of $250,000 and not less than $1,000,000 in total.
        Commitment fees associated with the new facility are equal to 0.25% per
        annum on each banks' committed amount.

        The new credit facility requires the Company to meet certain financial
        covenants and ratios including maximum leverage, minimum interest
        coverage and minimum tangible net worth ratios. In addition, the
        Company must meet requirements regarding monthly, quarterly and annual
        financial reporting. The new facility also contains covenants which
        restrict the actions of the Company with respect to the payment of
        dividends, acquisitions, mergers, disposition of assets or
        subsidiaries, issuance of capital stock and capital expenditures. The
        Company may at any time repay outstanding borrowings, in whole or part,
        without premium or penalty, except with respect to restrictions
        identified above in connection with the selection of the euro-rate
        interest option. As of December 31, 1996 the Company was in compliance
        with the covenants contained in the new facility.

        As a result of the refinancing the Company incurred an extraordinary
        loss, net of tax benefit, of $269,017. The extraordinary loss was
        composed of a $124,590 ($74,754 net of tax benefit) prepayment penalty
        for early retirement of debt and a $323,772 ($194,263 net of tax
        benefit) write-off of deferred financing costs associated with the
        refinanced debt.

6.      REDEEMABLE PREFERRED STOCK:

        On November 26, 1996, the Company redeemed the remaining shares of its
        Series A Redeemable Preferred Stock issued in connection with the
        acquisition of MLC. At the time of redemption there were 11,207
        outstanding shares with a face amount of $100 per share. These shares
        were redeemed at a twenty-five percent discount for an aggregate
        purchase price of $840,525.

7.      SUBSEQUENT EVENTS:

        On January 2, 1997, the Company signed a Stock Purchase Agreement and
        acquired Bill Coleman T.V., Inc., a privately-owned 15-store
        rental-purchase chain in Michigan. The Company paid approximately $6.0
        million in cash, and an option to purchase 25,000 shares of the
        Company's common stock at an exercise price of $8.875, with $350,000
        placed in an escrow account as a source of payment for seller's
        breaches of representations and warranties and final purchase price
        adjustments.  The acquisition considerably strengthens the Company's
        penetration in Michigan from seven to twenty-two stores, and is in line
        with the Company's strategy to cluster stores in selected markets.


                                       8

<PAGE>   9
                                 RENT-WAY, INC.

ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

GENERAL

During the three month period ended December 31, 1996, the Company generated
record revenues, operating income and income before the effect of an
extraordinary item. The Company's total revenues increased by 32.6% compared to
the same three month period last year. Operating income and income before the
effect of an extraordinary item increased by 42.5% and 75.8%, respectively, when
compared to the same three month period last year. The increase in revenue,
operating income and net income are primarily due to acquisitions made during
fiscal 1996, improved same store operating profits, including stores acquired
from MLC and a reduction in certain expenses resulting from economies of scale.

During the three months ended December 31, 1996, the Company took steps to
support it's acquisition strategy by obtaining a new collateralized revolving
credit facility. In November 1996, the Company secured a $40.0 million
collateralized revolving credit facility from a syndicate of banks led by
National city Bank of Pennsylvania. Of the total facility, approximately $7.0
million was used to refinance existing senior debt with the remainder of such
facility available for future store acquisitions. As a result of the
refinancing, the Company incurred an extraordinary loss, net of tax benefit, of
$269,017. The extraordinary item is composed of a pre-payment penalty resulting
from the early extinguishment of debt and the write-off of deferred finance
costs associated with the refinanced debt. Also in connection with the
refinancing, the Company redeemed the remainder of its Series A Redeemable
Preferred Stock. The Company redeemed the preferred stock at a 25% discount to
face value resulting in a gain of $280,175. As a result of these adjustments,
earnings applicable to common shares increased 95.4% to $960,549 from $491,502
compared to the same period last year.

On January 2, 1997, the Company signed a Stock Purchase Agreement and acquired
Bill Coleman T.V., Inc., a privately-owned 15-store rental-purchase chain in
Michigan. The Company paid approximately $6.0 million in cash and an option to
purchase 25,000 shares of the Company's common stock at an exercise price of
$8.875, with $350,000 placed in an escrow account as a source of payment for
seller's breaches of representations and warranties and final purchase price
adjustments. The acquisition considerably strengthens the Company's penetration
in Michigan from seven to twenty-two stores, and is in line with the Company's
strategy to cluster stores in selected markets.

Management is actively seeking merger and acquisition candidates with financial
and geographic profiles consistent with the Company's growth objectives.


                                       9
<PAGE>   10

                                 RENT-WAY, INC.

ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS, (Continued)

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items from
the Company's unaudited Statements of Income, expressed as a percentage of
revenues.

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                             DECEMBER 31,

                                                                           1996           1995
                                                                           ----           ----     
<S>                                                                       <C>             <C>
Revenues:
  Rental revenue                                                           87.4%           86.2%
  Other revenue                                                            12.6            13.8
                                                                          -----           -----
     Total revenues                                                       100.0           100.0

Costs and operating expenses:
  Depreciation and amortization:
     Rental merchandise                                                    23.6            26.1
     Property and equipment                                                 1.8             1.4
     Amortization of goodwill                                               2.0             1.9
                                                                          -----           -----
         Total depreciation and amortization                               27.4            29.4

  Salaries and wages                                                       27.9            24.8
  Advertising                                                               5.3             5.2
  Occupancy                                                                 6.6             6.7
  Other operating expenses                                                 19.2            21.2
                                                                          -----           -----
         Total costs and operating expenses                                86.4            87.3

   Operating income                                                        13.6            12.7

   Interest expense                                                        (2.4)           (4.4)
   Other Income                                                              --              .2
                                                                          -----           -----

   Income before income taxes and extraordinary item                       11.2             8.5

   Income tax expense                                                      (5.2)           (3.9)
                                                                          -----           -----

   Income before extraordinary item                                         6.0             4.6

   Extraordinary item                                                      (1.7)             --
                                                                          -----           -----

   Net income                                                               4.3             4.6

   Redeemable preferred stock, gain on redemption (dividends)               1.8            (0.4)
                                                                          -----           -----

   Earnings applicable to common shares                                     6.1%            4.2%
                                                                          =====           =====
</TABLE>

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, total revenues increased by $3.9 million (32.6%) to $15.7
million from $11.8 million. The increase was principally due to the inclusion
of the results for the stores acquired during fiscal 1996. The stores acquired
in 1996 accounted for $3.3 million (84.6%) of the increase while the Company's
same stores accounted for $0.6 million (15.4%) of the increase. Other revenue
increased by $0.4 million (21.2%) to $2.0 million from $1.6 million principally
due to stores acquired in 1996.

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, total costs and operating expenses increased to $13.5
million from $10.3 million primarily as a result of the costs and operating
expenses associated with stores acquired in 1996, but decreased to 86.4% from
87.3% of total revenues. This decrease of 0.9% resulted primarily from a 2.0%
decrease in depreciation and amortization as a


                                       10

<PAGE>   11

                                 RENT-WAY, INC.

ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS, (Continued)

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995, Continued

percentage of total revenues, a 0.1% decrease in occupancy as a percentage of
total revenues and a 2.0% decrease in other operating expenses as a percentage
of total revenues. Depreciation expense related to rental merchandise increased
by $0.6 million to $3.7 million from $3.1 million, but decreased by 2.5% as a
percentage of total revenues primarily due to increases in weekly rental rates,
lower purchase costs of rental merchandise due to increasing volume, and
improvements in the realization of potential collectible rental revenue.
Amortization of goodwill increased by $0.1 million primarily because of the
increase in goodwill related to stores acquired in 1996. Salaries and wages
increased by $1.5 million to $4.4 million from $2.9 million principally due to
the addition of twenty-six new locations, an increase in same store payroll, up
grades in the regional manager position, and an overall strengthening of
corporate personnel. The twenty-six locations from recent acquisitions produced
additional payroll cost of approximately $0.9 million for the three month
period. Same store payroll increased $0.3 million as compared to the same
quarter last year. The upgrade in the regional manager position and the
strengthening of corporate personnel were responsible for an increase during
the three month period of approximately $0.2 million and $0.1 million,
respectively.  Salaries and wages were 27.9% and 24.8% of total revenues for
the three months ended December 31, 1996 and 1995, respectively. The Company,
in anticipation of future growth, has strengthened store and regional personnel
by upgrading with managers who have extensive multi-unit experience. In
addition to this upgrade, the increase in salaries and wages in relation to
total revenues was primarily due to the increase in staffing levels in the
McKenzie stores, the twenty-six stores acquired this year having a lower
average revenue base than existing Rent-Way stores, and a fewer number of
stores per regional manager added from current year acquisitions. Advertising
expense increased $0.2 million or 0.1% as a percentage of total revenues to
$0.8 million from $0.6 million principally due to the addition of the stores
acquired in 1996. Occupancy expense increased $0.2 million to $1.0 million from
$0.8 million principally due to the addition of the stores acquired in 1996,
but decreased to 6.6% from 6.7% of total revenues.  Other operating expenses
increased $0.5 million to $3.0 million from $2.5 million principally due to the
addition of the stores acquired in 1996, but decreased to 19.2% from 21.2% of
total revenues. This 2.0% decrease occurred because of the Company's ability to
allocate corporate costs and certain overhead costs over a greater number of
stores and increased revenues.

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, operating income increased by $0.6 million (42.5%) to $2.1
million from $1.5 million , and increased to 13.6% from 12.7% of total
revenues.  The improvement in operating income was principally due to the
stores acquired in 1996 and the factors discussed above.

For the three months ended December 31, 1996 compared to the three months ended
1995, interest expense decreased by $0.1 million to $0.4 million from $0.5
million. In addition, interest expense decreased to 2.4% from 4.4% of total
revenues. This decrease was principally due to the repayment of approximately
$13.2 million of outstanding senior debt with funds from the Company's public
stock offering in March 1996, and lower interest rates associated with the new
collateralized revolving credit facility obtained in November 1996 (See Note 5
to the Financial Statements).

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, income tax expense increased to $0.8 million from $0.5
million because the Company generated greater taxable income. The Company is
accruing income tax expense based on an effective tax rate of 46%, which is
higher than the statutory tax rates, because amortization expense related to
goodwill incurred in connection with its acquisitions is not deductible for
purposes of computing income tax.

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, net income increased by $0.2 million (26.0%) to $0.7 million
from $0.5 million. The increase, was due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

On November 22, 1996, the Company entered into a new collateralized revolving
credit facility (the "new facility") with a syndicate of banks led by National
City Bank of Pennsylvania, providing for loans or letters of credit up to $40.0
million. The syndicate is comprised of four banks, with National City Bank of
Pennsylvania, LaSalle National Bank, and Harris Trust and Savings Bank
committed for an equal ratable share of 27.25%, and Heller Financial, Inc.
committed for an 18.25% ratable share. This agreement replaces the existing
$15.0 million Secured Credit Agreement with First Source Financial LLP. Of the
$40.0 million, approximately $7.0 million was used to refinance existing senior
indebtedness with the balance available for store acquisitions. The agreement
expires on November 22, 1999. As of December 31, 1996, the Company had
approximately $10.0 million of availability under its working capital loan
commitment.


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<PAGE>   12


                                 RENT-WAY, INC.

ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS, (Continued)

LIQUIDITY AND CAPITAL RESOURCES, Continued

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, the Company's net cash used in operating activities
increased to $2.9 million from $1.4 million. This increase was principally due
to a $1.2 million increase in rental merchandise purchases, a $0.5 million
increase in prepaid assets and a $0.4 million increase in current liabilities,
offset by increases in non-cash amortization and depreciation. The increase in
depreciation, amortization, and rental merchandise purchases resulted primarily
from the stores acquired in 1996.

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, the Company's net cash used in investing activities remained 
stable at $0.8 million.

For the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, the Company's net cash provided by financing activities
increased to $3.7 million from $1.4 million. The increase in net cash provided
by financing activities was principally due to increased borrowings on the
Company's credit facilities.

INFLATION

During the three months ended December 31, 1996, the cost of rental
merchandise, lease rental expense and salaries and wages have increased
modestly. These increases have not had a significant effect on the results of
operations because the Company has been able to charge commensurably higher
rental for its merchandise. This trend is expected to continue in the
foreseeable future.

OTHER MATTERS

In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 -
"Accounting for Stock-based Compensation" effective for transactions entered
into after December 15, 1995. The Company intends on adopting this Standard's
disclosure-only provisions in fiscal 1996. Management does not believe the
adoption of this standard will have a significant impact on the financial
statements of the Company.

CAUTIONARY STATEMENT

This Report on Form 10-Q and the foregoing Management's Discussion and Analysis
of Financial Condition and Results of Operations contains various "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements represent the Company's expectations or
beliefs concerning future events. Any forward-looking statements made by or on
behalf of the Company are subject to uncertainties and other factors that could
cause actual results to differ materially from such statements. These
uncertainties and other factors include, but are not limited to, (i) the
ability of the Company to acquire additional rental-purchase stores on
favorable terms, (ii) the ability of the Company to improve the performance of
such acquired stores and to integrate such acquired stores into the Company's
operations, and (iii) the impact of state and federal laws regulating or
otherwise affecting the rental-purchase transaction.

Undo reliance should not be placed on any forward-looking statements made by or
on behalf of the Company as such statements speak only as of the date made. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, the
occurrence of future events or otherwise.


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<PAGE>   13

                                 RENT-WAY, INC.

                           PART II OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     A.   EXHIBITS

          The Exhibits filed as part of this report are listed below.

              EXHIBIT NO.       DESCRIPTION
              -----------       -----------
                  11            Computation of Net Income per Common Share.

                  27            Financial Data Schedule.

     B.   REPORTS ON FORM 8-K

              None

                                   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.


      1/16/97                  /s/ JEFFREY A. CONWAY
------------------------       ------------------------------------
Date                           Jeffrey A. Conway
                               Vice President and Chief Financial Officer
                               (Principal Financial and Accounting Officer
                               and Duly Authorized Officer)


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