<PAGE>

                   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, 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 333-06585

                         CROSS-CONTINENT AUTO RETAILERS, INC.
                (Exact name of registrant as specified in its charter)

            DELAWARE                                      75-2653095
(State or other jurisdiction of                          (IRS Employer
 incorporation or organization)                       Identification No.)

            1201 S. TAYLOR
            AMARILLO, TEXAS                                  79101
(Address of principal executive offices)                   (Zip Code)

                                    (806) 374-8653
                 (Registrant's telephone number, including area code)

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     .   No  X  .
                                        ---        ---

Number of shares outstanding of each of the issuer's classes of common stock, as
of November 13, 1996.

          Class                                Shares Outstanding
    ---------------------                 ------------------------------
      $.01 Par Value                               13,800,000



                                        1


<PAGE>


                         CROSS-CONTINENT AUTO RETAILERS, INC.

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (IN THOUSANDS)
                                     (UNAUDITED)

<TABLE>
                                             THREE MONTHS ENDED        NINE MONTHS ENDED
                                                SEPTEMBER 30,            SEPTEMBER 30,
                                           --------------------    ---------------------
                                             1996        1995        1996         1995
                                           -------      -------    -------       -------

<S>                                        <C>        <C>          <C>        <C>      
Revenues:
    Vehicle sales                          $ 66,987   $ 57,537     $192,888    $159,001
    Other operating revenue                   9,595      6,281       24,936      16,843
                                           --------   --------     --------    --------
       Total revenues                        76,582     63,818      217,824     175,844
                                           --------   --------     --------    --------

Cost and expenses: 
    Cost of sales                            64,528     53,374      184,449     147,845
    Selling, general and administrative       8,315      6,685       24,010      18,323
    Depreciation and amortization               272        240          821         712
    Management fees paid to related party         -      1,393            -       3,548
    Employee stock compensation                   -          -        1,099           -
                                           --------   --------     --------    --------
       Total cost and expenses               73,115     61,692      210,379     170,428
                                           --------   --------     --------    --------
                                              3,467      2,126        7,445       5,416

Other income (expense):
    Interest income                             197        206          724         612
    Interest expense                         (1,068)      (955)      (3,318)     (2,888)
                                           --------   --------     --------    --------
    Income before income taxes                2,596      1,377        4,851       3,140
    Income tax provision                        961        515        2,186       1,174
                                           --------   --------     --------    --------
       Net income                          $  1,635   $    862     $  2,665    $  1,966
                                           --------   --------     --------    --------
                                           --------   --------     --------    --------
</TABLE>

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

                                       2

<PAGE>

                         CROSS-CONTINENT AUTO RETAILERS, INC.

                             CONSOLIDATED BALANCE SHEETS
                                    (IN THOUSANDS)
                                     (UNAUDITED)


                                        ASSETS

                                           SEPTEMBER 30, 1996   DECEMBER 31,1995
                                           ------------------   ----------------
Current assets:                             
    Cash and cash equivalents                   $  53,482           $ 8,362
    Accounts receivable                            10,758             9,383
    Inventories                                    39,825            43,731
                                                ---------           -------
       Total current assets                       104,065            61,476
Property and equipment, at cost, less           
 accumulated depreciation                          12,209            12,107
Goodwill, net                                       7,286             7,385
Other assets                                        2,833             2,439
                                                ---------           -------
       Total assets                             $ 126,393           $83,407
                                                ---------           -------
                                                ---------           -------
                                            
                                            
                         LIABILITIES AND STOCKHOLDERS' EQUITY
                                            
Current Liabilities:
    Floor plan notes payable                    $  35,530          $ 39,088
    Current maturities of long-term debt            1,345             1,525
    Accounts payable                                3,982             4,846
    Due to affiliates                               4,746             5,954
    Accrued expenses and other liabilities          8,081             7,495
    Deferred income taxes                           2,032             2,032
                                                ---------           -------
       Total current liabilities                   55,716            60,940

Long-term debt                                     10,730            11,859
Deferred warranty revenue - long-term portion       3,264             3,507
                                                ---------           -------
       Total long-term liabilities                 13,994            15,366

Stockholders' equity:
    Preferred stock, $.01 par value, 10,000,000 
     shares authorized, none issued                  -                 -
    Common stock, $.01 par value, 100,000,000 
     shares authorized, 13,800,000 issued and 
     outstanding                                      138              -
    Paid-in capital                                47,843             1,064
    Retained earnings                               8,702             6,037
                                                ---------           -------
       Total stockholders' equity                  56,683             7,101
                                                ---------           -------

Commitments and contingencies   

       Total liabilities and stockholders'
        equity                                  $ 126,393           $83,407
                                                ---------           -------
                                                ---------           -------


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

                                         3


<PAGE>

                         CROSS-CONTINENT AUTO RETAILERS, INC.

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (IN THOUSANDS)
                                     (UNAUDITED)

                                                      NINE MONTHS ENDED
                                                        SEPTEMBER 30,
                                                    ---------------------
                                                     1996           1995
                                                    -------        ------

Cash flows from operating activities:
    Net income                                      $ 2,665       $ 1,966
    Adjustments to reconcile net income to net 
     cash provided by operating activities:
    Depreciation and amortization                       821           712
    Proceeds from extended warranty sales             1,683         2,492
    Amortization of deferred warranty revenue        (1,819)       (1,592)
    Employee stock compensation                       1,099           -
(Increase) decrease in:
    Accounts receivable                              (1,375)       (2,508)
    Inventory                                         3,906        (3,217)
    Other assets                                       (394)         (382)
Increase (decrease) in:
    Accounts payable - trade                           (864)        1,577
    Accrued expenses and other liabilities              479         3,035
                                                    --------      -------
       Net cash provided by operating activities      6,201         2,083

Cash flows from investing activities:
    Acquisition of property and equipment              (824)         (239)
                                                    --------      -------
       Net cash used by investing activities           (824)         (239)

Cash flows from financing activities:
    Change in floor plan notes payable               (3,558)        1,945
    Due to affiliates                                (1,208)        1,742
    Long-term debt repayments                        (1,309)       (1,243)
    Proceeds from common stock issuance              45,818           -   
                                                    --------      -------
       Net cash provided by financing activities     39,743         2,444

Increase in cash and cash equivalents                45,120         4,288
Cash and cash equivalents at beginning of period      8,362         5,001
                                                    --------      -------

Cash and cash equivalents at end of period          $53,482       $ 9,289
                                                    --------      -------
                                                    --------      -------



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

                                       4

<PAGE>

                      CROSS-CONTINENT AUTO RETAILERS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 1996


NOTE 1.  UNAUDITED INTERIM FINANCIAL INFORMATION

    The accompanying unaudited consolidated financial statements have been 
prepared in accordance with the instructions to Form 10-Q and do not include 
all of the information and footnotes required by generally accepted 
accounting principles for complete financial statements.  In the opinion of 
management, all adjustments (consisting of normal recurring accruals) 
considered necessary for a fair presentation have been included.  Operating 
results for the nine months ended September 30, 1996 are not necessarily 
indicative of the results that may be expected for the year ending December 
31, 1996.  This interim report should be read in conjunction with the 
consolidated financial statements and notes related thereto, included in 
Cross-Continent Auto Retailer, Inc.'s ("C-CAR" or the "Company") Form S-1 
(registration no. 333-06585) filed with the Securities and Exchange 
Commission (the "Commission") on August 30, 1996, as supplemented by the 
prospectus dated September 23, 1996, filed with the Commission pursuant to 
Rule 424(b) under the Securities Act of 1933, as amended.

NOTE 2.  INITIAL PUBLIC OFFERING

    In September 1996, the Company sold 3,675,000 shares of its common stock 
in an initial public offering for $14.00 per share (the "Offering").  Net 
proceeds from the Offering, after considering underwriting commissions, 
printing costs, professional fees, and other direct expenses, were $45.6 
million.

NOTE 3.  NET INCOME PER COMMON SHARE

    Earnings per share data are not presented because the historical capital 
structure prior to the Company's Offering is not comparable to the capital 
structure existing after the Offering.  Giving effect to the Offering as if 
it had been consummated on January 1, 1996 and January 1, 1995, respectively, 
the pro forma earnings per share would have been $.13 and $.14 for the three 
months ended September 30, 1996 and 1995, respectively, and $.22 and $.34 for 
the nine months ended September 30, 1996 and 1995, respectively.  The 
adjustments to arrive at pro forma net income include estimated additional 
administrative expense which would have been incurred by the Company as a 
stand-alone publicly owned company, the elimination of the management fees 
paid in 1995 and reduced interest expense due to the use of proceeds to 
retire floor plan debt, net of applicable income tax benefit.  Pro forma 
earnings per share are based on the assumption that 13,800,000 shares are 
outstanding for each period.

NOTE 4.  ACQUISITION OF LYNN HICKEY DODGE

    Effective October 1, 1996, the Company acquired the automobile dealership 
assets of Lynn Hickey Dodge, Inc. in Oklahoma City, Oklahoma.  The dealership 
is engaged in the retail sales of new and used vehicles, retail and wholesale 
of replacement parts, and vehicle servicing.   The dealership will continue 
to operate under the name of Lynn Hickey Dodge ("Hickey Dodge").  The 
purchase price of approximately $14 million was funded with cash proceeds 
from the Offering.  The acquisition will be accounted for under the purchase 
method and the operating results of  Hickey Dodge will be included in the 
Company's consolidated statement of operations beginning October 1, 1996.

                                       5
<PAGE>

    The Company's consolidated revenues and net income for the nine months 
ended September 30, 1996 are presented below on a pro forma basis as though 
Hickey Dodge had been acquired and the Offering had occurred (see note 3) as 
of January 1, 1996 (in thousands, except per share data):

    Total revenue                $318,071
    Net income                   $  5,400
    Net income per share         $    .39

These pro forma amounts are not necessarily indicative of the operating 
results that would have occurred had the acquisition been consummated as of 
the beginning of 1996, nor are they necessarily indicative of future results. 
The estimated pro forma impact on the balance sheet would be to increase 
inventory and floor plan by $13.7 million and $8.4 million, respectively, 
property and equipment by $.4 million and goodwill by $13.2 million.

NOTE 5.  RELATED PARTY TRANSACTIONS

    The Company received services provided by Gilliland Group Family 
Partnership ("GGFP") which included treasury, risk management, tax 
compliance, employee benefits administration and other miscellaneous 
services. GGFP is controlled by Bill A. Gilliland and Robert W. Hall, 
Chairman and Senior Vice Chairman, respectively.  During the unaudited nine 
months ended September 30, 1996 and 1995, allocated expenses to the Company 
approximated $615,000 and $638,000, respectively.  These allocations are 
classified as selling, general and administrative expense in the accompanying 
consolidated statement of operations.

    In connection with its business travel, the Company from time to time 
uses an airplane that is owned and operated by Plains Air, Inc.   Plains Air, 
Inc. is owned by Bill A. Gilliland and Robert W. Hall, Chairman and Senior 
Vice Chairman, respectively.  Currently, the Company pays Plains Air, Inc. 
$13,050 per month plus a fee of approximately $488 per hour for use of the 
airplane. During the nine months ended September 30, 1996 and 1995 the 
Company paid Plains Air, Inc. an aggregate of $112,000 and $86,000, 
respectively, for the use of the airplane.

    In addition to the above corporate allocations, the Company previously 
paid a management fee for executive management services.  This fee was 
generally based upon the profits earned and the level of executive management 
services rendered.  These fees are shown separately on the face of the 
accompanying statement of operations.  Commencing in 1996, the Company ceased 
to pay management fees.  Effective July 1, 1996, the senior management group 
consisting of the Chairman, Senior Vice Chairman, Vice Chairman, and Senior 
Vice President and Chief Operating Officer, will receive annual base salaries 
approximating $1,020,000 in the aggregate, may receive restricted stock if 
certain performance objectives are met and may also receive grants of stock 
options.  In conjunction with the reorganization, the Company agreed to pay 
one of its executive officers a bonus of $600,000.  This bonus has been 
expensed in the first nine months of 1996.

    In general, the Company is required to pay for all vehicles purchased 
from the automakers upon delivery of the vehicles to the Company.  General 
Motors Acceptance Corporation ("GMAC") provides financing for all new 
vehicles and used vehicles that are less than five years old and have been 
driven less than 70,000 miles.  This type of financing is known as "floor 
plan financing" or "flooring." Under this arrangement with GMAC, the Company 
may deposit funds with  GMAC in an amount up to 75% of the amount of the 
floor plan financing.  Such funds earn interest at the same rate charged by 
GMAC to the Company for its flooring.  From time to time, the control group 
and other affiliates will advance funds to the Company primarily for the 
purpose of investing their excess cash with GMAC.  The Company acts only as 
an intermediary in this process.  At 

                                        6
<PAGE>

September 30, 1996, funds advanced and outstanding from affiliates 
approximated $4,384,000.  Such amounts outstanding pursuant to these 
arrangements are included in Due to Affiliates in the accompanying balance 
sheet.  The amount of interest accrued pursuant to these arrangements during  
the nine months ended September 30, 1996 and 1995 approximated $276,000 and 
$160,000, respectively.

    During 1994, GGFP advanced the Company $1.05 million to fund the relocation
of one of its dealerships.  During 1995, GGFP advanced funds aggregating $2.6
million to the Company for working capital purposes at the dealerships acquired
in 1995.  At September 30, 1996, the amount outstanding pursuant to these
advances approximated $362,000.

    GGFP was the contracting agent for the construction of certain facilities 
for the Company during 1995.  The total cost of the facilities approximated 
$570,000 which included approximately $52,000 as payment to GGFP for 
architectural and construction management fees.  During 1996, GGFP will act 
as the contracting agent for the construction and renovation of certain 
facilities. The total cost of the facilities will approximate $800,000.

    The Company leases its corporate offices from GGFP under a five-year 
lease extending through June 2001, for an annual rent of approximately 
$64,800.

    GGFP also subleases to the Company the real estate on which the Company's 
Performance Nissan dealership is located.  Annual rent under the sublease if 
$228,000, which is the same amount payable to GGFP under the principal lease 
for the property.

                                        7
<PAGE>

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

GENERAL

    Cross-Continent Auto Retailers, Inc. owns and operates a group of seven 
franchised automobile dealerships (including Hickey Dodge) in the Amarillo, 
Texas and Oklahoma City, Oklahoma markets.  The financial condition and 
results of operations reported herein are based solely upon the results of 
the six dealerships owned by C-CAR at September 30, 1996.  The Company 
generates its revenues from sales of new and used vehicles, fees for repair 
and maintenance services, sales of replacement parts, sales of extended 
warranties on vehicles, and fees and commissions from arranging financing and 
credit insurance in connection with vehicle sales.

FACTORS THAT MAY AFFECT FUTURE RESULTS

    Certain matters discussed herein are forward-looking statements about the 
business, financial condition and prospects of the Company.  The actual 
results could differ materially from those indicated by such forward-looking 
statements because of various risks and uncertainties.  Such risks and 
uncertainties may include, but are not limited to, regional and national 
economic conditions, changes in consumer demand for products offered by the 
Company, employee strikes and other matters that may adversely affect the 
availability of products and pricing, state and federal regulatory 
environment, and other risks indicated in the Company's previous filings with 
the  Commission.  The Company cannot control these risks and uncertainties 
and, in many cases, cannot predict the risks and uncertainties that could 
cause its actual results to differ materially from those indicated by the 
forward-looking statements.

RESULTS OF OPERATIONS

REVENUES

    Revenues grew in each of the Company's primary revenue areas for the 
third quarter period ended September 30, 1996 compared to the third quarter 
period ended September 30, 1995, causing total revenue to increase 
approximately 20% to $76.6 million. The Company's total revenue increased 
approximately 24% to $217.8 million for the nine month period ended September 
30, 1996 as compared with total revenue of $175.8 million in the nine month 
period ended September 30, 1995.

    New vehicle sales revenue increased approximately 3% for the quarter to 
$32.6 million, compared with $31.5 million in the third quarter of 1995. New 
vehicle sales revenue increased approximately 16% to $98.8 million in the 
first nine months of 1996, compared with $85.2 million for the same period of 
1995. Substantially all of this increase was attributable to the Company's 
acquisition of its Performance Dodge dealership in Oklahoma City, Oklahoma, 
which it acquired on December 4, 1995, which was partially offset by lower 
demand for new vehicles in Amarillo.

    Used vehicle sales revenue increased approximately 32% in the third 
quarter of 1996 to $34.4 million, compared with $26.0 million in the third 
quarter of 1995. Used vehicle sales revenue increased approximately 28% to 
$94.1 million in the first nine months of 1996, compared to $73.9 million in 
the first nine months of 1995.  The Company has a policy of maintaining a 
39-day supply of used vehicles.  If a used vehicle remains in inventory for 
60 days, the Company disposes of the vehicle by selling it to another dealer 
or wholesaler.  An increase in sales of used vehicles to wholesalers and 
other dealers in accordance with the Company's inventory management 
guidelines 

                                       8
<PAGE>

accounted for approximately one-half of the increase for the three month and 
nine month periods.  The remainder of the increase was attributable to the 
Company's acquisition of its Performance Dodge dealership in Oklahoma City, 
Oklahoma which it acquired on December 4, 1995, and an overall increase in 
the average selling price per retail unit.

    The Company's other operating revenue, the components of which include 
fees for repair and maintenance services, sales of replacement parts, sales 
of extended warranties on vehicles, and fees and commissions from arranging 
financing and credit insurance in connection with vehicle sales,  increased 
approximately 53% to $9.6 million in the third quarter of 1996, compared to 
$6.3 million in the third quarter of 1995.  Other operating revenue increased 
approximately 48% to $24.9 million in first nine months of 1996 compared to 
$16.8 million in same period of 1995.  The increase is primarily attributable 
to the inclusion of the Company's Performance Dodge dealership, which it 
acquired on December 4, 1995.  The remaining increase in other operating 
revenue can be attributed to the Company exclusively selling warranties of 
third party vendors at its  dealerships.  Historically, the Company sold its 
own in-house extended warranty at its  dealerships and thus recognized the 
resulting revenue attributable to sale of its in-house warranties over the 
term of the warranties, although it received payment in full at the time of 
the sale.  In contrast, when the Company sells warranties of third party 
vendors the Company receives and immediately recognizes commission income at 
the time of sale since the Company has no further obligation pursuant to the 
extended warranty contracts.  Net commissions received by the Company from 
the sale of warranties of third party vendors for the third quarter of 1996 
approximated $1.2 million.

GROSS PROFIT

    Gross profit increased approximately 16% in the third quarter of 1996 to 
$12.1 million, compared with $10.4 million in the third quarter of 1995.  
Gross profit increased approximately 19% in the first nine months of 1996 to 
$33.4 million, compared with $28.0 million for the first nine months of 1995 
primarily because of the acquisition of the Company's Performance Dodge 
dealership.  Gross profit as a percentage of sales decreased to 15.7% in the 
third quarter of 1996 from 16.4% in third quarter of 1995.  Gross profit as a 
percentage of sales decreased to 15.3% in the first nine months of 1996 from 
15.9% for the same period in 1995.  The decrease in gross profit as a 
percentage of sales was caused by reduced margins on new and used vehicles, 
which was partially offset by higher margins on other operating revenue.    

    The reduction in gross margin on new vehicles was primarily attributable 
to increased vehicle costs resulting from the Company's efforts to minimize 
the effect of inventory shortfalls caused by GM's parts plant strike in March 
1996 by purchasing supplemental inventory from other dealers.

    The reduction in gross margin on used vehicles was primarily attributable 
to increased vehicle purchase and reconditioning costs as well as greater 
volume of sales of used vehicles to other dealers and wholesalers (which 
sales are frequently at or slightly below cost) to avoid carrying charges 
associated with used vehicle inventory.  In the third quarter of 1996, 
approximately 29% of the Company's used vehicle sales were to other dealers 
and wholesalers as compared to approximately 22% in the third quarter of 
1995.  In the nine month period of 1996 approximately 29% of the Company's 
used vehicle sales were to other dealers and wholesalers,  compared to 
approximately 23% for the same period of 1995.

    The increase in gross margin from other operating revenue was primarily
attributable to an increase in gross profit from finance, insurance and extended
warranty sales. Beginning in the third quarter of 1996 the Company began selling
warranties of third party vendors at all of its

                                      9

<PAGE>

dealerships.  Net commissions received by the Company from the sale of 
warranties of third party vendors for the third quarter of 1996 approximated 
$1.2 million.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES; MANAGEMENT FEES; EMPLOYEE STOCK 
COMPENSATION

    The Company's selling, general and administrative expenses increased to 
$8.3 million in the third quarter of 1996 compared to $6.7 million in the 
third quarter of 1995, and increased as a percentage of revenue to 10.9% from 
10.5%. The Company's selling, general and administrative expenses increased 
to $24.0 million in the nine month period of 1996, compared to $18.3 million 
in the nine month period of 1995, and increased as a percentage of revenue to 
11.0% from 10.4%.

    Substantially all of the increase is attributable to the acquisition of 
the Company's Performance Dodge dealership.  The remaining portion of the 
increase is attributable to an increase in the Company's corporate expense 
resulting from the conversion from a private company to a public company.  As 
of January 1, 1996, the Company ceased paying management fees to  GGFP, and 
the Company began providing corporate oversight previously provided by GGFP.  
Such oversight costs were previously reflected in the management fee.

    In the first nine months of 1996, the Oklahoma City dealerships' selling, 
general and administrative expenses were higher as a percentage of their 
total revenues compared with the Company's Amarillo dealerships.  This was 
due to certain expenses incurred by the Oklahoma City dealerships in 
integrating the Company's systems into their operations and implementing the 
Company's strategies.

    In conjunction with the Company's reorganization, the Company recorded a 
non-continuing executive bonus of $600,000, which was expensed in its 
entirety in the first nine months of 1996.

    Prior to the Company's Offering the Company recorded a non-cash charge 
relating to employee stock compensation of approximately $1.1 million, which 
was expensed in its entirety in the first nine months of 1996.

INTEREST EXPENSE

    The Company's interest expense increased  approximately 12% to $1.1 
million for the third quarter of 1996 compared to $1.0 million for the third 
quarter of 1995, and increased  approximately 14% to $3.3 million from $2.9 
million in the nine month period.  The increase is primarily attributable to 
the inclusion of the Company's Performance Dodge dealership, which was 
partially offset by a reduction in interest expense at the Company's Amarillo 
dealerships. Additionally, the Company recorded interest income approximating 
$40,000 from the investment of Offering proceeds for the 4 day period of 
September 27, 1996 through September 30, 1996.

NET INCOME 

    The Company's net income increased approximately 89% to $1.635 million in 
the third quarter of 1996 compared to $ .862 million in the third quarter of 
1995. The Company's net income increased approximately 36% to $2.665 million 
in the first nine months of 1996, compared to $1.966 million in the first 
nine months of 1995.  The increase was primarily attributable to the 
elimination of the management fees paid to GGFP, and the commencement of 
selling third party extended warranty contracts on an exclusive basis, which 
was partially offset by an increase in selling, general and administrative 
expenses.  Excluding the non-continuing portion of the management fees, net 
income increased approximately 3% to $1.635 million in the third quarter 

                                        10
<PAGE>

of 1996 compared to $1.579 million in the third quarter of 1995.  Excluding 
the non-continuing portion of the management fees, executive bonus and 
employee stock compensation expense, net income would have increased 
approximately 11% to $4.126 million in the first nine months of 1996, 
compared to $3.719 million in the first nine months of 1995.

LIQUIDITY AND CAPITAL RESOURCES

    The Company requires cash primarily for financing its inventory of new 
and used vehicles and replacement parts, acquisitions of additional 
dealerships, capital expenditures and transition expenses in connection with 
its acquisitions.  Historically, the Company has met these liquidity 
requirements primarily through cash flow generated from operating activities, 
floor plan financing and borrowings under credit agreements with GMAC and 
commercial banks. Floor plan financing from GMAC represents the primary 
source of financing for vehicle inventories.

    The Company finances its purchases of new vehicle inventory (including 
its Dodge and Nissan vehicles) with GMAC.  The Company also maintains a line 
of credit with GMAC for the financing of used vehicles, pursuant to which 
GMAC provides financing for up to 80% of the cost of used vehicles that are 
less than five years old and that have been driven fewer than 70,000 miles.  
GMAC receives a security interest in all inventory it finances.  The Company 
makes monthly interest payments on the amount financed by GMAC.  The Company 
must repay the principal amount of indebtedness with respect to any vehicle 
within two days of the sale of such vehicle by the Company.  The Company 
periodically renegotiates the terms of its financing with GMAC, including the 
interest rate.  As of September 30, 1996, the Company had outstanding floor 
plan debt of $35.5 million and paid an average annual interest rate of 8.0%.

    From time to time the Company also finances its purchases of new and used 
vehicles, replacement parts and short-term receivables through borrowings 
from commercial banks at various rates.  As a result of the Hickey Dodge 
acquisition, the Company has arranged a floor plan line for new and used 
vehicles with Chrysler Financial Corporation.  At September 30, 1996, there 
was no such indebtedness outstanding.

    During the first nine months of 1996, the Company generated net cash of 
$6.2 million from operating  activities, compared to $2.1 million for the 
nine months ended September 30, 1995.  The increase is primarily attributable 
to decreased inventory levels,  partially offset by increased sales of 
Company warranties and increased accounts payable.

    Cash used in investing activities of $824,000 during the first nine 
months of 1996 were primarily capital expenditures.  In October 1996, the 
Company acquired Hickey Dodge for approximately $14 million in cash.  Capital 
expenditures for the fourth quarter are expected to approximate $500,000 
relating primarily to capital improvements to the service department at one 
of the Company's dealerships, which will be funded with cash from operations. 
The Company currently  anticipates that any future acquisitions will be 
financed with proceeds from the Offering, issuance of stock or debt or a 
combination of cash, stock and debt.

    Cash provided by financing activities amounted to $39.7 million for the 
nine months ended September 30, 1996 and was primarily attributable to 
proceeds of the  Offering in the amount of $45.8 million.  The cash provided 
by the Offering proceeds was partially offset by a reduction in floor plan 
debt and amounts due to affiliates.  In 1995 cash provided by financing 
activities reflected an increase in inventory financing and loans from 
affiliates.

    The Company believes that its existing capital resources, including the 
remaining proceeds of the Offering after considering the acquisition of 
Hickey Dodge, will be sufficient to run the 

                                      11
<PAGE>

Company's operations in the ordinary course and fund its debt service 
requirements.  The Company estimates that it will incur a tax liability of 
approximately $4 million in connection with the change in its tax basis of 
accounting for inventory from LIFO to FIFO.  The Company believes that it 
will be required to pay this liability in three to six equal annual 
installments, beginning in March 1997, and believes that it will be able to 
pay such obligation with cash provided by operations.

SEASONALITY

    The Company generally experiences a higher volume of new and used vehicle 
sales in the second and third quarters of each year.  If the Company acquires 
dealerships in other markets, it may be affected by other seasonal or 
consumer buying trends.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

    From time to time, the Company is named in claims involving the 
manufacture of automobiles, contractual disputes and other matters arising in 
the ordinary course of the Company's business.  Currently, no legal 
proceedings are pending against or involve the Company that, in the opinion 
of management, could be expected to have a material adverse effect on the 
business, financial condition or results of operations of the Company.

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

    On July 22, 1996 and September 4, 1996 the Company's stockholders, acting 
by unanimous written consent, approved the Company's Amended and Restated 
Certificate of Incorporation and Bylaws, the Company's 1996 Stock Option Plan 
and the Rights Agreement between the Company and The Bank of New York.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  EXHIBITS

EXHIBIT                      
NUMBER             DESCRIPTION    
-------  -----------------------------------------------------
2.1      Asset Purchase Agreement, dated as of June 17, 1996, 
         among Lynn Hickey Dodge, Inc., Lynn Hickey and 
         Cross-Country Dodge, Inc. incorporated by reference
         to Exhibit 2.1 of the Company's Registration Statement 
         on Form S-1 (Registration No. 333-06585),
         as amended (the "Registration Statement")

3.1      Amended and Restated Certificate of Incorporation
         of Cross-Continent Auto Retailers, Inc.

3.2      Amended and Restated Bylaws of Cross-Continent Auto 
         Retailers, Inc.

4.1      Specimen Common Stock Certificate (incorporated by 
         reference to Exhibit 4.1 of the Registration Statement)


                                      12
<PAGE>

4.2      Rights Agreement, dated as of September 20, 1996,
         between Cross-Continent Auto Retailers, Inc. and 
         The Bank of New York, as rights agent

4.3      Amended and Restated 1996 Stock Option Plan of 
         Cross-Continent Auto Retailers, Inc.

10.1     Dealers Sales and Service Agreement, dated November 1,
         1995, between the Chevrolet Division of General Motors
         Corporation and Plains Chevrolet, Inc., as amended by 
         Supplemental Agreement, dated as of July 29, 1996
         (incorporated by reference to Exhibit 10.1 of the
         Registration Statement)

10.2     Dealer Sales and Service Agreement, dated September 23, 
         1996, between the Nissan Division of Nissan Motor Corporation 
         in U.S.A., Performance Nissan, Inc. and Cross-Continent Auto
         Retailers, Inc.

27.1     Financial Data Schedule

    (b)  REPORTS ON FORM 8-K

         None 

                                        13
<PAGE>
                                      SIGNATURES


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

                                 CROSS-CONTINENT AUTO RETAILERS, INC.


Date: November 14, 1996    By: /s/ CHARLES D. WINTON
                              -------------------------------------------------
                                   Charles D. Winton, Vice President, Secretary
                                   and Chief Accounting Officer


Date: November 14, 1996    By: /s/ JOHN W. GAINES
                              -------------------------------------------------
                                   John W. Gaines, Vice President of Finance


                                       14


<PAGE>

                                    EXHIBIT INDEX



EXHIBIT
NUMBER                       DESCRIPTION    
-------------------------------------------------------------------------------

2.1      Asset Purchase Agreement, dated as of June 17, 1996, 
         among Lynn Hickey Dodge, Inc., Lynn Hickey and 
         Cross-Country Dodge, Inc. incorporated by reference
         to Exhibit 2.1 of the Company's Registration Statement 
         on Form S-1 (Registration No. 333-06585),
         as amended (the "Registration Statement")

3.1      Amended and Restated Certificate of Incorporation
         of Cross-Continent Auto Retailers, Inc.

3.2      Amended and Restated Bylaws of Cross-Continent Auto 
         Retailers, Inc.

4.1      Specimen Common Stock Certificate (incorporated by 
         reference to Exhibit 4.1 of the Registration Statement)

4.2      Rights Agreement, dated as of September 20, 1996,
         between Cross-Continent Auto Retailers, Inc. and
         The Bank of New York, as rights agent

4.3      Amended and Restated 1996 Stock Option Plan of 
         Cross-Continent Auto Retailers, Inc.

10.1     Dealers Sales and Service Agreement, dated November 1,
         1995, between the Chevrolet Division of General Motors
         Corporation and Plains Chevrolet, Inc., as amended by 
         Supplemental Agreement, dated as of July 29, 1996
         (incorporated by reference to Exhibit 10.1 of the
         Registration Statement)

10.2     Dealer Sales and Service Agreement, dated September 23, 
         1996, between the Nissan Division of Nissan Motor Corporation 
         in U.S.A., Performance Nissan, Inc. and Cross-Continent Auto
         Retailers, Inc.

27.1     Financial Data Schedule