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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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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, 2000

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 2-95465-S

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WESTAR FINANCIAL SERVICES INCORPORATED(Exact name of registrant as specified in its charter)

Washington

91-1715252(State or other jurisdiction of
Incorporation or organization)

(IRS Employer Identification Number)The Financial Center; Tumwater, WA

98501(Address of principal executive office)

(Zip Code)


Registrant's
telephone number, including area code:(360) 754-6227

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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 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:

Common Stock

2,348,120Class

Number of Shares Issued at November 1, 2000


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## 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Westar Financial Services Incorporated and Subsidiaries  Consolidated Balance Sheets  As Of September 30, 2000 and March 31, 2000

|                                                                                          |  | September 30
(Unaudited) |             | March 31 |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | -------- | -
|Cash                                                                                      |  | $                        | 947,920     |          | $
|Accounts receivable, net of allowance for credit losses                                   |  |                          | 924,537     |          |  
|Credit enhancement receivable, net of allowance for credit losses                         |  |                          | 2,648,308   |          |  
|Operating leases held for sale, net of allowance for credit losses                        |  |                          | 2,064,816   |          |  
|Direct financing receivable, net of allowance for credit losses                           |  |                          | 2,943,332   |          |  
|Deferred tax asset, net of valuation allowance of $5,976,201 and $4,709,778, respectively |  |                          |             |          |  
|Fixed and other assets                                                                    |  |                          | 1,831,966   |          |  
|                                                                                          |  |                          |             |          |  
|                                                                                          |  | $                        | 11,360,879  |          | $
|                                                                                          |  |                          |             |          |  
|Accounts payable                                                                          |  | $                        | 3,324,457   |          | $
|Notes payable to banks                                                                    |  |                          | 7,854,846   |          |  
|Notes payable affiliates                                                                  |  |                          | 12,223,075  |          |  
|Other liabilities                                                                         |  |                          | 2,844,190   |          |  
|                                                                                          |  |                          |             |          |  
|                                                                                          |  |                          | 26,246,568  |          |  
|                                                                                          |  |                          |             |          |  
|Redeemable preferred stock                                                                |  |                          | 1,250,000   |          |  
|                                                                                          |  |                          |             |          |  
|Common stock, no par value                                                                |  |                          | 3,716,177   |          |  
|Paid in capitalstock warrants                                                            |  |                          | 371,495     |          |  
|Accumulated deficit                                                                       |  |                          | (20,223,361 | )        |  
|                                                                                          |  |                          |             |          |  
|                                                                                          |  |                          | (16,135,689 | )        |  
|                                                                                          |  |                          |             |          |  
|                                                                                          |  | $                        | 11,360,879  |          | $
|                                                                                          |  |                          |             |          |  

See
accompanying notes to consolidated financial statements.

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Westar Financial Services Incorporated and Subsidiaries
Consolidated Statements of Operations
For the three months and six months ended September 30, 2000 and 1999
(Unaudited)

|                                           |  | Three Months Ended |            | Six Months Ended |  
|------------------------------------------ |  | ------------------ | ---------- | ---------------- | -
|
|Revenues:                                  |  |                    |            |                  |  
|Revenues from sales and securitizations    |  | $                  | 57,063,616 |                  | $
|Revenues on direct financing assets        |  |                    | 23,390     |                  |  
|Revenues from operating leases             |  |                    | 1,107,004  |                  |  
|Administrative fee income                  |  |                    | 1,173,080  |                  |  
|Service fee income                         |  |                    | 179,530    |                  |  
|Other income                               |  |                    | 82,684     |                  |  
|                                           |  |                    |            |                  |  
|Gross revenues                             |  |                    | 59,629,304 |                  |  
|Direct Costs:                              |  |                    |            |                  |  
|Costs related to sales and securitizations |  |                    | 57,257,597 |                  |  
|Interest                                   |  |                    | 405,644    |                  |  
|Depreciation expense on operating leases   |  |                    | 786,995    |                  |  
|Origination fees                           |  |                    | 387,200    |                  |  
|Provision for credit losses                |  |                    | 7,500      |                  |  
|Other                                      |  |                    | 361,316    |                  |  
|                                           |  |                    |            |                  |  
|Total direct costs                         |  |                    | 59,206,252 |                  |  
|                                           |  |                    |            |                  |  
|Gross Margin                               |  |                    | 423,052    |                  |  
|General and administrative expenses        |  |                    | 1,659,750  |                  |  
|                                           |  |                    |            |                  |  
|Loss before subordinated debt interest     |  |                    | (1,236,698 | )                |  
|Subordinated debt interest expense         |  |                    | (269,923   | )                |  
|                                           |  |                    |            |                  |  
|Loss before federal income tax benefit     |  |                    | (1,506,621 | )                |  
|Income tax benefit                         |  |                    |            |                  |  
|                                           |  |                    |            |                  |  
|Net loss                                   |  |                    | (1,506,621 | )                |  
|Dividends on redeemable preferred stock    |  |                    | (28,906    | )                |  
|                                           |  |                    |            |                  |  
|Net loss applicable to common stock        |  | $                  | (1,535,527 | )                | $
|                                           |  |                    |            |                  |  
|Weighted average number of shares          |  |                    | 2,348,120  |                  |  
|                                           |  |                    |            |                  |  
|Net loss per common share                  |  | $                  | (.65       | )                | $
|                                           |  |                    |            |                  |  

See
accompanying notes to consolidated financial statements.

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Westar Financial Services Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
For the six months ended September 30, 2000 and 1999
(Unaudited)
Increase (Decrease) in Cash

|                                                    |  | 2000 |             | 1999 |  
|--------------------------------------------------- |  | ---- | ----------- | ---- | -
|Net cash provided by (used in) operating activities |  | $    | (6,775,431  | )    | $
|                                                    |  |      |             |      |  
|Cash flows used in investing activities:            |  |      |             |      |  
|Other                                               |  |      | (1,090,828  | )    |  
|                                                    |  |      |             |      |  
|Net cash used in investing activities               |  |      | (1,090,828  | )    |  
|                                                    |  |      |             |      |  
|Cash flows from financing activities:               |  |      |             |      |  
|Proceeds from issuance of common stock              |  |      |             |      |  
|Additions to notes payable to banks                 |  |      | 92,850,632  |      |  
|Payments on notes payable to banks                  |  |      | (88,838,257 | )    |  
|Additions to notes payablesubordinated debt        |  |      | 4,014,944   |      |  
|Payments on notes payablesubordinated debt         |  |      | (614,383    | )    |  
|                                                    |  |      |             |      |  
|Net cash provided by (used in) financing activities |  |      | 7,412,936   |      |  
|                                                    |  |      |             |      |  
|Net decrease in cash                                |  |      | 453,323     |      |  
|Cash:                                               |  |      |             |      |  
|Beginning of period                                 |  |      | 1,401,243   |      |  
|                                                    |  |      |             |      |  
|End of period                                       |  | $    | 947,920     |      | $
|                                                    |  |      |             |      |  

See
accompanying notes to consolidated financial statements.

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## 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The Company's consolidated annual financial statements presented in the 2000 Annual Report on Form 10-K of the Company includes a summary of
significant accounting policies and should be read in conjunction with this Form 10-Q. The consolidated financial statements include the accounts of Westar Auto Holding
Co., Inc. ("WestAH"), a 100%-owned subsidiary of the Company, Westar Finance Holding Co. ("WestFH"), a 100%-owned subsidiary of the Company, Westar Auto Finance L.L.C. ("WestAF"), a limited
liability company owned 99% by the Company and 1% by WestAH, and Westar Lease Origination Trust, a Massachusetts business trust registered in the state of Washington, beneficially owned by WestAF. The
statements for the six months ended September 30, 2000 and 1999, are unaudited, condensed and do not contain all information required by generally accepted accounting principles to be included
in a full set of annual financial statements. In the opinion of Management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results of operations for
such periods are included. All significant inter-company accounts and transactions have been eliminated. The results of operations for the six months ended September 30, 2000, are not
necessarily indicative of the results of operations for the entire year. This information included in this Form 10-Q should be read in conjunction with Management's Discussion and
Analysis and the consolidated financial statements and notes thereto included in Westar Financial Services Incorporated's 2000 Annual Report on Form 10-K.

Forward-Looking Statements

Although most of the information contained in this report is historical, certain statements contain forward-looking information. To the extent these statements
involve, without limitation, product development and introduction plans, the Company's expectations for growth, estimates of future revenues, expenses, profit, cash flow, balance sheet items,
forecasts of demand or market trends for the Company's products and for the auto finance industry or any other guidance on future periods, these statements are forward-looking and involve matters
which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Readers of this report should
consider, along with other relevant information, the
risks identified in this report and other risks identified from time to time in the Company's filings with the Securities and Exchange Commission, press releases and other communications.

Interest Paid

The Company paid cash for interest of $368,042 and $278,688 for the three months ended and $750,310 and $546,243 for the six months ended September 30,
2000 and 1999, respectively. The change is due to increased volumes of assets warehoused.

Earnings Per Share

Earnings (loss) per share is computed using the weighted-average number of common shares outstanding for the three and six months ended September 30,
2000 and 1999, respectively. Net loss used in the computation of earnings per share has been increased to include the redeemable preferred stock dividends. Earnings per share does not include common
stock warrants or common stock options, as their effect is anti-dilutive.

Direct Financing Receivables

The Company repurchased the stream of cash flows from the 1996-A and 1996-B Securitization from the Industrial Bank of Japan in
August 2000. The Company will receive the cash flows over the

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next 18 months. The Company has an allowance in the amount of $44,000 set up to offset any uncollectable accounts.

Federal Income Tax

The Company provides a 100% valuation allowance against increases in the deferred tax asset balance. Increases in the deferred tax asset allowance offset the
tax benefit related to the temporary differences creating the deferred tax asset and result in no federal income tax expense for the corresponding period. The deferred tax asset is primarily comprised
of tax net operating losses, which are available for an average of 13 years to offset future reported tax liabilities.

Notes Payable Affiliates

In July 2000, the Company entered into an agreement with Navidec, Inc. to borrow $1,000,000 as subordinated debt. The note is due July 5,
2001 and bears interest at the rate of 9%.

In
August 2000, the Company entered into an agreement with Navidec, Inc. to borrow $500,000 as subordinated debt. The note is due August 25, 2001 and bears
interest at the rate of 9%.

Securitization or SBAS Transactions

The Company completed three and five Securities Based Asset Sales ("SBASs") or Asset Backed Securitizations ("ABS") transactions in the first and second
quarter of fiscal 2001 respectively and in an aggregate amount of $35 and $57 million for a year to date total of $92 million. The Company's cash proceeds from these transactions were
reduced by a credit enhancement in the amount of $1.2 million and servicing cash reserves in the amount of $466K, which are to be received in 60 monthly payments. The Company continues
to service the leases securitized. The Company's proprietary origination/issuer/ titling securitization structure, Westar Lease Origination Trust, has completed twenty-five securitizations
and sales of automobile lease-backed securities in private-placement offerings to date.

The
leases sold in the above transactions are operating leases and they are accounted for in accordance with SFAS 13.

Subsequent Events

In October 2000, the Company's origination/issuer/titling securitization structure, Westar Lease Origination Trust, completed its twenty-sixth and
twenty-seventh security based asset sales involving $22 million of automobile lease-backed securities in a private-placement offering. The Company's proceeds from the securitization were
reduced by a reserve in the amount of $157,000, which is to be received in 60 monthly payments. The Company continues to service the leases securitized. The leases sold in the above transaction
are operating leases and they are accounted for in accordance with SFAS 13.

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

BUSINESS OVERVIEW

E-COMMERCE ORIGINATION CHANNELS

Internet

The Company has formed a strategic alliance with DriveOff.com, Inc. in which WEST is the exclusive financial portal for all of the transactions
generated through the Driveoff.com site. In September 2000, MSN CarPoint (jointing owned by Ford and Microsoft) agreed to purchase DriveOff.Com, for which Westar will continue to be the
exclusive financial administrator. The Company

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began originating transactions through DriveOff.com on September 28, 1999. Driveoff.com operates in 48 states as of September 30, 2000.

This
3rd generation Internet automobile acquisition channel is focused on significantly increasing consumer satisfaction with the process while decreasing prices to the consumer. The
program empowers consumers to negotiate new car purchases and financing 100% online. Consumers are able to design and "build" a vehicle at a firm price, arrange the financing and schedule an
appointment to accept delivery of the vehicle from a dealer.

Intranet

The Intranet conduit duplicates the operation of Westar's Internet channel except that the entire DriveOff business model and technology are placed within the
webspace of another organization, only visible to and usable by members of the host organization. This business model aligns itself with organizations that have extraordinary consumer credibility and
intensely loyal constituents. It seeks organizations that want to deliver value through a positive auto experience. Likely candidates for Intranet alliances include large affinity membership
organizations, banks or insurance companies. As the exclusive financial hub and fulfillment agent for DriveOff, Westar earns a fee each time a consumer transaction passes through its decisioning
process.

Westar
and DriveOff are piloting an Intranet effort with Costco Wholesale Corporation (NASD: COST) in five Denver warehouses. The pilot program is expected to last until Winter, 2000.

Westar
has an agreement with First Union Capital Markets Group ("First Union"), which provides for its support of Westar's Internet and Intranet operations through a loan purchase
arrangement with WEST for up to $1 billion annually of loans originated through DriveOff.com.

Westar
retains for its own account the prime credit leases originated by the Internet and Intranet channels.

Private Label

Westar's Private Label channel is designed to offer other financial services firms access to Westar's
LASIRpro©decisioning technology and processes. With LASIRpro, a bank with a consumer automobile
leasing need, but without its own capability, can use Westar's technology and processes for real time, real world decisioning and commitments. This allows the originating entity to preserve its market
presence by serving its dealers and consumers while making nearly instantaneous credit, asset and pricing decisions. Westar receives either fee income or all or a portion of the originationed assets
for its services. Westar initiated Private Label activities with the Maitland, Florida office of AmSouth Bancorporation (NYSE: ASO) and has begun the service in all of AmSouth's markets. Westar has
also begun to provide Mellon Bank (NYSE: MEL) Private Label services in August 2000 in the Mid-Atlantic States.

The
company is negotiating with other financial institutions in both the Intranet and Private Label channels.

Management
believes the diversification provided by four origination channels allows the Company to build a sustainable competitive advantage by using its proprietary leading edge
decisioning and communications technologies and its proprietary lease securitization capabilities.

Westar's
proprietary LASIRpro system, risk management techniques, innovative decisioning and communications technology and diversified funding strategy are designed to allow the
Company to price its products to yield an above-average return on investment while offering the most credit worthy consumers lower effective finance rates.

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The Company intends to increase its client base in each of its e-commerce origination channels as well as lease originations by continuing to expand its existing dealer
relationships within its current geographic market and to engage additional institutional clients in the e-commerce origination channels.

RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL POSITION  Six months ended September 30, 2000 compared to six months ended September 30, 1999.

In the last five years, Westar has recreated itself from a traditional commercial equipment lessor to a prime credit consumer auto lessor competing within auto
dealerships, to a leading Internet financier, and, presently, a four-channel financial portal.

As
a financial portal, Westar originates, decisions, commits to and fulfills consumer financings for its own account or the accounts of others, using sophisticated decisioning tools
and high speed communications to assure transparency to all parties in the process. Westar has created a business model where it is relatively indifferent as to the identity of the ultimate investor.

Westar
Financial Services Incorporated and its Subsidiaries provide prime credit quality consumer automobile lease financing through franchised automobile dealers in the western
states and through its e-commerce origination channels throughout the United States. Westar has designed and developed a number of financing, lease servicing and risk management
innovations. While the Company's statement of operations reports a net loss of approximately $1,507,000 and $628,000 for the three months and $3,715,000 and $1,571,000 for the six months ended
September 30, 2000 and 1999, respectively, it is management's opinion that Westar's proprietary decisioning and fulfillment capabilities are one of the most scalable and marketable programs
currently available and a valued investment in the Company's future.

Volume
of lease originations increased from 884 leases costing $23M to 1,987 leases costing $52M for the three months ended September 30, 1999 and 2000 and increased from 1,728
leases costing $48M to 3,242 leases costing $94M for the six months ended September 30, 1999 and 2000. The outstanding face value of leases serviced totaled 8,987 accounts for $258M. The credit
quality of originated leases improved, from average FICO scores of 710 in the prior quarter to 734 in the current period.

Gross
revenues for the quarter September 30, 2000 increased 80% from $33.1M in the comparable quarter to $59.6M and increased 66% for the six months ended September 30,
2000 from $58.2M in the comparable period to $96.8M. The increase in total gross revenues was directly related to the 125% increase in lease volumes for the three months and the 88% increase for the
six months ended September 30, 2000. The significant increase in volumes enabled WEST to complete $35.5M and $57.1M in Securitizations and Security Based Asset Sales in the first two quarters
of fiscal 2001, respectively. Also as a result of the increased volumes, revenues from operating leases increased $738K or 200% for the quarter ended September 30, 2000 from $369K in the
comparable quarter to $1.1M and increased $1.1M or 136% for the year to date from $824K in the comparable period to $1.9M. Administration fees increased $687K or 141% for the quarter from $486K in the
comparable quarter to $1.2M and increased $977K or 104% for the six months ended $937K in the comparable period to $1.9M. As Westar retains all servicing rights to the assets sold servicing income has
increased $98K or 119% for the quarter from $82K in the comparable quarter to $180K and increased $186K or 130% for the six months from $144K in the comparable period to $330K.

Direct
costs increased $26.9M or 83% for the quarter ended September 30, 2000 from $32.3M in the comparable quarter to $59.2M and increased $39.7M or 69% for the six months
ended September 30, 2000 from $57.1M in the comparable period to $96.8M primarily due to the increase in lease origination volumes. As a result of the increased volumes, costs from sales and
securitizations increased $25.5M or 80% for quarter from $31.8M in the comparable quarter to $57.3M and increased

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$37.8M or 68% for the six months from $56M in the comparable period to $93.8M. Depreciation expense also increased $511K or 185% for the three months from $276K in the comparable quarter to $787K and
increased $700K or 119% for the six months from $588K in the comparable period to $1.3M. Due to the increase in lease volumes being warehoused prior to securitization or sales, interest costs
increased $336K or 480% for the quarter from $70K in the comparable quarter to $406K and increased $478K or 233% for the six months ended September 30, 2000 from $205K in the comparable period
to $683K. Origination fees is a new expense directly related to the Private Label origination channel.

Gross
margins decreased approximately $325K or 43%, from $748K to $423K from the quarter ended September 30, 1999 and decreased approximately $1M or 99% from $1M to $10K from
the six months ended September 30, 1999. The decrease is primarily due to the Company's decision during the first quarter to use aggressive pricing to rapidly develop a leadership position in
its new origination channels, particularly in its Private Label activities through two of its institutional origination partners on the east coast. After achieving its volume and penetration goals in
those markets, the Company implemented a series of three price increases in the period from late June to late-August to increase margins while continuing to accelerate origination volumes
in the new channels. The effect of the price increases, though fully in effect only during the final month of the quarter, increased margins from the second quarter of 1999 by $826K, or 1.3% of total
revenues.

General
and administrative expenses increased by approximately $475K or 40%, from $1.2M in the first quarter of 1999 to $1.6M and increased $985K or 44% from $2.3M for the six months
ended September 30, 1999 to $3.3M for the six months ended September 30, 2000. This is primarily due to opening three new distribution channels for financial transaction originations.
The most significant increases in general and administrative expense occurred in salaries and benefits, rent expense and depreciation expense.

During
the next year, the Company expects to create relatively substantial growth in originations, decisionings, commitments and fulfillments as well as in managed assets. Management
expects margins from fee income and income earned from its portfolio to increase at least as rapidly as volumes. A significant portion of the difference will be the result of the scalability which
Management believes
Westar will realize from its significant investments in technology, innovative processes and alliance channels and its highly skilled and motivated Team Members.

While
Westar expects to continue to face intense competition from other firms, particularly the largest banks, financial services companies, the financial subsidiaries of automobile
manufacturers and various types of "dot.com" startups, the Company is presently unaware of any direct competitor with the same breadth of enterprise as the Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires substantial cash to implement its business strategy, including cash to: (i) acquire vehicles; (ii) pay sales or
securitization costs; (iii) satisfy requirements for working capital, credit enhancement receivable and servicing cash reserves; (iv) pay operating expenses; (v) satisfy debt
service; (vi) pay preferred stock dividends; (vii) implement its e-commerce expansion; and, (viii) invest in technology, systems and personnel. A substantial portion
of the Company's revenues in any period results from sales or securitizations of leases in such period, but in a securitization transaction a portion of the cash underlying such revenues is received
over the life of the leases. The Company has historically been successful in meeting its liquidity needs through internal cash flow, borrowings from financial institutions, securitizations and SBASs,
portfolio sales and sales of equity and debt securities.

In
the second quarter of fiscal 2001, the Company received $1.5 million from subordinated promissory notes. The notes have no prepayment penalties and are to be repaid with
interest, calculated at 9%. These funds are being utilized for working capital requirements and will be repaid

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with future proceeds from operations, additional equity or debt financing, if any. Currently, these notes mature over the next 12 months with $1.0 million due on July 5, 2001 and
$.5 million due on August 25, 2001.

To
diversify funding strategies, the Company is negotiating several Asset Backed Commercial Paper ("ABCP") facilities with a number of banks. The diversification of funding strategies
is intended to improve long-term business performance, strengthen the Company's competitive position and build a sustainable competitive advantage.

Westar
was the third Company in the nation to structure a free standing lease securitization and the first to originate multiple securitizations from within a single bankruptcy remote
structure and to originate a tax benefit transfer from within a securitization. As of September 30, 2000, the Company has completed twenty-five securitizations and sales while it
retains the servicing of the portfolios and receives servicing income through the life of the lease.

The
Company entered into an agreement with Bank One, Columbus NA in July 1995 which was expanded in November 1996 from the initial $12 million limit to
$25 million. In September 1999, Management renewed the financing facility at $25 million. The line of credit has expired and the Company is currently renegotiating the terms and
expects these changes to be in place by the end of the third quarter. The Company must comply with certain restrictive loan covenants.

This
revolving credit warehouse facility is utilized as interim financing for the acquisition of vehicle leases until sufficient volume is achieved to sell such leases through an ABS
or SBAS transaction. The net proceeds from the sales of originated leases provide a source of cash for repayment of related borrowings under the warehouse line thus providing additional availability
of credit to fund future vehicle purchases. Remaining proceeds not used to repay the warehouse line provide a source of cash for payment of short-term liabilities and general and
administrative expenses. Management anticipates increased originations coupled with higher margins will generate additional cash flows to be utilized for working capital requirements. At
September 30, 2000 the unused portion of the warehouse line is $4.6 million.

It
is the opinion of Management that, as of September 30, 2000, the liquidity sources discussed above in conjunction with subsequent events noted below are sufficient to meet
the Company's immediate cash flow needs for operations and for the acquisition of leases in the normal course of business. The Company is currently in negotiations to obtain additional capital through
both private and public financing to provide for the Company's planned growth over the next several years. There can be no assurance that such negotiations will be successful.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to a variety of market risks, including the effects of changes in interest rates, inflation and used automobile valuations. The Company
monitors the effect of changes in interest rates relative to other factors that also effect earnings, such as unit lease production. The Company monitors and manages these financial exposures as an
integral part of its overall risk management program.

The
Company originates and warehouses, until sufficient volumes are pooled for securitization or sold through portfolio sale transactions, fixed-rate assets. The Company
is at risk from interest rate fluctuations while the assets are being warehoused. The Company recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect of
interest rate fluctuations on earnings. Assuming an instantaneous increase or decrease of one percentage point in interest rates applied to all leased assets pooled in a typical $30 million
securitization, the Company's after-tax earnings on the transaction would change by approximately $700,000. The Company has developed sophisticated models to assess the sensitivity of its
earnings to changes in market interest rates and will

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be able to use various tools available, such as interest rate swaps and pre-funding rate caps, to minimize the risks associated with the effect of changing prices. These models and tools
provide management both the information needed to make timely pricing decisions as well as market alternatives to manage and minimize risk. In a rising rate environment the Company's gross margin will
tend to narrow.

Fluctuations
in used vehicle prices are another market risk to which the Company is exposed. Unexpected changes in the used vehicle market not only impact credit losses, but also
residual losses. The Company minimizes credit loss exposure through its SBAS transactions and minimizes residual exposure through a residual value assurance program.

The
effect of inflation on general and administrative expenses over the past several years has been negligible. Inflation is not expected to impact earnings in the ensuing
twelve-month period.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities

None

Item 3. Defaults Upon Senior Securities

None

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

None.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K



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None

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## 

SIGNATURES

Pursuant to the requirement 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.

|                        |  | WESTAR FINANCIAL SERVICES INCORPORATED
|----------------------- |  | --------------------------------------
|November 3, 2000
(Date) |  | By:                                   
|November 3, 2000
(Date) |  | By:                                   

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