##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-K

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2003                                             
|          
|or        
|          
|o          |  | 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: 28050



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Onyx Acceptance Corporation

(Exact name of Registrant as specified in its
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 33-0577635                                 
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)

Onyx Acceptance Corporation

27051 Towne Centre Drive,
Suite 100


Foothill Ranch, CA 92610


(Address of principal executive offices)(Zip
code)


(949) 465-3900

(Registrants telephone number including
area code)


Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:


Common Stock ($0.01 Par Value)


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 þ          No o

Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments
to this
Form 10-K.     þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the
Act).     Yes o          No þ

Based on the
closing sale price of $6.46 of the registrants Common
Stock as quoted on the Nasdaq National Market on June 30,
2003, the aggregate market value of such stock held by
non-affiliates of the registrant was approximately
$20.2 million on that date. The number of shares
outstanding of the Companys Common Stock as of the closing
of the market on February 13, 2004 was 5,244,450. The
registrant does not have different classes of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the
registrants Proxy Statement for the Annual Meeting of
Stockholders currently expected to be held on May 26, 2004,
to be filed with the Commission pursuant to Regulation 14A,
are incorporated by reference in Part III of this
Report.



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ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

|               |  |                                                                                                                      |  |      |    | 
|-------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|               |  |                                                                                                                      |  | Page
|               |  |                                                                                                                      |  |     
|PART I        
|Item 1.        |  | Business                                                                                                             |  |      | 3  | 
|Item 2.        |  | Properties                                                                                                           |  |      | 18 | 
|Item 3.        |  | Legal Proceedings                                                                                                    |  |      | 18 | 
|Item 4.        |  | Submission of Matters to a
    Vote of Security Holders                                                              |  |      | 18 | 
|PART II       
|Item 5.        |  | Market for Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities |  |      | 19 | 
|Item 6.        |  | Selected Financial Data                                                                                              |  |      | 20 | 
|Item 7.        |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                            |  |      | 21 | 
|Item 7A.       |  | Quantitative and Qualitative
    Disclosures about Market Risk                                                       |  |      | 37 | 
|Item 8.        |  | Financial Statements and
    Supplementary Data                                                                      |  |      | 38 | 
|Item 9.        |  | Changes in and Disagreements
    With Accountants on Accounting and Financial Disclosure                             |  |      | 39 | 
|Item 9A.       |  | Controls and Procedures                                                                                              |  |      | 39 | 
|PART III      
|Item 10.       |  | Directors and Executive
    Officers of the Registrant                                                               |  |      | 40 | 
|Item 11.       |  | Executive Compensation                                                                                               |  |      | 40 | 
|Item 12.       |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters               |  |      | 40 | 
|Item 13.       |  | Certain Relationships and
    Related Transactions                                                                   |  |      | 40 | 
|Item 14.       |  | Principal Accountant Fees
    and Services                                                                           |  |      | 40 | 
|PART IV       
|Item 15.       |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                                                 |  |      | 41 | 
|EXHIBIT 10.146
|EXHIBIT 14.1  
|EXHIBIT 21.1  
|EXHIBIT 23.1  
|EXHIBIT 23.2  
|EXHIBIT 31.1  
|EXHIBIT 31.2  
|EXHIBIT 32.2  
|EXHIBIT 32.2  



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PART I

Forward-Looking Statements

When used throughout this Annual Report, the
words believes, anticipates and
expects and similar expressions are intended to
identify forward-looking statements. Such statements are subject
to the many risks and uncertainties which affect the
Companys business, and actual results could differ
materially from those projected and forecasted. These
uncertainties, which include competition within the automobile
finance industry, the effect of economic conditions, litigation
risks and the availability of capital to finance planned growth,
may not be limited to those we have identified and disclosed in
this Annual Report. These and other factors which could cause
actual results to differ materially from those in the
forward-looking statements are discussed under the heading
Risk Factors. Given these uncertainties, readers are
cautioned not to place undue reliance on such statements. Other
than as may be required by law, the Company also undertakes no
obligation to update these forward-looking statements to reflect
any future events or circumstances after the filing of this
Annual Report.






|        |         
|------- | --------
|Item 1. | Business

General

Onyx Acceptance Corporation, a Delaware
Corporation, (Onyx or the Company) is a
specialized consumer finance company engaged in the purchase,
warehousing, securitization and servicing of motor vehicle
retail installment contracts originated by franchised and select
independent automobile dealerships (collectively the
Contracts). The Company was founded in August 1993
by a team of executives with extensive automobile finance
experience in the major aspects of prime and near-prime auto
lending, including underwriting, servicing, information systems
implementation, interest rate management, securitizations and
auto dealer center management. The Company focuses its efforts
on acquiring prime and near-prime Contracts collateralized by
late model used and, to a lesser extent, new motor vehicles,
entered into with purchasers whom the Company believes have a
favorable credit profile. Since commencing the purchase,
origination and servicing of Contracts in February 1994, the
Company has purchased or originated approximately
$10.3 billion in Contracts, has completed
34 securitizations and currently has an active dealer base
of approximately 12,000 dealerships. The Company has
expanded its operations from a single office in Orange County,
California to 18 auto finance centers (the Auto
Finance Centers) serving most regions of the United States.

Market and Competition

The Company operates in a highly competitive
market. The automobile finance market has historically been
serviced by a variety of financial entities including the
captive finance affiliates of major automotive manufacturers,
banks, savings associations, independent finance companies,
credit unions and leasing companies. A number of these
competitors have greater financial resources than the Company.
Many of these competitors also have long-standing relationships
with automobile dealerships and may offer dealerships or their
customers other forms of financing or services not provided by
the Company.

The Company competes for the purchase of
Contracts which meet its underwriting criteria on the basis of
emphasizing strong relationships with its dealership customer
base through its local presence. The Company supports its
dealership customer base with expanded service hours. The
Company believes that its strong personal relationships with,
and its level of service to, the dealerships in its customer
base provide a competitive advantage to the Company.

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Business Strategy

The Companys principal objective is to
become one of the leading sources of prime and near-prime auto
lending in the United States by leveraging the experience of its
senior management team in this industry. The Company seeks to
maintain and increase profitability through the implementation
of the following strategies:

Targeted Market and Product
Focus:The Company targets the prime
and near-prime auto lending market because it believes that
prime and near-prime lending produces greater origination and
operating efficiency than does sub-prime lending. The Company
focuses on late model used rather than new vehicles, as
management believes the risk of loss on used vehicles is lower,
due to lower depreciation rates, while interest rates are
typically higher.

Localized Dealership
Service:The Company provides a high
level of service to its dealership base by underwriting and
purchasing Contracts and marketing to and servicing dealerships
on a local level through its Auto Finance Centers. The Company
strategically locates its Auto Finance Centers in geographic
areas of high dealership concentration to facilitate personal
service in the local markets, including consistent buying
practices, expanded hours of operation, competitive rates, a
dedicated dealer service staff, fast turnaround time and systems
designed to expedite the processing of Contract applications.
This personal service is provided by account managers (the
Account Managers) with an established reputation for
responsiveness and integrity who call on dealerships in a
consistent and professional manner. The Company believes that
its local presence and service provide the opportunity to build
strong and lasting relationships with dealerships.

Expansion of Dealership Customer
Base:The Company establishes active
relationships with a substantial percentage of franchised
dealerships in the regions in which it does business through its
Auto Finance Centers. The Company intends to establish
additional relationships in 2004 and will open an additional
Auto Finance Center in New York during the second quarter
of 2004.

Maintenance of Underwriting Standards and
Portfolio Performance:The Company has
developed an underwriting process that is designed to achieve
attractive yields while minimizing delinquencies and losses.
Based on its belief that a standardized commercially available
credit scoring system is a less effective means of assessing
credit risk, especially in the near-prime sector, the Company
employs trained credit managers (the Credit
Managers) in the local Auto Finance Centers to purchase
Contracts satisfying the underwriting criteria developed by the
Company. To assist in the underwriting process, the Company has
developed an internal grading system that evaluates the
borrowers credit parameters and generates recommended
advance and buy rates. Significant deviations from the suggested
rates are investigated by the centralized Credit Audit
Department. The Companys Credit Managers and Account
Managers are compensated as a team, and their compensation
relies, in part, upon the quality of underwriting of the
Contracts they approve. The Company has developed a credit
review process where a post-funding audit is performed on many
purchases and originations by reviewing Contracts against the
Companys underwriting standards within days after they
have been funded. This audit provides feedback to enhance the
underwriting process. To further monitor the integrity of the
underwriting process, management regularly tracks the yields,
delinquency and loss rates of Contracts purchased by each Credit
and Account Manager team.

Technology-Supported Operational
Controls:The Company has developed
and instituted control and review systems that enable it to
monitor both the operations of the Company and the performance
of the serviced portfolio. These risk management systems allow
senior management to monitor Contract production, yields and
performance on a real-time basis. The Company believes that its
information systems not only enhance its internal controls but
also allow it to significantly expand its serviced portfolio
without a significant corresponding increase in its labor costs.

Liquidity Through Warehousing and
Securitizations:The Companys
strategy is to complete securitizations on a regular basis and
to use warehouse credit facilities to fund Contracts prior to
securitization. To fund dealer participation and finance daily
operations, the Company relies on credit facilities that are
collateralized by the Companys retained interest in
securitized assets (RISA), subordinated debt
offerings and cash generated through operating activities. The
Company has in the past also executed residual interest

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securitizations and sales to pay down these
credit facilities. The Company also utilizes both securitization
and hedging strategies to leverage its capital efficiently and
to substantially reduce its interest rate risk.


Operations

Dealership Marketing and
Service:As of December 31, 2003,
the Company had 18 Auto Finance Centers located throughout the
United States and had relationships with approximately 12,000
dealerships. Of these dealerships, approximately 86% are
franchised and approximately 14% are independent automobile
dealerships. The Company believes that franchised and select
independent automobile dealerships are most likely to provide
the Company with Contracts that meet the Companys
underwriting standards.

The following table sets forth information about
the Companys Contracts and Auto Finance Centers as of the
dates indicated:

|                                                               |  |                                  |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|-------------------------------------------------------------- |  | -------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                                               |  |                                 
|                                                               |  | For the Years Ended December 31,
|                                                               |  |                                 
|                                                               |  | 1999                             |           | 2000 |  | 2001 |           | 2002 |  | 2003
|                                                               |  |                                  |           |      |  |      |           |      |  |     
|                                                               |  |                                 
|                                                               |  | (Dollars in thousands)          
|Number of auto finance centers                                 |  |                                  | 17        |      |  |      | 19        |      |  |      | 19        |  |  |   | 18        |  |  |   | 18        | 
|Number of contracts purchased                                  |  |                                  | 127,628   |      |  |      | 131,648   |      |  |      | 115,141   |  |  |   | 108,212   |  |  |   | 104,477   | 
|Dollar volume of contracts collateralized by new
    vehicles  |  | $                                | 245,058   |      |  | $    | 301,100   |      |  | $    | 351,073   |  |  | $ | 424,107   |  |  | $ | 440,934   | 
|Dollar volume of contracts collateralized by used
    vehicles |  | $                                | 1,313,946 |      |  | $    | 1,370,603 |      |  | $    | 1,255,257 |  |  | $ | 1,189,934 |  |  | $ | 1,155,788 | 
|Dollar volume of contracts                                     |  | $                                | 1,559,004 |      |  | $    | 1,671,703 |      |  | $    | 1,606,330 |  |  | $ | 1,614,041 |  |  | $ | 1,596,720 | 
|Average dollar volume of contracts per auto
    finance center |  | $                                | 91,706    |      |  | $    | 87,984    |      |  | $    | 84,543    |  |  | $ | 89,669    |  |  | $ | 88,706    | 
|Number of active dealerships                                   |  |                                  | 7,617     |      |  |      | 9,741     |      |  |      | 10,115    |  |  |   | 10,827    |  |  |   | 12,065    | 
|Serviced portfolio                                             |  | $                                | 2,133,460 |      |  | $    | 2,690,607 |      |  | $    | 2,864,338 |  |  | $ | 2,905,968 |  |  | $ | 2,843,446 | 

The Companys objectives over the next
12 months are to expand its financing reach in metropolitan
areas within the United States and to further develop
relationships with existing franchised and select independent
dealerships in the states where the Company is currently doing
business. The Company plans to open a new Auto Finance Center in
New York during the second quarter in 2004. The Company
also created a centralized buying function in 2003 to service
smaller markets that are currently not serviced by the Auto
Finance Centers.

The Account Managers work from the Auto Finance
Centers to solicit, enroll and educate dealerships as well as to
maintain relationships with the Companys existing
dealership customer base. Each Account Manager visits the
dealership finance manager at each targeted dealership in his or
her territory and presents information about the Companys
dealership services. The Companys services include
expanded service hours and the ability to rapidly respond to
credit applications. The Account Managers educate the dealership
finance managers about the Companys underwriting
philosophy, including its preference for prime and near-prime
quality Contracts and its practice of using trained Credit
Managers (rather than sole reliance upon computerized scoring
systems) to review applications.

The Account Managers also advise the dealership
finance managers regarding the Companys commitment to
serve a broad scope of qualified borrowers through its prime and
near-prime auto lending programs: the Premier, the
Preferred, the Standard and the
Standard plus Programs. The Premier Program allows
the Company to market lower interest rates in order to capture
customers of superior credit quality. The

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Preferred Program allows the Company to offer
Contracts at higher interest rates, in relation to the Premier
Program, to borrowers with proven credit quality. The Standard
Programs allow the Company to assist qualified borrowers, who
may have experienced previous credit problems or have not yet
established a significant credit history, at interest rates
higher than the Companys other programs.


The Company enters into a non-exclusive
dealership agreement containing certain representations and
warranties by the dealership about the Contracts. After this
relationship is established, the Account Managers continue to
actively monitor the relationship to meet the Companys
objectives with respect to the volume of applications satisfying
the Companys underwriting standards. Due to the
non-exclusive nature of the Companys relationships with
dealerships, the dealerships retain discretion to determine
whether to solicit financing from the Company or from another
source or sources for a customer seeking to finance a vehicle
purchase. The Account Managers regularly telephone and visit
dealership finance managers to reinforce to them the
Companys objectives and to answer any questions they may
have. To increase the effectiveness of these contacts, the
Account Managers can obtain from the Companys management
information systems real-time information listing by dealership
the number of applications submitted, the Companys
responses and the reasons why a particular application was
rejected. The Company believes that the personal relationships
its Account Managers, Credit Managers and Auto Finance Center
Managers establish with the finance managers at the dealerships
are a significant factor in creating and maintaining productive
relationships with its dealership customer base.

Underwriting and Purchasing of
Contracts

The Companys underwriting standards are
applied by trained Credit and Account Managers with a personal,
hands-on analysis of the creditworthiness of each applicant,
rather than sole reliance upon standardized commercially
available credit scoring systems used by several of the
Companys competitors. The Company believes that
credit-scoring systems may approve applicants who are in fact
not creditworthy, while denying credit to others who may have
acceptable credit risk for the interest rate being charged. In
addition, the Company believes that it can enhance the
relationship with its dealership and consumer customer base by
having its Credit and Account Managers utilize a rules/exception
based automated credit and audit system. The Credit and Account
Managers personally review each application and communicate to
the submitting dealership the results of the review, including
the reasons why a particular application may have been declined.
This practice encourages the dealership finance managers to
submit Contracts meeting the Companys underwriting
standards, thereby increasing the Companys operating
efficiency. In order to ensure consistent application of its
underwriting standards as its volume of Contract purchases
increases, the Company has a formal internal training program
for new and existing Credit and Account Managers.

The underwriting process begins when an
application is either faxed or transmitted electronically from
the dealership to the Companys corporate headquarters
where it is input or uploaded into the Companys front-end
application processing system. Each application is evaluated by
a Credit or Account Manager in the assigned Auto Finance Center
using uniform underwriting standards developed by the Company.
These underwriting standards are intended to assess the
applicants ability to timely repay all amounts due under
the Contract and the adequacy of the financed vehicle as
collateral. To evaluate credit applications, the Credit or
Account Manager reviews, among other things, on-line
information, including reports of credit reporting agencies,
nationally recognized vehicle valuation services and ownership
of real estate listed on an application. The Company has
installed an in-house grading system to enhance its current
underwriting standards. The system analyzes the applicants
credit profile and collateral and produces recommended advance
and buy rate guidelines. The system also performs additional
fraud checks to alert the users of potential problems with the
application. The system also verifies the overall Contract grade
with the users credit limits, as each user is assigned a
credit limit. If the application falls outside the users
limits, the system will prompt the application to be reviewed by
a higher user level. The system was installed to further enhance
the enforcement of the Companys credit policies and to
monitor credit exceptions on a real-time basis. The
Companys wide area network permits a Credit or Account
Manager in any Auto Finance Center to access an application on a
real-time basis. This computer network enables senior management
to efficiently review Contracts requiring senior approval and
permits the Company to seamlessly shift underwriting work among
its Auto Finance Centers to

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increase operating efficiency. Finally, the
Companys risk management reporting system permits daily
review by senior management of operating results sorted by any
number of variables, including by Credit/ Account Manager, Auto
Finance Center or dealership.


The funds advanced by the Company to purchase a
Contract generally do not exceed: (i) for a new financed
vehicle, the dealers invoice plus taxes, title and license
fees, any extended warranty and credit insurance; or
(ii) for a used financed vehicle, the wholesale value
assigned by a nationally recognized vehicle valuation service
value guide, plus taxes, title and license fees, any extended
warranty and credit insurance. However, the actual amount
advanced for a Contract may be limited by a number of factors,
including the length of the Contract term, the make, model and
year of the financed vehicle and the creditworthiness of the
obligor. These adjustments are made to insure that the financed
vehicle constitutes adequate collateral to secure the Contract.
Contracts purchased or originated in 2003 had an average loan to
value ratio of 102%.

Once the review of an application is completed,
the Credit or Account Manager communicates the decision to the
dealership specifying approval, conditional approval (for
example, conditioned on an increase in the down payment,
reduction in the term of the financing, or the addition of a
co-signer to the Contract), or denial.

The dealership is required to deliver the
necessary documentation for each approved Contract to be
purchased by the Company to the originating Auto Finance Center.
The Company audits such documents for completeness and
consistency with the application, providing final approval for
the funding of the Contract once these requirements have been
satisfied. The completed Contract file is then promptly
forwarded to the corporate headquarters.

The Auto Finance Center purchasing the Contract
funds the purchase and may pay the dealer a fee in the form of
dealer participation in the finance income. The dealership can
receive 100% of the dealer participation, at purchase or at
month-end, and the Company is entitled to recover from the
dealership over the life of the Contract the unearned portion of
the dealer participation in the event of a prepayment of the
purchased Contract or a repossession or charge-off of the
Contract. The Company also offers other participation methods,
in which the Company pays less than 100% of the dealer
participation, but for which the dealership is under no
obligation to refund any unearned participation amount if the
Contract defaults or prepays after the expiration of a set
period of time after the Contract purchase date.

The Company conducts a post-funding credit review
of many of its Contracts through its centralized Credit Audit
Department. In the review, the funded application is re-examined
to ensure compliance with the Companys underwriting
requirements. As part of the post-funding review, a
predetermined sampling of approximately one out of eight
Contracts is selected for which the borrower is contacted to
verify certain information on the Contract. The results are then
reviewed by senior management to ensure consistent application
of the Companys underwriting standards.

The Company employs a compensation system for its
Credit Managers, Account Managers and Auto Finance Centers based
on teams. The system is designed to reward those employees whose
Contract purchases meet the Companys volume and yield
objectives while preserving credit quality. Generally, these
bonuses are payable monthly and constitute a significant portion
of an employees compensation. The Company believes this
incentive compensation system motivates employees to purchase
only those prime and near-prime quality Contracts that meet the
Companys objectives of increasing volume at targeted
yields while preserving credit quality.

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The following table sets forth information about
the Companys Contracts as of the dates indicated:

|                                                                                                 |  |                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------------------------------ |  | -------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                                                                                 |  |                                 
|                                                                                                 |  | For the Years Ended December 31,
|                                                                                                 |  |                                 
|                                                                                                 |  | 1999                             |           | 2000 |  | 2001 |           | 2002 |  | 2003
|                                                                                                 |  |                                  |           |      |  |      |           |      |  |     
|                                                                                                 |  |                                 
|                                                                                                 |  | (Dollars in thousands)          
|Contracts purchased                                                                              |  | $                                | 1,559,004 |      |  | $    | 1,671,703 |      |  | $    | 1,606,330 |   |  | $ | 1,614,041 |   |  | $ | 1,596,720 |  
|Average contract amount purchased                                                                |  | $                                | 12.2      |      |  | $    | 12.6      |      |  | $    | 14.0      |   |  | $ | 14.9      |   |  | $ | 15.3      |  
|Weighted average initial term (months)                                                           |  |                                  | 57.0      |      |  |      | 57.2      |      |  |      | 58.2      |   |  |   | 59.3      |   |  |   | 60.5      |  
|Percentage of dollar amount of contracts
    purchased and collateralized by new motor vehicles  |  |                                  | 15.72     | %    |  |      | 18.01     | %    |  |      | 21.86     | % |  |   | 26.28     | % |  |   | 27.61     | %
|Percentage of dollar amount of contracts
    purchased and collateralized by used motor vehicles |  |                                  | 84.28     | %    |  |      | 81.99     | %    |  |      | 78.14     | % |  |   | 73.72     | % |  |   | 72.39     | %

Periodically, the Company performs an analysis of
its serviced portfolio to evaluate the effectiveness of its
underwriting guidelines. As external economic factors, credit
delinquencies or credit losses change, the Company may adjust
its underwriting guidelines and/or incentive compensation system
to maintain the asset quality deemed acceptable by the
Companys management.

Servicing and Collection Procedures

The Company services all Contracts in its
serviced portfolio. The Company currently outsources its
customer billing functions. Through a service provider, the
Company mails to each obligor a monthly billing statement
approximately 20 days prior to the due date. The Company
believes this method has proven to be more effective in
controlling delinquency, and therefore losses, than payment
coupon books which are delivered to the obligor at the time the
Contract is purchased. The Company charges a late fee, where
allowed by law, on any payment received after the expiration of
the applicable grace period. Most payments from obligors are
deposited directly into a lockbox account while the remainder of
payments are received directly by the Company.

Under the terms of its credit facilities and
securitization trusts, the Company acts as servicer with respect
to all Contracts purchased or originated in its serviced
portfolio. The Company receives servicing fees for servicing
securitized Contracts equal to one percent per annum of the
outstanding principal balance of such Contracts. The Company
services the securitized Contracts by collecting payments due
from obligors and remitting such payments to the trustee or
agent in accordance with the terms of the servicing agreements.
The Company maintains computerized records with respect to each
Contract to record receipts and disbursements and to prepare
related servicing reports.

Collection Procedures

Collection activities with respect to delinquent
Contracts are performed by the Company at its Foothill Ranch,
California and Hazelwood, Missouri collection centers.
Collection activities include prompt investigation and
evaluation of the causes of any delinquency. An obligor is
considered delinquent when he or she has failed to make at least
90% of a scheduled payment under the Contract within
30 days of the related due date.

To automate its collection procedures, the
Company uses features of its computer systems to provide
tracking and notification of delinquencies. The collection
system provides relevant obligor information (for example,
current addresses, phone numbers and loan information) and
records of all Contracts. The system also records an
obligors promise to pay and provides supervisors the
ability to review collection personnel activity and to modify
collection priorities with respect to Contracts. The Company
also utilizes a predictive dialing system to make phone calls to
obligors whose payments are past due. The predictive dialer is a

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computer-controlled telephone dialing system
which dials phone numbers of obligors from a file of records
extracted from the Contract database. By eliminating time wasted
on attempting to reach obligors, this system permits a collector
to work on average three times the number of accounts. Once a
live voice responds to the automated dialers call, the
system automatically transfers the call to a collector and the
relevant account information to the collectors computer
screen. The system also tracks and notifies collections
management of phone numbers that the system has been unable to
reach within a specified number of days, thereby promptly
identifying for management all obligors who cannot be reached by
telephone.


Once an obligor is more seriously delinquent,
these accounts are assigned to specific collectors at the
Foothill Ranch or Hazelwood collection centers who have primary
responsibility for such delinquent accounts until they are
resolved. To expedite collections from late paying obligors, the
Company uses several third party payment services which allow an
obligor to remit payments which are in turn deposited to the
Companys lockbox accounts.

Generally, after a scheduled payment under a
Contract continues to be past due for between 45 and
60 days, the Company will initiate repossession of the
financed vehicle. However, if a Contract is deemed
uncollectible, if the financed vehicle is deemed by collection
personnel to be in danger of being damaged, destroyed or made
unavailable for repossession, or if the obligor voluntarily
surrenders the financed vehicle, Onyx may recover it without
regard to the length of payment delinquency. Repossessions are
conducted by third parties that are engaged in the business of
repossessing vehicles for secured parties. Under California law
and the laws of most other states, after repossession, the
obligor generally has an additional period of time to redeem the
financed vehicle before the financed vehicle may be resold by
the Company in an effort to recover the balance due under the
Contract.

If the proceeds from the sale of a repossessed
vehicle fall short of the balance due on the Contract, the
Company will experience a loss. The current policy of the
Company is to recognize losses on repossessed vehicles in the
month in which the vehicle is sold or in which a scheduled
payment becomes 120 days delinquent, whichever occurs
first. Losses may occur in connection with delinquent Contracts
for which the vehicle was not repossessed, either because of a
discharge of the obligors indebtedness in a bankruptcy
proceeding or due to the Companys inability to locate the
financed vehicle or the obligor. In these cases, losses are
recognized at the time a Contract is deemed uncollectible or
during the month a scheduled payment under the Contract becomes
150 days past due, whichever occurs first.

Upon repossession and sale of the financed
vehicle, any deficiency remaining is pursued against the obligor
to the extent deemed practical by the Company and to the extent
permitted by law. The loss recognition and collection policies
and practices of the Company may change over time in accordance
with the business judgment of the Companys management.

Modifications and Extensions

The Company offers certain credit-related
extensions to obligors. These extensions are offered only when
the Company believes that the obligors financial
difficulty has been resolved or will no longer impair the
obligors ability to make future payments.

Insurance

Each Contract requires the obligor to obtain
comprehensive and collision insurance with respect to the
related financed vehicle with the Company named as a loss payee.
In the event that the obligor fails to maintain the required
insurance, the Company has purchased limited comprehensive and
collision insurance from Great American Insurance Companies. A
portion of the policy provides the Company with protection on
each uninsured or underinsured financed vehicle against total
loss, damage or theft. In conjunction with the blanket coverage,
the Company also has the ability to place month-to-month
insurance certificates through Great American Insurance
Companies on uninsured accounts whose Contracts allow for such
placement. To further reduce its exposure to uninsured
motorists, the Company operates an insurance tracking function
at its corporate headquarters. This department systematically
records cancellations, expirations and renewals and initiates
contacts with both obligors and insurers to maximize compliance
with Company policy.

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Financing and Sale of Contracts

During 2003, the Company financed the acquisition
and origination of Contracts primarily through its Triple-A CP
Facility described below. As a means to improve liquidity, the
Company expanded and diversified its lending lines with the
execution of a $150.0 million warehouse facility sponsored
by CDC Financial Products Inc. and guaranteed by XL Capital
Assurance Inc., in January 2003, as further discussed below (the
CDC CP Facility). The Triple-A CP Facility and the
CDC CP Facility are collectively referred to as the CP
Facilities.

CP Facilities:As of
December 31, 2003, the Company was party to two warehouse
facilities. The Companys primary warehouse facility was a
$300 million facility (the Triple-A CP
Facility), with Triple-A One Funding Corporation
(Triple-A). Onyx Acceptance Financial Corporation
(Finco), a special purpose subsidiary of the
Company, is the borrower under the Triple-A CP Facility. The
Triple-A CP Facility is used to fund the purchase or origination
of Contracts. Triple-A is a rated commercial paper asset-backed
conduit sponsored by MBIA Insurance Corporation
(MBIA). MBIA provides credit enhancement for the
facility by issuing a financial guarantee insurance policy
covering all principal and interest obligations owed for the
borrowings under the facility. The Company pledges certain of
its Contracts held for sale to borrow from Triple-A. The
Triple-A CP Facility was renewed in November 2001 for a
three-year term, subject to annual renewals by liquidity
providers. During 2003, the size of the Triple-A CP Facility was
reduced from $355.0 million to $300.0 million in
conjunction with the acquisition of the CDC CP Facility.

In January 2003, a subsidiary of the Company,
Onyx Acceptance Receivables Corporation (OARC),
executed a $150 million warehouse facility with CDC
Financial Products Inc. (CDC) which provides
warehouse funding for the purchase or origination of Contracts
and has been used in concert with the Triple-A CP Facility. XL
Capital Assurance Inc. provides credit enhancement for the
facility by issuing a financial guarantee insurance policy
covering all principal and interest obligations owed for
borrowings under the facility. The Company pledges certain of
its Contracts held for sale to borrow under the CDC CP Facility.
The CDC CP Facility was renewed and expanded to
$300 million in January 2004 with the addition of another
lending group. The facility is now set to expire in January 2005.

The Company finances dealer participation
payments and daily operations principally through credit
facilities collateralized by its retained interest in
securitized assets, proceeds from subordinated debt offerings,
and cash from operating activities.

The Residual Lines:As of December 31, 2003, the Company, through a special
purpose subsidiary of the Company, Onyx Acceptance Funding
Corporation (Fundco), had two residual financing
facilities: a $35 million line with Merrill Lynch
International, as buyer (MLI), and Merrill Lynch,
Pierce, Fenner & Smith Inc., as agent
(Merrill), and a $21.4 million facility with
Credit Suisse First Boston (Europe) Limited, as buyer
(CSFB-Europe), and Credit Suisse First Boston
Corporation, as agent (CSFB). The MLI facility was
executed in April 2003, and replaced a $50.0 million
residual line with Salomon Smith Barney Realty Corporation
(SBRC). Each loan under the MLI line has a
nine-month revolver period followed by a twelve-month
amortization period. The CSFB-Europe line was renewed in October
2003, at which time the facility size was reduced from
$35 million to $21.4 million, until January 2004. In
January 2004, the line was extended through April 2004 as a
$20 million facility. The Company expects to renew the line
at the $20 million level for another year at that time. The
reductions in the CSFB-Europe line were related to the Company
entering into a $30 million residual financing facility
with Galleon Capital, LLC (Galleon), in January
2004. (The Galleon facility together with the MLI facility and
the CSFB-Europe facility are sometimes referred to herein as the
Residual Lines). The Galleon facility provides for a
twelve-month revolving period followed by an accelerated
amortization period.

Residual
Securitizations:As an additional
source of funds, the Company has utilized residual
securitizations to increase the Companys liquidity. During
the first quarter of 2000, the Company securitized the residual
cash flows from 15 of its then outstanding securitizations. The
proceeds of this transaction were used by the Company to pay
down two residual financing facilities and pay off another
residual financing facility. The Company refinanced this
residual securitization in the amount of $21.0 million
during the second quarter of 2002 and in the amount of
$9.2 million during the fourth quarter of 2002. During the
first quarter of 2002,

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the Company completed its second residual
interest securitization for the purpose of providing additional
borrowing capacity under its Residual Lines. This transaction
generated approximately $75.0 million in proceeds. The
Company retired both of these residual securitizations in 2003.


Subordinated Debt:As of December 31, 2003, the Company had outstanding
approximately $51.1 million of subordinated debt,
$12.0 million of which has a stated interest rate of 12.5%
and a maturity of June 2006. The remaining balance of
$39.1 million was raised through the Companys
renewable unsecured subordinated note program launched during
the first quarter of 2002. The weighted average interest rate on
the balance of the renewable notes outstanding as of
December 31, 2003 was approximately 8.5%. The renewable
notes have varying maturities ranging from three months to ten
years.

The facilities and lines above contain
affirmative, negative and financial covenants typical of such
credit facilities. The Company was in compliance with these
covenants as of December 31, 2003.

Hedging and Interest Rate Risk
Management:The Company employs a
hedging strategy that is intended to minimize the risk of
interest rate fluctuations, and which historically has involved
the execution of forward interest rate swaps or use of a
pre-funding structure for the Companys securitizations.
The Company is not required to maintain collateral on the
outstanding hedging program, until the point where the fair
value of the swap declines below ($1.0) million.

Securitization:Regular Contract securitizations are an integral part of the
Companys business plan because they allow the Company to
increase its liquidity, provide for redeployment of its capital
and reduce risks associated with interest rate fluctuations. The
Company has developed a securitization program that involves
selling interests in pools of its Contracts to investors through
the public issuance of AAA/ Aaa rated asset-backed securities.
The Company completed four AAA/ Aaa rated publicly underwritten
asset-backed securitizations in the total amount of
$1.6 billion in 2003.

The net proceeds of these securitizations are
used to pay down outstanding indebtedness incurred under the
Companys warehouse credit facilities used to purchase
Contracts, thereby creating availability for the purchase of
additional Contracts. Through December 31, 2003, the
Company had securitized approximately $10.0 billion of
Contracts in 34 separate transactions. In each of its
securitizations, the Company sold its Contracts to a newly
formed grantor or owner trust, which issued certificates or
notes in an amount equal to the aggregate principal balance of
the Contracts.

To improve the level of profitability from the
sale of securitized Contracts, the Company arranges for credit
enhancement to achieve an improved credit rating on the
asset-backed securities issued. This credit enhancement has
taken the form of a financial guaranty insurance policy (the
Financial Guarantee Insurance Policy) insuring the
payment of principal and interest due on the asset-backed
securities.

The Company receives servicing fees for its
duties relating to the accounting for and collection of the
Contracts. In addition, the Company is entitled to the future
excess cash flows arising from the trusts. Generally, the
Company sells the Contracts at face value and without recourse,
except that certain representations and warranties with respect
to the Contracts are provided by the Company as the servicer and
Finco as the seller to the trusts.

Gains on sale of Contracts arising from
securitizations provide a significant portion of the
Companys revenues. Several factors affect the
Companys ability to complete securitizations of its
Contracts, including conditions in the securities markets
generally, conditions in the asset-backed securities market
specifically, the credit quality of the Companys portfolio
of Contracts and the Companys ability to obtain credit
enhancement.

Government Regulation

The Company is subject to regulation,
supervision, and licensing under various federal, state and
local statutes, ordinances and regulations, including the
Sarbanes-Oxley Act of 2002. The Company is required to comply
with the laws of those states in which it conducts operations.
Management believes that it is in compliance with these laws and
regulations.

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Consumer Protection
Laws:Numerous federal and state
consumer protection laws and related regulations impose
substantial requirements upon lenders and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission
Act, the Fair Credit Reporting Act, the Fair and Accurate Credit
Transactions Act, the Gramm-Leach-Bliley Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Boards Regulations B and
Z, states adaptations of the Uniform Consumer Credit Code
and of the Uniform Commercial Code (the UCC), state
and federal privacy laws and state motor vehicle retail
installment sales acts and other similar laws. These laws, among
other things, require the Company to provide certain disclosures
to applicants, prohibit misleading advertising and protect
against discriminatory financing or unfair credit and collection
practices. The Truth-in-Lending Act and Regulation Z
promulgated thereunder require disclosure of, among other
things, the payment schedule, the finance charge, the amount
financed, the total of payments and the annual percentage rate
charged on each retail installment contract. The Equal Credit
Opportunity Act, and similar state laws, prohibit creditors from
discriminating against credit applicants (including retail
installment contract obligors) on the basis of specific
enumerated criteria. Creditors are also required to make certain
disclosures regarding consumer rights and advise consumers whose
credit applications are not approved. The rules of the Federal
Trade Commission (the FTC) limit the types of
property a creditor may accept as collateral to secure a
consumer obligation, and its holder in due course rule provides
for the preservation of the consumers claims and defenses
when a consumer obligation is assigned to a holder. With respect
to used vehicles specifically, the FTCs rule on Sale of
Used Vehicles requires that all sellers of used vehicles
prepare, complete and display a Buyers Guide which
explains any applicable warranty coverage for such vehicles.
Also, some state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract
disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some
cases these provisions, if violated, could affect the
Companys ability to enforce the Contracts it purchases or
originates.

Employees

The Company employs personnel experienced in all
areas of loan origination, documentation, collection and
administration. The Company employs and trains specialists in
loan processing and servicing with minimal crossover of duties.
At December 31, 2003, the Company had 917 full-time
employees, none of whom were covered by collective bargaining
agreements. The Company believes it has good relationships with
its employees.

BUSINESS RISKS

You should carefully consider the following
risks in your evaluation of us and our common stock. The risks
and uncertainties described below may not be the only ones
facing our Company. Additional risks and uncertainties,
including, but not limited to, credit, economic, competitive,
governmental and financial factors affecting our operations,
markets, financial products, and services and other factors
discussed in our future filings with the Securities and Exchange
Commission may also adversely impact and impair our business. If
any of these risks actually occur, our business, results of
operations, cash flows or financial condition would likely
suffer. In such case, the trading price of our common stock
could decline, and you may lose all or part of the money you
paid to buy our common stock.

We Need Substantial Liquidity.

We require a substantial amount of liquidity to
operate our business. Among other things, we use such liquidity
to:



| |   |                                                        
| | - | -------------------------------------------------------
| |  | acquire Contracts;                                     
|
| |  | pay dealer participation;                              
|
| |  | pay securitization costs and fund related
    accounts;
|
| |  | settle hedge transactions;                             

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| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | satisfy working capital requirements and pay
    operating expenses; and
|
| |  | pay interest expense.                                                   

A substantial portion of our revenues in any
period is represented by the gain on sale of Contracts generated
by a securitization in such period, but the cash underlying such
revenues is received over the life of the Contracts.

We have historically operated on a negative cash
flow basis. We generated positive cash flow beginning in the
fourth quarter of 2003, and will likely continue to remain cash
flow positive on a quarterly basis, provided the volume of
Contract purchases remains steady on an annual basis. We have
historically funded negative operating cash flows principally
through borrowings from financial institutions, sales of equity
securities and sales of subordinated notes. We cannot assure
you, however, that (1) we will remain cash flow positive,
(2) we will have access to the capital markets in the
future for equity, debt issuances or securitizations, or
(3) financing through borrowings or other means will be
available on acceptable terms to satisfy our cash requirements.
If we are unable to access the capital markets or obtain
acceptable financing, our results of operations, financial
condition and cash flows would be materially and adversely
affected. See Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Liquidity and Capital Resources.

We Depend on Warehouse Financing.

We depend on warehouse facilities with financial
institutions to finance the purchase or origination of Contracts
pending securitization. Our business strategy requires that such
financing continue to be available during the warehousing period.

Whether the CP Facilities continue to be
available to us depends on, among other things, whether we
maintain a target net yield for the Contracts financed under the
CP Facilities and comply with certain financial covenants
contained in the sale and servicing agreements between us, as
seller, and our respective wholly-owned special purpose
subsidiary, Finco or OARC, as purchaser. These financial
covenants include:



| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | a minimum ratio of net worth plus subordinated
    debt to total assets;   
|
| |  | a maximum ratio of credit enhancement assets to
    tangible net worth; and
|
| |  | an earnings before interest, depreciation and
    taxes coverage ratio.    

We cannot assure you that our CP Facilities will
be available to us or that they will be available on favorable
terms. If we are unable to arrange new warehousing credit
facilities or extend our existing credit facilities when they
expire, our results of operations, financial condition and cash
flows could be materially and adversely affected.

We Depend on Residual Financing.

When we sell our Contracts in securitizations, we
receive cash and a residual interest in the securitized assets
(RISA). The RISA represents the future cash flows to
be generated by the Contracts in excess of the interest paid on
the securities issued in the securitization and other costs of
servicing the Contracts and completing the securitization. (See
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Securitizations). We typically use the RISA from each
securitization as collateral to borrow cash under our Residual
Lines to finance our operations. The amount of cash advanced by
our lenders under our Residual Lines depends on a collateral
formula that is determined in large part by how well our
securitized Contracts perform. If our portfolio of securitized
Contracts experience a higher delinquency and loss ratios than
expected, then the amount of money we can borrow under the
Residual Lines would be reduced. The reduction in availability
under these Residual Lines could materially and adversely affect
our operations, financial condition and cash flows.
Additionally, we are subject, under the documentation governing
the Residual Lines, to certain financial covenants. During the
year, the Company recorded a $8.6 million write-down of the
Companys RISA asset stemming from higher than expected
losses and delinquency on certain securitizations.

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We Depend on Securitizations to Generate
Revenue.

We rely significantly upon securitizations to
generate cash proceeds for repayment of our warehouse and our
residual credit facilities and to create availability to
purchase additional Contracts. Further, gain on sale of
Contracts generated by our securitizations represents a
significant portion of our revenues. Our ability to complete
securitizations of our Contracts is affected by the following
factors, among other things:



| |   |                                                                   
| | - | ------------------------------------------------------------------
| |  | conditions in the securities markets generally;                   
|
| |  | conditions in the asset-backed securities market
    specifically;
|
| |  | the credit quality of our portfolio of
    Contracts; and         
|
| |  | our ability to obtain credit enhancement.                         

If we were unable to profitably securitize a
sufficient number of our Contracts in a particular financial
reporting period, then our revenues for such period could
decline and could result in lower net income or a loss for such
period. In addition, unanticipated delays in closing a
securitization could also increase our interest rate risk by
increasing the warehousing period for our Contracts. See
Managements Discussion and Analysis of Results of
Operations and Financial Condition  Liquidity and
Capital Resources.

We Depend on Credit Enhancement.

From inception through December 31, 2003,
each of our securitizations has utilized credit enhancement in
the form of a financial guarantee insurance policy in order to
achieve AAA/ Aaa ratings. This form of credit
enhancement reduces the cost of the securitizations relative to
alternative forms of credit enhancement currently available to
us. We cannot assure you that:



| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | we will be able to continue to obtain credit
    enhancement in any form from our current providers;                      
|
| |  | we will be able to obtain credit enhancement from
    any other provider of credit enhancement on acceptable
    terms; or
|
| |  | future securitizations will be similarly rated.                                                                           

We also rely on financial guarantee insurance
policies to reduce our borrowing cost under the CP Facilities.
If our current providers credit ratings are downgraded or
if they withdraw the credit enhancement, we could be subject to
higher interest costs for our future securitizations and
financing costs during the warehousing period. Such events could
have a material adverse effect on our results of operations,
financial condition and cash flows.

We Are Subject to Interest Rate
Fluctuations.

Our profitability is largely determined by the
difference, or spread, between the effective rate of
interest received by us on the Contracts acquired and the
interest rates payable under our credit facilities during the
warehousing period and for securities issued in securitizations.

Several factors affect our ability to manage
interest rate risk. First, the Contracts are purchased or
originated at fixed interest rates, while amounts borrowed under
our credit facilities bear interest at variable rates that are
subject to frequent adjustment to reflect prevailing rates for
short-term borrowings. Our policy is to increase the buy rates
we issue to dealerships in response to increases in our cost of
funds during the warehousing period. However, there is generally
a time lag before such increased borrowing costs can be offset
by increases in the buy rates for Contracts and, in certain
instances, the rates charged by our competitors may limit our
ability to pass through our increased costs of warehouse
financing.

Second, the spread can be adversely affected
after a Contract is purchased or originated and while it is held
during the warehousing period by increases in the prevailing
rates in the commercial paper markets. While the CP Facilities
permit us to select maturities to coincide with the projected
end of the warehouse period, if we selected a shorter maturity
or have a delay in completing a securitization, we would face
this risk.

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Third, the interest rate demanded by investors in
securitizations is a function of prevailing market rates for
comparable transactions and the general interest rate
environment. Because the Contracts purchased or originated by us
have fixed rates, we bear the risk of spreads narrowing because
of interest-rate increases during the period from the date the
Contracts are purchased until the pricing of our securitization
of such Contracts. We employ a hedging strategy that is intended
to minimize this risk and which historically has involved the
execution of forward interest rate swaps or use of a pre-funding
structure for our securitizations. However, we cannot assure you
that this strategy will consistently or completely offset
adverse interest-rate movements during the warehousing period or
that we will not sustain losses on hedging transactions. Our
hedging strategy requires estimates by management of monthly
Contract acquisition volume and timing of our securitizations.
If such estimates are significantly inaccurate, then our gains
on sales of Contracts, results of operations and cash flows
could be materially and adversely affected.

We also have exposure to interest rate
fluctuations under the Residual Lines. In periods of increasing
interest rates, our cash flows, results of operations and
financial condition could be materially adversely affected.

In addition, we have some interest rate exposure
to falling interest rates to the extent that the interest rates
charged on Contracts sold in a securitization with a pre-funding
structure decline below the rates prevailing at the time that
the securitization prices. Such a rate decline would reduce the
interest rate spread because the interest rate on the notes
and/or the certificates would remain fixed. This would
negatively impact the gain on sale of Contracts and our results
of operations and cash flows.

We Will Be Adversely Affected When Contracts
are Prepaid or Defaulted.

Our results of operations, financial condition,
cash flows and liquidity depend, to a material extent, on the
performance of Contracts purchased, originated, warehoused, and
securitized by us. A portion of the Contracts acquired by us may
default or prepay during the warehousing period. We bear the
risk of losses resulting from payment defaults during the
warehousing period. In the event of payment default, the
collateral value of the financed vehicle may not cover the
outstanding Contract balance and costs of recovery. We maintain
an allowance for credit losses on Contracts held for investment,
which reflects managements estimates of anticipated credit
losses during such period. If the allowance is inadequate, then
we would recognize as an expense the losses in excess of such
allowance, and our results of operations could be adversely
affected. In addition, under the terms of the CP Facilities, we
are not able to borrow against defaulted Contracts.

Our servicing income can also be adversely
affected by prepayments of or defaults under Contracts in the
serviced portfolio. Our contractual servicing revenue is based
on a percentage of the outstanding principal balance of such
Contracts. Thus, if Contracts are prepaid or charged-off, then
our servicing revenue will decline to the extent of such prepaid
or charged-off Contracts.

The gain on sale of Contracts recognized by us in
each securitization and the value of the RISA in each
transaction reflects managements estimate of future credit
losses and prepayments for the Contracts included in such
securitization. If actual rates of credit loss or prepayments,
or both, on such Contracts exceed those estimated, the value of
the RISA would be impaired. We periodically review our credit
loss and prepayment assumptions relative to the performance of
the securitized Contracts and to market conditions. Our results
of operations and liquidity could be adversely affected if
credit loss or prepayment levels on securitized Contracts
substantially exceed anticipated levels. Under certain
circumstances, we would be required to record an impairment
charge through a reduction to gain-on-sale. Further, an
impairment of RISA could reduce the amount available to us under
our Residual Lines, thus possibly requiring us to pay down
amounts outstanding under these facilities or provide additional
collateral to cure any borrowing base deficiency.

During the year ended December 31, 2003, the
Company recorded an impairment loss of $8.6 million
compared to $15.1 million for the year ended
December 31, 2002. The impairments principally reflect the
adverse performance of securitizations executed during 1999 and
2000, stemming from higher than expected losses and delinquency.

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Effects of Terrorist Attacks and Military
Response.

The long-term economic impact of the events of
September 11, 2001 and the United States continuing
military response, remain uncertain, but could have a material
effect on general economic conditions, consumer confidence and
market liquidity. No assurance can be given as to the effect of
these events on the performance of the Contracts. Any adverse
impact resulting from these events could materially affect our
results of operations, financial condition and cash flows.

In addition, activation of a substantial number
of U.S. military reservists or members of the National
Guard may significantly increase the proportion of Contracts
whose interest rates are reduced by the application of the
Servicemembers Civil Relief Act (the Relief Act,
which amends and replaces the Soldiers and Sailors
Civil Relief Act of 1940). The Relief Act provides, generally,
that an obligor who is covered by the Relief Act may not be
charged interest on the related Contract in excess of 6%
annually during the period of the obligors active duty.

We Will Be Adversely Affected If We Lose
Servicing Rights.

Our results of operations, financial condition
and cash flows would be materially and adversely affected if any
of the following were to occur:



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | loss of the servicing rights under our sale and
    servicing agreements for the CP Facilities; or   
|
| |  | loss of the servicing rights under the applicable
    sale and servicing agreement of an owner trust.

We are entitled to receive servicing income only
while we act as servicer under the applicable sale and servicing
agreement. Under the CP Facilities, our right to act as servicer
can be terminated by our lender or financial insurer upon the
occurrence of certain events.

Our Quarterly Earnings May
Fluctuate.

Our revenues have fluctuated in the past and are
expected to fluctuate in the future principally as a result of
the following factors:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | the timing and size of our securitizations;                                                                        
|
| |  | the performance of our serviced portfolio;                                                                         
|
| |  | variations in the volume of our Contract
    acquisitions;                                                         
|
| |  | the interest rate spread between our cost of
    funds and the average interest rate of purchased Contracts;       
|
| |  | the effectiveness of our hedging strategies;                                                                       
|
| |  | the investor rate for securitizations; and                                                                         
|
| |  | a trigger event that would block release of
    excess cash flows from a securitization trusts spread
    account.

Any significant decrease in our quarterly
revenues could have a material adverse effect on our results of
operations, financial condition, cash flows and stock price.

We Depend on Key Personnel.

Our future operating results depend in
significant part upon the continued service of our key senior
management personnel, none of whom is bound by an employment
agreement. Our future operating results also depend in part upon
our ability to attract and retain qualified management,
technical, sales and support personnel for our operations. We
cannot assure you that we will be successful in attracting or
retaining such personnel. The loss of any key employee, the
failure of any key employee to perform in his or her current
position or our inability to attract and retain skilled
employees, as needed, could materially and adversely affect our
results of operations, financial condition and cash flows.

16



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##### Table of Contents



Our Industry is Highly Competitive.

Competition in the field of financing retail
motor vehicle sales is intense. The automobile finance market is
highly fragmented and historically has been serviced by a
variety of financial entities including the captive finance
affiliates of major automotive manufacturers, as well as banks,
savings associations, independent finance companies, credit
unions and leasing companies. Several of these competitors have
greater financial resources than we do. Many of these
competitors also have long-standing relationships with
automobile dealerships and offer dealerships or their customers
other forms of financing or services not provided by us. Our
ability to compete successfully depends largely upon our
relationships with dealerships and the willingness of
dealerships to offer those Contracts that meet our underwriting
criteria to us for purchase. We cannot assure you that we will
be able to continue to compete successfully in the markets we
serve.

We May Be Harmed by Adverse Economic
Conditions.

We are a motor vehicle consumer auto finance
company whose activities are dependent upon the sale of motor
vehicles. Our ability to continue to acquire Contracts in the
markets in which we operate and to expand into additional
markets is dependent upon the overall level of sales of new and
used motor vehicles in those markets. A prolonged downturn in
the sale of new and used motor vehicles, whether nationwide or
in the California market, could have a material adverse impact
upon us, our results of operations and our ability to implement
our business strategy.

The automobile industry generally is sensitive to
adverse economic conditions both nationwide and in California,
where we have our largest single-state exposure. Periods of
rising interest rates, reduced economic activity or higher rates
of unemployment generally result in a reduction in the rate of
sales of motor vehicles and higher default rates on motor
vehicle contracts. We cannot assure you that such economic
conditions will not occur, or that such conditions will not
result in severe reductions in our revenues or the cash flows
available to us to permit us to remain current on our credit
facilities.

We Are Subject to System Risks.

In July 2001, the Company converted from an
external service provider for its loan accounting and
collections system to an in-house system. If issues with the
in-house system arise in the future, we may be unable to acquire
Contracts and service the outstanding portfolio. The failure of
this system could materially and adversely affect our results of
operations, financial condition and cash flows.

We Are Subject to Many Regulations.

Our business is subject to numerous federal and
state consumer protection laws and regulations, which, among
other things:



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | require us to comply with certain requirements
    due to our being a publicly traded company;
|
| |  | require us to obtain and maintain certain
    licenses and qualifications;                    
|
| |  | limit the interest rates, fees and other charges
    we are allowed to charge;                
|
| |  | limit or prescribe certain other terms of our
    Contracts;                                  
|
| |  | require us to protect the privacy of consumer
    information;                                
|
| |  | require specific disclosures; and                                                             
|
| |  | define our rights to repossess and sell
    collateral.                                       

We believe that we are in compliance, in all
material respects, with all such laws and regulations, and that
such laws and regulations have had no material adverse effect on
our ability to operate our business. However, we will be
materially and adversely affected if we fail to comply with:



| |   |                                 
| | - | --------------------------------
| |  | applicable laws and regulations;

17



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##### Table of Contents





| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | changes in existing laws or regulations;                                 
|
| |  | changes in the interpretation of existing laws or
    regulations; or    
|
| |  | any additional laws or regulations that may be
    enacted in the future.

We Are Subject to Litigation Risks.

We are party to various legal proceedings,
similar to actions brought against other companies in the motor
vehicle finance industry and other businesses. Companies in the
motor vehicle finance industry have also been named as
defendants in an increasing number of class action lawsuits
brought by purchasers of motor vehicles and others claiming
violation of various federal and state consumer credit, as well
as similar and other, laws and regulations.

While we intend to vigorously defend ourselves
against such proceedings, there is a chance that our results of
operations, financial condition and cash flows could be
materially and adversely affected by unfavorable outcomes.






|        |           
|------- | ----------
|Item 2. | Properties

The Company did not own any real property at
December 31, 2003. The Company leases approximately
82,000 square feet of office space for its headquarters
located in Foothill Ranch, California. The Company also leases
office space for its Auto Finance Centers and its Hazelwood,
Missouri collection center. The average size of an Auto Finance
Center is generally four to five thousand square feet. The
Hazelwood collection center is approximately 20,000 square
feet. One Auto Finance Center is located in the corporate
headquarters building.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

As a consumer finance company, the Company is
subject to various consumer claims and litigation seeking
damages and statutory penalties based upon, among other things,
disclosure inaccuracies and wrongful repossession, which could
take the form of a plaintiffs class action complaint. The
Company, as the assignee of finance Contracts originated by
dealers, may also be named as a co-defendant in lawsuits filed
by consumers principally against dealers. Finally, the Company
also is subject to other litigation common to the motor vehicle
finance industry and businesses in general. The damages and
penalties claimed by consumers and others in these types of
matters can be substantial. The relief requested by the
plaintiffs varies but includes requests for compensatory,
statutory and punitive damages.

Management believes that the Company has taken
prudent steps to address the litigation risks associated with
the Companys business activities. However, there can be no
assurance that the Company will be able to successfully defend
against all such claims or that the determination of any such
claim in a manner adverse to the Company would not have a
material adverse effect on the Companys automobile finance
business.

At the present time, the Company is party only to
ordinary routine litigation, incidental to its business, which
the Company expects will be resolved without any material
adverse effect on the Companys results of operations or
financial condition.






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

No matters were submitted during the fourth
quarter of the fiscal year covered by this Annual Report on
Form 10-K to a vote of security holders, through the
solicitation of proxies or otherwise.

18



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##### Table of Contents






PART II






|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities:

The Companys Common Stock is traded on the
Nasdaq National Market under the symbol ONYX. The
following table provides quarterly high and low closing prices
for the Companys Common Stock for the years ended
December 31, 2003 and December 31, 2002.

|               |  |      |       |     |  |   |      | 
|-------------- |  | ---- | ----- | --- |  | - | ---- | 
|               |  | High |       | Low
|               |  |      |       |    
|2002           |  |      |       |     |  |   |      | 
|First quarter  |  | $    | 5.10  |     |  | $ | 3.52 | 
|Second quarter |  | $    | 5.20  |     |  | $ | 3.76 | 
|Third quarter  |  | $    | 4.29  |     |  | $ | 2.55 | 
|Fourth quarter |  | $    | 3.83  |     |  | $ | 2.29 | 
|2003           |  |      |       |     |  |   |      | 
|First quarter  |  | $    | 4.35  |     |  | $ | 2.70 | 
|Second quarter |  | $    | 6.85  |     |  | $ | 3.56 | 
|Third quarter  |  | $    | 11.58 |     |  | $ | 6.09 | 
|Fourth quarter |  | $    | 12.95 |     |  | $ | 9.99 | 

At March 15, 2004, there were approximately
1,072 beneficial holders of the Companys Common Stock.

Dividend Policy

The Companys ability to pay or declare
dividends is subject to compliance with the terms of certain of
its credit facilities. As of December 31, 2003, the Company
has never paid dividends.

19



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

SELECTED FINANCIAL DATA

The following selected financial data should be
read in conjunction with the Consolidated Financial Statements
of the Company and the notes thereto and Managements
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein.

|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |           |      |         |        | 
|----------------------------- | -------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------- | -------------- | ---- | ------ | ------ | --------- | ---- | ------ | ------ | --------- | ---- | ------ | ------ | --------- | ---- | ------ | ------ | --------- | ---- | ------- | ------ | 
|                              |                                                                                                    |                                                     
|                              |                                                                                                    | For the Years Ended December 31,                    
|                              |                                                                                                    |                                                     
|                              |                                                                                                    | 1999                                                 |               | 2000           |      | 2001   |        | 2002      |      | 2003  
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |       
|                              |                                                                                                    |                                                     
|                              |                                                                                                    | (Dollars in thousands, except for per share amounts)
|Statement of Operations Data: |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|REVENUE:                      |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Net interest income(1)                                                                             |                                                      | $             | 4,000          |      |        | $      | (1,285    | )    |        | $      | 10,064    |      |        | $      | 22,202    |      |        | $      | 24,730    |     
|                              | Servicing fee income(1)                                                                            |                                                      |               | 31,023         |      |        |        | 51,521    |      |        |        | 57,256    |      |        |        | 51,973    |      |        |        | 53,083    |     
|                              | Gain on sale of contracts (net)                                                                    |                                                      |               | 53,920         |      |        |        | 45,029    |      |        |        | 30,765    |      |        |        | 13,695    |      |        |        | 26,899    |     
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              |                                                                                                    |                                                      | Total revenue |                |      | 88,943 |        |           |      | 95,265 |        |           |      | 98,085 |        |           |      | 87,870 |        |           |      | 104,712 |       
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|EXPENSES:                     |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Provision for credit losses(2)                                                                     |                                                      |               | 1,246          |      |        |        | 990       |      |        |        | 1,079     |      |        |        | (8        | )    |        |        | 3,216     |     
|                              | Operating expenses                                                                                 |                                                      |               | 70,959         |      |        |        | 84,304    |      |        |        | 89,535    |      |        |        | 84,660    |      |        |        | 91,874    |     
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              |                                                                                                    |                                                      |               | Total expenses |      |        | 72,205 |           |      |        | 85,294 |           |      |        | 90,614 |           |      |        | 84,652 |           |      |         | 95,090 | 
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Income before income taxes                                                                         |                                                      |               | 16,738         |      |        |        | 9,971     |      |        |        | 7,471     |      |        |        | 3,218     |      |        |        | 9,622     |     
|                              | Income taxes                                                                                       |                                                      |               | 6,946          |      |        |        | 4,136     |      |        |        | 3,061     |      |        |        | 1,335     |      |        |        | 3,904     |     
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Net income                                                                                         |                                                      | $             | 9,792          |      |        | $      | 5,835     |      |        | $      | 4,410     |      |        | $      | 1,883     |      |        | $      | 5,718     |     
|                              |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Net income per share of Common Stock:                                                              |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |           |     
|                              |                                                                                                    | Basic                                                |               | $              | 1.59 |        |        | $         | 1.03 |        |        | $         | 0.88 |        |        | $         | 0.37 |        |        | $         | 1.12 |        
|                              |                                                                                                    | Diluted                                              |               | $              | 1.50 |        |        | $         | 1.00 |        |        | $         | 0.84 |        |        | $         | 0.36 |        |        | $         | 1.01 |        
|                              | Basic shares outstanding (in thousands)                                                            |                                                      |               | 6,174          |      |        |        | 5,657     |      |        |        | 5,026     |      |        |        | 5,085     |      |        |        | 5,102     |     
|                              | Diluted shares outstanding (in thousands)                                                          |                                                      |               | 6,514          |      |        |        | 5,811     |      |        |        | 5,232     |      |        |        | 5,179     |      |        |        | 5,683     |     
|Operating Data:               |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Contracts purchased during the period                                                              |                                                      | $             | 1,559,004      |      |        | $      | 1,671,703 |      |        | $      | 1,606,330 |      |        | $      | 1,614,041 |      |        | $      | 1,596,720 |     
|                              | Number of Contracts purchased during the period                                                    |                                                      |               | 127,628        |      |        |        | 131,648   |      |        |        | 115,141   |      |        |        | 108,212   |      |        |        | 104,477   |     
|                              | Contracts securitized during the period                                                            |                                                      | $             | 1,450,000      |      |        | $      | 1,720,000 |      |        | $      | 1,600,000 |      |        | $      | 1,675,000 |      |        | $      | 1,600,000 |     
|                              | Number of active dealerships (at end of period)                                                    |                                                      |               | 7,617          |      |        |        | 9,741     |      |        |        | 10,115    |      |        |        | 10,827    |      |        |        | 12,065    |     
|                              | Operating expenses as percentage of average
    serviced portfolio during the period(3)            |                                                      |               | 4.1            | %    |        |        | 3.4       | %    |        |        | 3.1       | %    |        |        | 2.9       | %    |        |        | 3.2       | %   
|Selected Portfolio Data:      |                                                                                                    |                                                      |               |                |      |        |        |           |      |        |        |           |      |        |        |           |      |        |        |          
|                              | Serviced portfolio (at end of period)                                                              |                                                      | $             | 2,133,460      |      |        | $      | 2,690,607 |      |        | $      | 2,864,338 |      |        | $      | 2,905,968 |      |        | $      | 2,843,446 |     
|                              | Average serviced portfolio during the period(3)                                                    |                                                      | $             | 1,728,875      |      |        | $      | 2,456,796 |      |        | $      | 2,818,572 |      |        | $      | 2,883,497 |      |        | $      | 2,877,831 |     
|                              | Number of Contracts in serviced portfolio (at end
    of period)                                   |                                                      |               | 209,745        |      |        |        | 269,372   |      |        |        | 289,426   |      |        |        | 291,898   |      |        |        | 280,459   |     
|                              | Weighted average annual percentage rate (at end
    of period)(4)                                  |                                                      |               | 14.77          | %    |        |        | 14.67     | %    |        |        | 13.38     | %    |        |        | 11.87     | %    |        |        | 10.40     | %   
|                              | Delinquencies as a percentage of the dollar
    amount of serviced portfolio (at end of period)(5) |                                                      |               | 2.81           | %    |        |        | 4.14      | %    |        |        | 4.01      | %    |        |        | 2.58      | %    |        |        | 1.37      | %   
|                              | Net charge-offs as a percentage of the average
    serviced portfolio during the period(3)         |                                                      |               | 1.85           | %    |        |        | 2.30      | %    |        |        | 2.78      | %    |        |        | 2.77      | %    |        |        | 2.12      | %   

20



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##### Table of Contents



|                    |                                  |                        |   |               |   |               |   |               |  |      |   |         |  |  |   |         |  |  |   |         | 
|------------------- | -------------------------------- | ---------------------- | - | ------------- | - | ------------- | - | ------------- |  | ---- | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                    |                                  |                       
|                    |                                  | As of December 31,    
|                    |                                  |                       
|                    |                                  | 1999                   |   | 2000          |   | 2001          |   | 2002          |  | 2003
|                    |                                  |                        |   |               |   |               |   |               |  |     
|                    |                                  | (Restated)(7)          |   | (Restated)(7) |   | (Restated)(7) |   | (Restated)(7) |  |     
|                    |                                  |                       
|                    |                                  | (Dollars in thousands)
|Balance Sheet Data: |                                  |                        |   |               |   |               |   |               |  |      |   |         |  |  |   |         |  |  |   |        
|                    | Cash and cash equivalents        |                        | $ | (4,142        | ) |               | $ | 5,748         |  |      | $ | 20,052  |  |  | $ | 8,231   |  |  | $ | 15,434  | 
|                    | Restricted cash                  |                        |   |              |   |               |   |              |  |      |   |        |  |  |   | 3,868   |  |  |   | 500     | 
|                    | Contracts held for sale(6)       |                        |   | 229,476       |   |               |   | 173,784       |  |      |   | 191,716 |  |  |   | 170,520 |  |  |   | 188,717 | 
|                    | Contracts held for investment(6) |                        |   |              |   |               |   |              |  |      |   | 3,539   |  |  |   | 8,406   |  |  |   | 11,298  | 
|                    | Credit enhancement assets        |                        |   | 142,884       |   |               |   | 146,013       |  |      |   | 184,300 |  |  |   | 183,564 |  |  |   | 182,344 | 
|                    | Total assets                     |                        |   | 384,503       |   |               |   | 334,153       |  |      |   | 405,202 |  |  |   | 390,944 |  |  |   | 413,815 | 
|                    | Warehouse borrowings             |                        |   | 232,288       |   |               |   | 172,509       |  |      |   | 190,008 |  |  |   | 166,007 |  |  |   | 183,008 | 
|                    | Residual lines                   |                        |   | 55,880        |   |               |   | 41,138        |  |      |   | 68,355  |  |  |   | 49,103  |  |  |   | 30,697  | 
|                    | Subordinated debt                |                        |   | 10,000        |   |               |   | 19,825        |  |      |   | 16,552  |  |  |   | 27,449  |  |  |   | 51,077  | 
|                    | Stockholders equity             |                        |   | 53,108        |   |               |   | 55,593        |  |      |   | 59,701  |  |  |   | 64,913  |  |  |   | 79,919  | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Prior to April 1, 2001, income generated
    from RISA was included as a component of service fee income.
    Additionally, certain amounts in the prior years
    consolidated financial statements have been reclassified to
    conform to the 2003 presentation.                                                                                           
|   
|(2) | The provision for credit losses for the year
    ended December 31, 2002 reflects a sales tax refund of
    approximately $2.0 million. The refund has been treated as
    a recovery as it relates to pro-rata sales taxes paid by the
    Company in financing the purchases of vehicles for which the
    related Contracts have been previously charged-off.
|   
|(3) | Averages are based on daily balances.                                                                                                                                                                                                                                                                                                                           
|   
|(4) | The weighted averages are based on the serviced
    portfolio outstanding at the end of the period.                                                                                                                                                                                                                                                             
|   
|(5) | Excludes repossessed inventory and accounts in
    bankruptcy.                                                                                                                                                                                                                                                                                                  
|   
|(6) | Contracts held for sale and Contracts held for
    investment exclude dealer participation, allowance for credit
    losses and loan premium. See Note 4 to the Consolidated
    Financial Statements.                                                                                                                                                          
|   
|(7) | As discussed in note 2 to the financial
    statements, the Company has restated certain balance sheet
    information for the years 1999 through 2002 to properly record
    the cut-off of cash transactions related to trust activity
    around each respective year end.                                                                                   






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Overview

Onyx is a specialized consumer finance company
engaged in the purchase, warehousing, securitization and
servicing of Contracts originated by franchised and select
independent automobile dealerships in the United States. The
Company focuses its efforts on acquiring Contracts that are
collateralized by late model used and, to a lesser extent, new
automobiles, that are entered into with purchasers whom the
Company believes have a favorable credit profile. Since
commencing the purchase of Contracts in February 1994, the
Company has acquired more than $10.3 billion in Contracts
and currently has relationships with approximately 12,000
dealerships. The Company has expanded its operations from a
single office in California to 18 Auto Finance Centers serving
many regions of the United States.

The Company generates revenues primarily through
the purchase, origination, warehousing, subsequent
securitization and ongoing servicing of Contracts. The Company
earns net interest income on Contracts held during the
warehousing period. Upon the securitization and sale of
Contracts, the Company recognizes a gain on sale of Contracts,
receives future excess cash flows generated by securitization
trusts and earns fees from servicing the securitized Contracts.

21



---



##### Table of Contents



The following table illustrates the changes in
the Companys Contract acquisition volume, total revenue,
securitization activity and serviced portfolio during the past
three fiscal years.

Selected Financial Information

|                                          |  |                                  |           |      |  |      |           |   |  |   |           |  
|----------------------------------------- |  | -------------------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                          |  |                                 
|                                          |  | For the Years Ended December 31,
|                                          |  |                                 
|                                          |  | 2001                             |           | 2002 |  | 2003
|                                          |  |                                  |           |      |  |     
|                                          |  |                                 
|                                          |  | (Dollars in thousands)          
|Contracts purchased during year           |  | $                                | 1,606,330 |      |  | $    | 1,614,041 |   |  | $ | 1,596,720 |  
|Average monthly purchases during the year |  |                                  | 133,860   |      |  |      | 134,503   |   |  |   | 133,060   |  
|Net interest income                       |  |                                  | 10,064    |      |  |      | 22,202    |   |  |   | 24,730    |  
|Gain on sale of contracts                 |  |                                  | 34,105    |      |  |      | 27,990    |   |  |   | 35,505    |  
|Impairment                                |  |                                  | (3,340    | )    |  |      | (15,178   | ) |  |   | (8,606    | )
|Residual securitization sale              |  |                                  |          |      |  |      | 883       |   |  |   |          |  
|Service fee income                        |  |                                  | 57,256    |      |  |      | 51,973    |   |  |   | 53,083    |  
|Total revenue(1)                          |  |                                  | 98,085    |      |  |      | 87,870    |   |  |   | 104,712   |  
|Contracts securitized during the year     |  |                                  | 1,600,000 |      |  |      | 1,675,000 |   |  |   | 1,600,000 |  
|Serviced portfolio at year end            |  |                                  | 2,864,338 |      |  |      | 2,905,968 |   |  |   | 2,843,446 |  



---



|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(1) | Total revenue is comprised of net interest
    income, service fee income and gain on sale of contracts.

Contracts Purchased and Serviced
Portfolio

In an effort to improve borrower credit
statistics, the Company modified its incentive compensation
system during the fourth quarter of 2000 to shift its purchases
of Contracts to a greater percentage of higher credit quality
product. The result has been increased credit scores, slower
volume growth and an improvement in overall borrower statistics.
Contract purchases, since the modification of the Companys
compensation system, have remained stable and have resulted in a
general stabilization of the Companys serviced portfolio.
The serviced portfolio at December 31, 2000, was
$2.7 billion compared to $2.9 billion at
December 31, 2001, $2.9 billion at December 31,
2002 and $2.8 billion at December 31, 2003.

With Contract purchases stable, management has
continued to focus its efforts on reviewing and utilizing
automation tools to assist in the underwriting and credit review
processes. The resulting enhancements to the front-end credit
decision processes have improved the speed of the decision and
the amount of information available to the Credit and Account
Managers. Management has also enhanced the post-funding review
process of the underwriting decision so that the process is more
automated and can be customized to select and analyze Contracts
meeting specific criteria.

Critical Accounting Policies

Credit Enhancement
Assets:SFAS 140 requires that
following a transfer of financial assets, an entity is to
recognize the assets it controls and the liabilities it has
incurred, and derecognize assets for which control has been
surrendered and liabilities that have been extinguished.

RISA represents the present value of the
estimated future cash flows to be received by the Company from
the excess spread created in securitization transactions. Excess
spread is calculated by taking the difference between the
weighted average coupon rate of the Contracts sold and the
weighted average security rate paid to the investors less
contractually specified servicing and guarantor fees and
projected credit losses, after giving effect to estimated
prepayments. The estimates that management makes during the
execution of the securitization relate to the expected
prepayment rate of the Contracts in the transaction, the
discount rate to be applied to the cash flows and the amount and
timing of cumulative net losses that will be experienced from
the Contracts that are sold in the transaction. As these
estimates are made at the inception of the transaction, they
will have a degree of uncertainty as the transaction ages. A
major variable to these estimates

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##### Table of Contents



relates to the general state of the economy at
any given time and its effect on the performance of the
Contracts in the transaction. The Company recognizes the excess
of all estimated cash flows attributable to the RISA estimated
at the acquisition date over the initial investment (accretable
yield) as interest income over the estimated life of the RISA
using the effective yield method. If estimated cash flows
change, then the accretable yield is recalculated and the
periodic accretion is adjusted prospectively. If the estimated
fair value of the RISA has declined below its carrying amount,
then an other-than-temporary decline is considered to exist if
there has been a decline in the estimated present value of
future cash flows. The difference between the carrying value and
fair value of the RISA is recorded as an impairment loss through
the income statement.


RISA is classified in a manner similar to
available for sale assets and as such is marked to market each
quarter. Market value changes are calculated by discounting the
estimated cash flows using a current market discount rate. Each
quarter management reviews its estimates of the cash flows and
adjusts any that are inconsistent with its current estimates. If
the effect of the new estimates reduces the present value of the
cash flows and if the fair market value has declined below the
carrying amount of the transaction, management will record an
impairment loss on the transaction. If the new estimated present
value has declined but the carrying amount remains below the
fair value, any change in the market value of the RISA is
reported as a separate component of stockholders equity on
the consolidated statements of financial condition as
accumulated other comprehensive income (loss), net of applicable
taxes.

Hedging Activities:The Contracts originated and held by us earn interest at a fixed
rate and, accordingly, we have exposure to changes in interest
rates during the warehouse period. We therefore employ a hedging
strategy that is intended to minimize the risk of interest rate
fluctuations. Such transactions involve the execution of forward
interest rate swaps and/or the use of a pre-funding structure
for securitizations.

Management monitors the hedging activities on a
frequent basis to ensure that the value of hedges, their
correlation to the Contracts being hedged and the amounts being
hedged continue to provide effective protection against interest
rate risk. Our hedging strategy requires estimates of monthly
Contract acquisition volume and of the timing of
securitizations. The amount and timing of hedging transactions
are determined by senior management and are based upon the
amount of Contracts purchased and the interest rate environment.

The Company uses forward interest rate swaps to
hedge the variability in the forecasted future net cash flows it
will receive from the eventual securitization of the Contracts
held for sale. The Companys interest rate swap agreements
involve arrangements to pay a fixed interest rate and receive a
floating interest rate, at specified intervals, calculated on
agreed-upon amortizing notional amounts. The debt and amounts
that the Company hedges are determined based on prevailing
market conditions and the current shape of the yield curve.
Interest rate swap agreements are executed as an integral part
of specific securitization transactions. Interest rate swap
agreements are unwound upon securitization, whereby the gain or
loss on the hedge is recorded to income and the associated
component of the gain or loss previously recorded in other
comprehensive income is reversed. As of December 31, 2003,
the Company had $150 million of forward interest rate swaps
outstanding with an AA-rated counterparty.

Derivative instruments used by Onyx involve, to
varying degrees, elements of credit risk in the event a
counterparty should default and market risk as the instruments
are subject to rate and price fluctuations. Credit risk is
managed through the use of credit standard guidelines,
counterparty diversification, monitoring of counterparty
financial condition and International Swap Dealers Association
master netting agreements in place with all derivative
counterparties.

All derivatives are recognized on the balance
sheet at their fair value. On the date that the Company enters
into a derivative contract, it designates the derivative as a
hedge of a forecasted transaction of the variability of cash
flows that are to be received or paid in connection with the
securitization (a cash flow hedge). Changes in the
fair value of a derivative that are highly effective and
previously designated to qualify as a cash flow hedge, to the
extent that the hedge is effective, are recorded in other
comprehensive income until earnings are affected by the
variability of cash flows of the hedged transaction (e.g., until
periodic settlements of a variable asset or liability are
recorded in earnings). Any hedge ineffectiveness (which
represents the amount by which the changes in the fair value of
the derivative exceed the variability in the cash flows of the
forecasted transaction) is recorded in current-period earnings.

23



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##### Table of Contents



Results of Operations

Years Ended
December 31, 2003, 2002 and 2001

The Company had net income of $5.7 million
for the year ended December 31, 2003, compared to net
income of $1.9 million and $4.4 million for the years
ended December 31, 2002 and 2001, respectively. The
increase in net income for the year was principally due to an
increase in net gains realized on securitizations to
$26.9 million in 2003 from $13.7 million and
$30.8 million in 2002 and 2001, respectively. From year-end
2001 to December 31, 2003, the Company has experienced a
significant reduction in its overall delinquency rates; however,
certain pre-2001 securitizations experienced higher losses and
delinquency than projected at the inception of the transactions.
As a result, the Company recorded impairment charges of
$8.6 million, $15.1 million and $3.3 million
during the years ended December 31, 2003, 2002 and 2001,
respectively. No impairment charges were recorded during the
fourth quarter of 2003.

Net Interest Income.Net interest income consists primarily of (1) the
difference between the finance revenue earned on Contracts held
on balance sheet during the warehousing period and the interest
costs associated with the Companys borrowings to purchase
such Contracts; (2) the difference between income accreted
on RISA and the interest costs associated with residual line
borrowings secured by RISA and (3) interest and amortized
fees charged in connection with the Companys subordinated
financings, capital lease obligations and the costs associated
with hedging activities under the guidelines of FAS 133.

Net interest income increased to
$24.7 million for 2003, from $22.2 million during
2002, and from $10.1 million during 2001. The increases
were principally due to an increase in interest income generated
from the Companys RISA and a corresponding decrease in
interest expense incurred on the Companys Residual Lines
and CP Facilities. For the year ended December 31, 2003
total income recognized on the RISA was approximately
$23.4 million, versus approximately $21.3 million for
the same period in 2002 and $8.4 million for 2001. Prior to
April 1, 2001, income generated from RISA was included as a
component of service fee income. The weighted average effective
yield recognized on the RISA asset during 2003 was 13.3% versus
12.0% for 2002 and 6.7% for 2001. The increase in yield for 2003
and 2002 was principally due to lower credit losses and better
overall performance on the Companys securitizations
executed after 2000, versus original projections made at the
time of sale. The Company has increased the fair value on
certain of its outstanding securitization transactions through
other comprehensive income on the statement of financial
condition. The increase is principally due to the improved loss
performance of certain securitization transactions, and will
result in higher earnings on the RISA assets in future quarters.

Interest expense associated with borrowings under
residual lines secured by RISA totaled approximately
$3.3 million for the year, compared to $7.1 million
for the year ended December 31, 2002 and $2.6 million
for the year ended December 31, 2001. The reduction in
interest expense during 2003 was mainly due to the clean-up call
executed on the $75.0 million 2002-A residual
securitization in August 2003. Total commercial paper interest
expense for the year was $4.3 million, compared to
$4.5 million and $10.2 million for the same periods in
2002 and 2001, respectively. The weighted average interest rate
paid on the Companys commercial paper line exclusive of
amortized fees, for the year ended December 31, 2003 was
approximately 1.2%, compared to 1.7% and 6.2% for 2002 and 2001,
respectively.

Other Interest
Expense.Other interest expense was
$7.2 million for the year ended December 31, 2003,
compared to $4.3 million and $2.9 million for the same
periods in 2002 and 2001, respectively. Other interest expense
includes interest and amortized fees on the Companys
subordinated financings, capital lease obligations and the costs
associated with hedging activities under the guidelines of
FAS 133. The increase in interest expense for the year
ended December 31, 2002 and 2003 was principally due to
interest charges in connection with the Companys
subordinated unsecured renewable notes program launched during
the first quarter of 2002. The weighted average interest rate on
the balance of the subordinated unsecured renewable notes
outstanding as of December 31, 2003 was 8.5%. Subordinated
unsecured renewable notes have varying maturities ranging from
three months to 10 years. The balance of subordinated
unsecured renewable notes outstanding was $39.1 million as
of December 31, 2003 and $14.5 million as of
December 31, 2002. Charges related to the guidelines of
FAS 133 were $0.2 million in 2003, compared to
$0.7 million for the same period

24



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##### Table of Contents



in 2002. The decrease was principally due to a
decline in the ineffective portion of the unrealized loss on
cash flow hedges.


Finance revenue earned on Contracts held for sale
and investment decreased to $16.1 million for the year
ended December 31, 2003, versus $16.7 million and
$17.4 million for the years ended December 31, 2002
and 2001, respectively. Finance revenue earned on Contracts held
for sale and investment is net of participation amortization and
is dependent upon the average balance of Contracts held for sale
and investment and the corresponding weighted average buy rate.
The weighted average buy rates for Contracts held for sale and
investment during the years ended December 31, 2003, 2002
and 2001 were 11.01%, 10.76% and 10.59%, respectively. The table
below depicts the major components of net interest income.

|                       |                                                         |                                  |        |        |   |      |        |        |  |   |        |        | 
|---------------------- | ------------------------------------------------------- | -------------------------------- | ------ | ------ | - | ---- | ------ | ------ |  | - | ------ | ------ | 
|                       |                                                         |                                 
|                       |                                                         | For the Years Ended December 31,
|                       |                                                         |                                 
|                       |                                                         | 2001                             |        | 2002   |   | 2003
|                       |                                                         |                                  |        |        |   |     
|                       |                                                         |                                 
|                       |                                                         | (Dollars in thousands)          
|Income:                |                                                         |                                  |        |        |   |      |        |        |  |   |        |       
|                       | Finance Revenue (net of participation
    amortization) |                                  | $      | 17,419 |   |      | $      | 16,656 |  |   | $      | 16,080 | 
|                       | RISA Income                                             |                                  |        | 8,386  |   |      |        | 21,336 |  |   |        | 23,386 | 
|                       |                                                         |                                  |        |        |   |      |        |        |  |   |        |       
|Total Interest Income  |                                                         |                                  | 25,805 |        |   |      | 37,992 |        |  |   | 39,466 |       
|Expense:               |                                                         |                                  |        |        |   |      |        |        |  |   |        |       
|                       | Warehouse Lines                                         |                                  |        | 10,249 |   |      |        | 4,450  |  |   |        | 4,267  | 
|                       | Residual Lines                                          |                                  |        | 2,575  |   |      |        | 7,085  |  |   |        | 3,302  | 
|                       | Subordinated Debt                                       |                                  |        | 2,403  |   |      |        | 2,072  |  |   |        | 1,813  | 
|                       | Subordinated Unsecured Renewable Notes                  |                                  |        |       |   |      |        | 1,356  |  |   |        | 5,072  | 
|                       | Residual Lines(1)                                       |                                  |        | 897    |   |      |        |       |  |   |        |       | 
|                       | FAS 133 Interest                                        |                                  |        | (426   | ) |      |        | 707    |  |   |        | 187    | 
|Capital Lease Interest |                                                         |                                  | 43     |        |   |      | 120    |        |  |   | 95     |       
|                       |                                                         |                                  |        |        |   |      |        |        |  |   |        |       
|Total Interest Expense |                                                         |                                  | 15,741 |        |   |      | 15,790 |        |  |   | 14,736 |       
|                       |                                                         |                                  |        |        |   |      |        |        |  |   |        |       
|Net Interest Income    |                                                         | $                                | 10,064 |        |   | $    | 22,202 |        |  | $ | 24,730 |       
|                       |                                                         |                                  |        |        |   |      |        |        |  |   |        |       



---



|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beginning April 1, 2001, the Company has
    classified interest expense from its Residual Lines of credit
    under net interest income as a means to match income generated
    from RISA.

Servicing Fee
Income.Contractual servicing fee
income is earned at a rate of 1.0% per annum on the
outstanding principal balance of Contracts securitized.
Servicing fee income is related to the size of the serviced
portfolio and also includes investment interest, late fees,
extension fees, document fees and other fees charged to customer
accounts.

Servicing fee income was $53.1 million for
the year ended December 31, 2003, compared to
$52.0 million and $57.3 million for the same periods
in 2002 and 2001, respectively. The increase in service fee
income for 2003 was principally due to an increase in document
fees earned on Contracts purchased during the year. The
reduction in service fee income for 2002 was principally due to
a reduction in investment income received on trust cash accounts
during the current periods reported. Additionally, included in
the first three months of 2001 was approximately
$1.1 million of excess service fee income recorded prior to
the adoption of EITF 99-20.

Gain on Sale of
Contracts.When the Company
securitizes Contracts, it allocates the acquisition cost of the
Contracts between the security sold and the retained interest,
based on their relative fair values. The reported gain is the
difference between the cash proceeds from the sale of Contracts
and its allocated cost. The residual interest in the securitized
assets (RISA) represents the present value of future
cash flows to be generated by the Contracts in excess of the
interest paid on the securities issued in the securitization and
other costs of servicing the Contracts and completing the
securitization. The present value of the estimated future

25



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##### Table of Contents



cash flows are determined based upon a cash-out
basis, net of charge-offs, dealer participation, gains and
losses on hedges and other items associated with servicing the
Contracts.


The following table illustrates the net interest
rate spread for each of the Companys securitizations
through December 31, 2003:

|                     |       |                             |         |              |  |          |              |           |  |           |       |           |  |  |      |   |  |  |      |   |  |  |      |   | 
|-------------------- | ----- | --------------------------- | ------- | ------------ |  | -------- | ------------ | --------- |  | --------- | ----- | --------- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - | 
|                     |       |                            
|                     |       | Securitization Transactions
|                     |       |                            
|                     |       |                             |         | Remaining    |  | Weighted |              | Weighted  |  |          
|                     |       |                             |         | Balance at   |  | Average  |              | Average   |  |          
|                     |       | Original                    |         | December 31, |  | Contract |              | Investor  |  | Gross     |       | Net      
|Securitization       |       | Balance                     |         | 2003         |  | Rate(1)  |              | Rate(1)   |  | Spread(2) |       | Spread(3)
|                     |       |                             |         |              |  |          |              |           |  |           |       |          
|                     |       |                             |         |              |  |          |              |           |  |          
|                     |       | (Dollars in thousands)      |         |              |  |          |              |           |  |          
|1994-1 Grantor Trust |       | $                           | 38,601  |              |  |          | Paid in Full |           |  |           | 13.75 | %         |  |  | 6.90 | % |  |  | 6.85 | % |  |  | 1.94 | %
|1995-1 Grantor Trust |       |                             | 105,000 |              |  |          | Paid in Full |           |  |           | 14.94 |           |  |  | 7.00 |   |  |  | 7.94 |   |  |  | 1.86 |  
|1996-1 Grantor Trust |       |                             | 100,500 |              |  |          | Paid in Full |           |  |           | 15.07 |           |  |  | 5.40 |   |  |  | 9.67 |   |  |  | 3.83 |  
|1996-2 Grantor Trust |       |                             | 85,013  |              |  |          | Paid in Full |           |  |           | 14.84 |           |  |  | 6.40 |   |  |  | 8.44 |   |  |  | 3.61 |  
|1996-3 Grantor Trust |       |                             | 120,000 |              |  |          | Paid in Full |           |  |           | 14.54 |           |  |  | 6.45 |   |  |  | 8.09 |   |  |  | 3.14 |  
|1996-4 Grantor Trust |       |                             | 100,000 |              |  |          | Paid in Full |           |  |           | 14.80 |           |  |  | 6.20 |   |  |  | 8.60 |   |  |  | 3.28 |  
|1997-1 Grantor Trust |       |                             | 90,000  |              |  |          | Paid in Full |           |  |           | 13.86 |           |  |  | 6.55 |   |  |  | 7.31 |   |  |  | 2.78 |  
|1997-2 Grantor Trust |       |                             | 121,676 |              |  |          | Paid in Full |           |  |           | 14.85 |           |  |  | 6.35 |   |  |  | 8.50 |   |  |  | 3.11 |  
|1997-3 Grantor Trust |       |                             | 149,600 |              |  |          | Paid in Full |           |  |           | 14.77 |           |  |  | 6.35 |   |  |  | 8.42 |   |  |  | 3.30 |  
|1997-4 Grantor Trust |       |                             | 166,000 |              |  |          | Paid in Full |           |  |           | 14.69 |           |  |  | 6.30 |   |  |  | 8.39 |   |  |  | 3.27 |  
|1998-1 Grantor Trust |       |                             | 173,000 |              |  |          | Paid in Full |           |  |           | 14.91 |           |  |  | 5.95 |   |  |  | 8.96 |   |  |  | 3.40 |  
|1998-A Owner Trust   |       |                             | 208,759 |              |  |          | Paid in Full |           |  |           | 14.73 |           |  |  | 5.87 |   |  |  | 8.86 |   |  |  | 3.34 |  
|1998-B Owner Trust   |       |                             | 250,000 |              |  |          | Paid in Full |           |  |           | 14.73 |           |  |  | 5.78 |   |  |  | 8.95 |   |  |  | 3.18 |  
|1998-C Owner Trust   |       |                             | 280,000 |              |  |          | Paid in Full |           |  |           | 14.89 |           |  |  | 5.72 |   |  |  | 9.17 |   |  |  | 3.51 |  
|1999-A Owner Trust   |       |                             | 310,000 |              |  |          | Paid in Full |           |  |           | 14.33 |           |  |  | 5.73 |   |  |  | 8.60 |   |  |  | 3.44 |  
|1999-B Owner Trust   |       |                             | 350,000 |              |  |          | Paid in Full |           |  |           | 14.65 |           |  |  | 5.86 |   |  |  | 8.79 |   |  |  | 3.54 |  
|1999-C Owner Trust   |       |                             | 400,000 |              |  |          | Paid in Full |           |  |           | 14.82 |           |  |  | 6.62 |   |  |  | 8.20 |   |  |  | 2.86 |  
|1999-D Owner Trust   |       |                             | 390,000 |              |  |          | Paid in Full |           |  |           | 15.01 |           |  |  | 6.90 |   |  |  | 8.11 |   |  |  | 2.87 |  
|2000-A Owner Trust   |       |                             | 430,000 |              |  |          | Paid in Full |           |  |           | 14.86 |           |  |  | 7.26 |   |  |  | 7.60 |   |  |  | 2.67 |  
|2000-B Owner Trust   |       |                             | 450,000 |              |  |          | 45,147       |           |  |           | 15.18 |           |  |  | 7.29 |   |  |  | 7.89 |   |  |  | 2.64 |  
|2000-C Owner Trust   |       |                             | 440,000 |              |  |          | 56,681       |           |  |           | 15.16 |           |  |  | 7.18 |   |  |  | 7.98 |   |  |  | 2.52 |  
|2000-D Owner Trust   |       |                             | 400,000 |              |  |          | 62,127       |           |  |           | 13.95 |           |  |  | 6.76 |   |  |  | 7.19 |   |  |  | 1.87 |  
|2001-A Owner Trust   |       |                             | 400,000 |              |  |          | 73,723       |           |  |           | 13.39 |           |  |  | 6.43 |   |  |  | 6.96 |   |  |  | 2.14 |  
|2001-B Owner Trust   |       |                             | 400,000 |              |  |          | 88,507       |           |  |           | 12.69 |           |  |  | 5.08 |   |  |  | 7.61 |   |  |  | 2.23 |  
|2001-C Owner Trust   |       |                             | 400,000 |              |  |          | 106,477      |           |  |           | 11.92 |           |  |  | 4.82 |   |  |  | 7.10 |   |  |  | 1.57 |  
|2001-D Owner Trust   |       |                             | 400,000 |              |  |          | 122,734      |           |  |           | 10.90 |           |  |  | 3.80 |   |  |  | 7.10 |   |  |  | 1.73 |  
|2002-A Owner Trust   |       |                             | 375,000 |              |  |          | 140,959      |           |  |           | 10.68 |           |  |  | 3.91 |   |  |  | 6.77 |   |  |  | 1.61 |  
|2002-B Owner Trust   |       |                             | 400,000 |              |  |          | 176,999      |           |  |           | 10.46 |           |  |  | 4.07 |   |  |  | 6.39 |   |  |  | 1.33 |  
|2002-C Owner Trust   |       |                             | 450,000 |              |  |          | 230,377      |           |  |           | 10.45 |           |  |  | 3.51 |   |  |  | 6.94 |   |  |  | 1.92 |  
|2002-D Owner Trust   |       |                             | 450,000 |              |  |          | 256,876      |           |  |           | 10.02 |           |  |  | 2.69 |   |  |  | 7.33 |   |  |  | 2.11 |  
|2003-A Owner Trust   |       |                             | 400,000 |              |  |          | 268,787      |           |  |           | 9.79  |           |  |  | 2.53 |   |  |  | 7.26 |   |  |  | 2.15 |  
|2003-B Owner Trust   |       |                             | 400,000 |              |  |          | 307,809      |           |  |           | 9.15  |           |  |  | 2.03 |   |  |  | 7.12 |   |  |  | 2.15 |  
|2003-C Owner Trust   |       |                             | 400,000 |              |  |          | 336,812      |           |  |           | 8.75  |           |  |  | 2.17 |   |  |  | 6.58 |   |  |  | 2.21 |  
|2003-D Owner Trust   |       |                             | 400,000 |              |  |          | 369,417      |           |  |           | 9.34  |           |  |  | 2.63 |   |  |  | 6.71 |   |  |  | 2.21 |  
|                     |       |                             |         |              |  |          |              |           |  |           |       |           |  |  |      |   |  |  |      |   |  |  |      |  
|                     | Total |                             | $       | 10,033,149   |  |          | $            | 2,643,432 |  |           |       |           |  |  |      |   |  |  |      |   |  |  |      |   | 
|                     |       |                             |         |              |  |          |              |           |  |           |       |           |  |  |      |   |  |  |      |   |  |  |      |  



---



|    |                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of issue date.                                                                                                                                                                                                                                                                                                              
|   
|(2) | Difference between weighted average Contract rate
    and weighted average investor rate as of the issue date.                                                                                                                                                                                                                 
|   
|(3) | Difference between weighted average Contract rate
    and weighted average investor rate, net of unearned dealer
    participation payments, underwriting costs, other issuance
    costs, servicing fees, estimated credit losses, ongoing
    financial guarantee insurance policy premiums and the hedging
    gain or loss.

26



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##### Table of Contents



The Company completed four securitizations
totaling $1.6 billion during the year ended
December 31, 2003, resulting in gains on sale of Contracts
of $35.5 million or 2.2% of the dollar amount of Contracts
securitized, compared to four securitizations totaling
$1.675 billion during the year ended December 31,
2002, resulting in gains on sale of Contracts totaling
$28.0 million or 1.7% and four securitizations totaling
$1.6 billion during the year ended December 31, 2001,
resulting in gains on sale of Contracts of $34.1 million or
2.1%. During 2003, the Company recorded an $8.6 million
pre-tax impairment charge on its RISA assets versus
$15.1 million in 2002 and $3.3 million in 2001. While
the Company has experienced a significant reduction in its
overall delinquency rates since December 31, 2001, certain
pre-2001 securitizations experienced higher losses and
delinquency rates than initially projected at the inception of
the transactions, related to the slow-down in the economy and
the lower credit quality of the borrowers. The impairment
charges have been recorded to reduce the gain on sale recorded
during the period. The table below depicts the components of the
net gain as reported in the consolidated statements of income.

|                             |                                     |                                  |        |        |  |      |         |        |  |   |        |        | 
|---------------------------- | ----------------------------------- | -------------------------------- | ------ | ------ |  | ---- | ------- | ------ |  | - | ------ | ------ | 
|                             |                                     |                                 
|                             |                                     | For the Years Ended December 31,
|                             |                                     |                                 
|                             |                                     | 2001                             |        | 2002   |  | 2003
|                             |                                     |                                  |        |        |  |     
|                             |                                     |                                 
|                             |                                     | (Dollars in thousands)          
|Gain on Sale                 |                                     | $                                | 34,105 |        |  | $    | 27,990  |        |  | $ | 35,505 |       
|Impairment                   |                                     |                                  | (3,340 | )      |  |      | (15,178 | )      |  |   | (8,606 | )     
|Residual securitization sale |                                     |                                  |       |        |  |      | 883     |        |  |   |       |       
|                             |                                     |                                  |        |        |  |      |         |        |  |   |        |       
|                             | Total net gain on sale of Contracts |                                  | $      | 30,765 |  |      | $       | 13,695 |  |   | $      | 26,899 | 
|                             |                                     |                                  |        |        |  |      |         |        |  |   |        |       

The increase in the gain as a percentage of the
Contracts securitized for 2003 was attributable to an increase
in net interest rate spreads during the year. During 2003, the
Company reduced its projected loss rate to approximately 3.73%
cumulative versus approximately 4.03% cumulative during 2002.
Over the past two years, management has targeted higher
credit-worthy borrowers resulting in a reduction in the static
pool losses on securitizations executed since 2001. As a result
of the decrease, the weighted average estimated net interest
rate spread for all securitizations executed in 2003 increased
to 2.18%, compared to 1.76% in 2002 and 1.91% in 2001. In an
effort to improve borrower credit statistics, the Company
modified its incentive compensation system during the fourth
quarter of 2000 to shift purchases of Contracts to a greater
percentage of higher credit quality products. The result has
been increased credit scores and an improvement in overall
borrower statistics. This improvement continued throughout 2003.
The allowance for credit loss on the serviced portfolio has
declined as a percentage of Contracts outstanding as newer
transactions have lower loss reserves based on the improved
quality of the underlying Contracts. Delinquency has declined
due in part to the Contracts originated since 2001.

The estimated net interest rate spread is the
difference between the weighted average Contract rate of the
securitized assets, the weighted average investor rate inclusive
of all costs related to the transaction and estimated annualized
net credit losses. Interest rate spread is affected by product
mix, general market conditions and overall market interest
rates. The risks inherent in interest rate fluctuations are
partially reduced through hedging activities.

During the first quarter of 2002, the Company
completed its second residual securitization from the residual
cash flows of nine then outstanding securitizations. The Company
did not record a gain on the transaction, as it was structured
as a financing transaction rather than a sale. The transaction
was rated by Moodys Investors Service, Inc. as Ba2,
with proceeds of approximately $75.0 million. The proceeds
of the residual securitization were used to pay down the
Companys Residual Lines with affiliates of its
securitization underwriters. In August 2003 a clean-up call was
executed on this residual securitization. Monthly cash releases
arising from the excess spread in the underlying transactions
now flow directly to the Company.

Provision for Credit
Losses.The provision for credit
losses represents net credit losses incurred on Contracts held
for investment. The provision for credit losses increased to
$3.2 million for the year ended December 31, 2003
compared to $8,000 and $1.1 million for 2002 and 2001
respectively. The small negative provision for credit losses for
the year ended December 31, 2002 reflects a sales tax
refund from the State of California of approximately
$2.0 million. The refund was treated as a recovery as it
related to pro-rata

27



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sales taxes paid by the Company in financing the
purchases of vehicles for which the related Contracts were
charged off. The Company plans to pursue additional refunds from
the state of California, and other states as available, but does
not expect future refunds to be of the magnitude of the 2002
amount.


Changes in the allowance for credit losses were
as follows:

|                               |  |                |        |      |  |      |        |   |  |   |        |  
|------------------------------ |  | -------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                               |  |               
|                               |  | December 31,  
|                               |  |               
|                               |  | 2001           |        | 2002 |  | 2003
|                               |  |                |        |      |  |     
|                               |  |               
|                               |  | (In thousands)
|Balance at beginning of period |  | $              | 1,175  |      |  | $    | 1,280  |   |  | $ | 1,851  |  
|Provision for credit losses    |  |                | 1,079  |      |  |      | (8     | ) |  |   | 3,216  |  
|Charged-off loans              |  |                | (2,121 | )    |  |      | (3,946 | ) |  |   | (7,424 | )
|Recoveries-tax refund          |  |                |       |      |  |      | 2,043  |   |  |   |       |  
|Recoveries-general             |  |                | 1,147  |      |  |      | 2,482  |   |  |   | 4,843  |  
|                               |  |                |        |      |  |      |        |   |  |   |        |  
|Balance at end of period       |  | $              | 1,280  |      |  | $    | 1,851  |   |  | $ | 2,486  |  
|                               |  |                |        |      |  |      |        |   |  |   |        |  

Operating Expenses.The Company has made a significant effort to control operating
expenses though renegotiation of existing service contracts and
the further implementation of technology and automation,
including the conversion of its loan accounting and collection
systems to an in-house system and the development of an
automated front-end credit application system. While these
improvements have increased operating efficiencies, the Company
has experienced an increase in charges associated with external
collection agencies and collection expenses, insurance and legal
services creating a combined increase of approximately
$6.7 million for the year ended December 31, 2003.
Total operating expenses were $91.9 million for the year
ended December 31, 2003 compared to $84.7 million and
$89.5 million for the same periods in 2002 and 2001. Total
operating expenses as a percent of the averaged serviced
portfolio were 3.17%, 2.94% and 3.18% for the years ended
December 31, 2003, 2002 and 2001, respectively.

Salaries and Benefits
Expense.The Company incurred salary
and benefit expenses of $54.8 million during the year ended
December 31, 2003, compared to $53.6 million during
the year ended December 31, 2002 and $52.8 million for
the year ended December 31, 2001. The Company has reduced
its operating staff by approximately 5% since December of 2002
as a result of operating efficiencies gained during 2003, with
most staff reductions in the data entry area. Additionally, the
Company consolidated and renegotiated long-term service
contracts with temporary staff agencies thereby reducing the
related expenses by approximately $490 thousand for the year
versus the same period in 2002. Decreases in salary and
temporary staff charges were partially offset by increases in
bonus incentives, annual merit increases and higher health care
costs in connection with the Companys benefit plans. The
Company employs approximately 63% of its workforce in the state
of California.

System and Servicing
Expense.System and servicing expense
increased to $4.3 million for the year ended
December 31, 2003, compared to $3.1 million and
$4.3 million for the years ended December 31, 2002 and
2001, respectively. Toward the end of the third quarter of 2002,
the Company implemented a third-party credit application system
in an effort to reduce the labor costs incurred to manually
input the credit applications from its dealer customers. The new
system streamlined the processing of a majority of the
Companys credit applications, which resulted in the
reduction of its data entry staff shortly after deployment.
Charges in connection this system were approximately
$1.2 million for the year ended December 31, 2003. The
Company incurred approximately $260 thousand in expenses for the
year ended December 31, 2002 for this system, as it was
initially deployed in September 2002.

Telephone and Data Line
Expenses.Telephone and data line
expenses decreased to $3.1 million for the year ended
December 31, 2003, from $3.4 million and
$5.0 million for the years ended December 31, 2002 and
2001, respectively. With the consolidation of many local
telephone service providers, the Company was able to shift a
large portion of its local and long distance services to a
single national provider and capitalize on volume discounts
provided by the carrier. Additionally, during 2003, management
substantially completed a cost study of telephone usage by its
branch network, and as a result, reduced the capacity of several
branches to better

28



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##### Table of Contents



match the required service needs. During 2002,
the Company received refunds from its long-distance service
carriers as a result of managements renegotiation of its
existing service contracts late in 2001; the refunds totaled
approximately $172 thousand.


Depreciation
Expense.Depreciation expense
decreased to $2.4 million in 2003 from $3.4 million
and $4.6 million for the years ended December 31, 2002
and 2001, respectively. Most system upgrades and leasehold
improvements associated with the Companys corporate office
relocation to Foothill Ranch during 1999 have been fully
depreciated. The Company uses a three-year straight-line life
for most capital purchases. The Company will continue to invest
in technology and infrastructure to support the serviced
portfolio and increase operating efficiencies.

Other Operating
Expenses.Other operating expenses
include professional fees, marketing, supplies, facility related
charges, collection expenses, insurance fees and credit bureau
fees. Other operating expenses increased by 29% to
$27.2 million from $21.1 million for the year ended
December 31, 2002, and $22.8 million for the year
ended December 31, 2001. The increase in other operating
expense stems from higher fees paid to collection agencies and
collection expenses, increased insurance costs, and higher legal
fees.

Income Taxes.The
Company files federal and certain state tax returns as a
consolidated group. Tax liabilities from the consolidated
returns are allocated in accordance with a tax sharing agreement
based on the relative income or loss of each entity on a
stand-alone basis. The effective tax rate for Onyx was 40.5% for
2003, 41.5% for 2002 and 41.0% for 2001.

Financial Condition

Restatement

As discussed in note 2 to the financial
statements, the Company has restated the 2002 balance sheet and
the 2002 and 2001 cash flow statements. The 2002 balance sheet
and cash flow statement were restated to properly record the
cut-off of cash transactions related to trust activity around
December 31, 2002. The 2002 cash flow statement was
restated to properly record the cut-off of cash transactions
related to trust activity around December 31, 2001.



| |                        
| | -----------------------
| | Contracts Held for Sale

Contracts held for sale are presented at the
lower of cost or market value and totaled $195.3 million at
December 31, 2003, compared to $176.7 million at
December 31, 2002. The number and principal balance of
Contracts held for sale is largely dependent upon the timing and
size of the Companys securitizations.



| |                              
| | -----------------------------
| | Contracts Held for Investment

Contracts held for investment are net of a
$2.5 million allowance for probable losses as of
December 31, 2003 and a $1.9 million allowance as of
December 31, 2002. Amounts held for investment include
Contracts that do not qualify for Contract securitizations as a
result of delinquency status or minimum balance or minimum
remaining term. The Company maintains an allowance for credit
losses to cover inherent losses on the Contracts held for
investment on the statement of financial condition. The
allowance for credit losses is increased by charging the
provision for credit losses and decreased by actual losses on
the Contracts held for investment. The level of the allowance is
based principally on the outstanding balance of Contracts held
for investment and historical loss trends.



| |                          
| | -------------------------
| | Credit Enhancement Assets

RISA, capitalized upon securitization of
Contracts, represents discounted cash flows and cash held in
spread accounts to be received by the Company from the excess
spread created in securitization transactions. Excess spread is
calculated by taking the difference between the weighted average
coupon rate of the Contracts sold and the weighted average
security rate paid to the investors less contractually specified
servicing and guarantor fees and projected credit losses, after
giving effect to estimated prepayments.

29



---



##### Table of Contents



Prepayment and credit loss assumptions are
utilized to project future earnings and are based on historical
experience. At the time of issuance, the Company uses a
1.75 ABS prepayment rate for all outstanding
securitizations with an average Contract life range of 1.67 to
1.76 years. Credit loss assumptions range from 3.5% to 4.4%
cumulative depending upon the credit statistics of the
underlying portfolio to be securitized. Credit losses are
estimated using cumulative loss frequency and severity estimates
by management. All assumptions are evaluated each quarter and
adjusted, if appropriate, to reflect the actual performance of
the underlying Contracts. Future earnings are discounted at a
rate management believes to be representative of market at the
time of securitization, which during 2003 ranged from 10.8% to
11.0%. As of December 31, 2003, the discount rates used for
valuing RISA ranged from 8.5% to 11%, and loss assumptions
ranged from 2.8% to 6.6% cumulative. Changes in loss, prepayment
and discount rate assumptions applied upon the execution of a
securitization could have a material effect on the original gain
recorded. The Company has disclosed under Note-6 to its audited
financial statements, a sensitivity analysis of the current fair
value of residual cash flows to immediate 10% and 20% adverse
changes in those assumptions.

During the year ended December 31, 2003, the
Company recorded an impairment loss of $8.6 million,
compared to $15.1 million for the year ended
December 31, 2002. Impairment charges are netted against
gain on sale as reported in the statement of income.

In initially valuing the RISA and determining
estimated cash flows, the Company establishes an off balance
sheet allowance for probable credit losses. The allowance is
based upon historical experience, the credit statistics of the
underlying portfolio and managements estimate of future
performance regarding credit losses. The amount is reviewed
periodically and adjustments are made if actual experience or
other factors indicate that future performance may differ from
managements prior estimates.

The following table presents the estimated future
cash flows to be received from securitizations. Estimated future
cash flows are calculated by taking the difference between the
weighted average coupon rate of the Contracts sold and the
weighted average security rate paid to the investors, less the
contractually specified servicing fee of 1.0%, financial
guaranty insurance premiums and other costs and fees, after
giving effect to estimated prepayments and assuming no losses.
To arrive at the RISA, this amount is reduced by the off balance
sheet allowance established for probable future losses and by
discounting to present value.

|                                                                  |  |                |           |              |  |   |           |  
|----------------------------------------------------------------- |  | -------------- | --------- | ------------ |  | - | --------- | -
|                                                                  |  | December 31,   |           | December 31,
|                                                                  |  | 2002           |           | 2003        
|                                                                  |  |                |           |             
|                                                                  |  |               
|                                                                  |  | (In thousands)
|Cash held in spread accounts                                      |  | $              | 112,080   |              |  | $ | 108,667   |  
|Estimated undiscounted RISA cash flows                            |  |                | 219,567   |              |  |   | 220,906   |  
|Off balance sheet allowance for losses                            |  |                | (109,490  | )            |  |   | (101,894  | )
|Discount to present value                                         |  |                | (38,593   | )            |  |   | (45,335   | )
|                                                                  |  |                |           |              |  |   |           |  
|Retained interest in securitized assets                           |  | $              | 183,564   |              |  | $ | 182,344   |  
|                                                                  |  |                |           |              |  |   |           |  
|Outstanding balance of contracts sold through
    securitizations |  | $              | 2,726,878 |              |  | $ | 2,643,431 |  

In January 2003, the Financial Accounting
Standards Board issued the pronouncement, Financial
Interpretation Number 46 (FIN 46),
Consolidation of Variable Interest Entities.
FIN 46 provides guidance in determining which off balance
sheet assets, liabilities and obligations should be consolidated
with the Companys financial statements. The guidance as
outlined in FIN 46 provides that qualified special purpose
entities as defined by FAS 140, like those the Company
employs, are excluded from the scope of FIN 46.



| |              
| | -------------
| | Asset Quality

The Company monitors and attempts to minimize
delinquencies and losses through timely collections and the use
of a predictive dialing system. At December 31, 2003, 30+
day delinquencies represented 1.37% of the amount of Contracts
in its serviced portfolio compared to 2.58% at December 31,
2002 and 4.01% at December 31, 2001. Net charge-offs as a
percentage of the average serviced portfolio were 2.12% for the
year ended December 31, 2003, compared to 2.77% and 2.78%
for the years ended December 31, 2002, and 2001,

30



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##### Table of Contents



respectively. In an effort to improve borrower
credit statistics, the Company modified its incentive
compensation system during the fourth quarter of 2000 to shift
purchases of Contracts to a higher percentage of higher credit
quality product. The result has been increased credit scores and
an improvement in overall borrower statistics. This improvement
continued throughout 2003. The allowance for loan loss has
declined as a percentage of Contracts outstanding as newer
transactions have lower loss reserves based on the improved
quality of the underlying Contracts. Delinquency has declined
due in part to the performance of Contracts originated after
2000.


Delinquency Experience of the Serviced
Portfolio

|                                 |                                                            |                                  |           |      |   |      |           |      |   |   |           |      |  
|-------------------------------- | ---------------------------------------------------------- | -------------------------------- | --------- | ---- | - | ---- | --------- | ---- | - | - | --------- | ---- | -
|                                 |                                                            |                                 
|                                 |                                                            | For the Years Ended December 31,
|                                 |                                                            |                                 
|                                 |                                                            | 2001                             |           | 2002 |   | 2003
|                                 |                                                            |                                  |           |      |   |     
|                                 |                                                            |                                 
|                                 |                                                            | (Dollars in thousands)          
|Serviced portfolio               |                                                            | $                                | 2,864,338 |      |   | $    | 2,905,968 |      |   | $ | 2,843,446 |     
|Delinquencies(1)(2) 30  59 days |                                                            |                                  | 78,056    |      |   |      | 51,645    |      |   |   | 28,084    |     
|60  89 days                     |                                                            |                                  | 20,859    |      |   |      | 14,127    |      |   |   | 5,889     |     
|90+ days                         |                                                            |                                  | 15,887    |      |   |      | 9,118     |      |   |   | 4,955     |     
|                                 | Total delinquencies as a percent of serviced
    portfolio |                                  |           | 4.01 | % |      |           | 2.58 | % |   |           | 1.37 | %



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Delinquencies include principal amounts only, net
    of repossessed inventory and accounts in bankruptcy. Delinquent
    repossessed inventory as a percent of the serviced portfolio
    were 0.58%, 0.61% and 0.77% at December 31, 2003, 2002 and
    2001, respectively. Delinquent contracts in bankruptcy as a
    percent of the serviced portfolio were 0.90%, 1.05% and 1.09% at
    December 31, 2003, 2002 and 2001 respectively.
|   
|(2) | The period of delinquency is based on the number
    of days payments are contractually past due.                                                                                                                                                                                                                                                                                                                                            

Loan Loss Experience of the Serviced
Portfolio

|                                                               |  |                                  |           |      |  |      |           |   |  |   |           |  
|-------------------------------------------------------------- |  | -------------------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                               |  |                                 
|                                                               |  | For the Years Ended December 31,
|                                                               |  |                                 
|                                                               |  | 2001                             |           | 2002 |  | 2003
|                                                               |  |                                  |           |      |  |     
|                                                               |  |                                 
|                                                               |  | (Dollars in thousands)          
|Number of contracts                                            |  |                                  | 289,426   |      |  |      | 291,898   |   |  |   | 280,459   |  
|Period end serviced portfolio                                  |  | $                                | 2,864,338 |      |  | $    | 2,905,968 |   |  | $ | 2,843,446 |  
|Average serviced portfolio(1)                                  |  | $                                | 2,818,572 |      |  | $    | 2,883,497 |   |  | $ | 2,877,831 |  
|Number of gross charge-offs                                    |  |                                  | 12,985    |      |  |      | 13,182    |   |  |   | 13,341    |  
|Gross charge-offs                                              |  | $                                | 90,772    |      |  | $    | 97,074    |   |  | $ | 74,398    |  
|Net charge-offs(2)                                             |  | $                                | 78,411    |      |  | $    | 79,803    |   |  | $ | 60,998    |  
|Net charge-offs as a percent of average serviced
    portfolio |  |                                  | 2.78      | %    |  |      | 2.77      | % |  |   | 2.12      | %



---



|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | Average is based on daily balances.                                                            
|   
|(2) | Net charge-offs are gross charge-offs minus
    recoveries on Contracts previously charged off.

31



---



##### Table of Contents



The following table illustrates the cumulative
net credit loss performance of each of the securitized pools
outstanding for the period from the date of securitization
through December 31, 2003, stated as a percentage of the
original principal balance.

|      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|----- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|MONTH |  | 99-A |      | 99-B |  | 99-C |      | 99-D |  | 00-A |      | 00-B |  | 00-C |      | 00-D |  | 01-A |      | 01-B |  | 01-C |      | 01-D |  | 02-A |      | 02-B |  | 02-C |      | 02-D |  | 03-A |      | 03-B |  | 03-C |      | 03-D
|      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |     
|1     |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|2     |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.01 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|3     |  |      | 0.02 | %    |  |      | 0.03 | %    |  |      | 0.03 | %    |  |      | 0.01 | %    |  |      | 0.02 | %    |  |      | 0.02 | %    |  |      | 0.01 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.01 | %    |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.01 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.01 | % |  |  | 0.00 | % |  |  | 0.01 | %
|4     |  |      | 0.05 | %    |  |      | 0.07 | %    |  |      | 0.06 | %    |  |      | 0.04 | %    |  |      | 0.04 | %    |  |      | 0.04 | %    |  |      | 0.03 | %    |  |      | 0.02 | %    |  |      | 0.02 | %    |  |      | 0.03 | %    |  |  | 0.02 | % |  |  | 0.02 | % |  |  | 0.01 | % |  |  | 0.01 | % |  |  | 0.01 | % |  |  | 0.01 | % |  |  | 0.01 | % |  |  | 0.02 | % |  |  | 0.01 | % |  |  |      |  
|5     |  |      | 0.11 | %    |  |      | 0.14 | %    |  |      | 0.16 | %    |  |      | 0.09 | %    |  |      | 0.11 | %    |  |      | 0.10 | %    |  |      | 0.06 | %    |  |      | 0.07 | %    |  |      | 0.07 | %    |  |      | 0.10 | %    |  |  | 0.05 | % |  |  | 0.04 | % |  |  | 0.02 | % |  |  | 0.04 | % |  |  | 0.06 | % |  |  | 0.03 | % |  |  | 0.02 | % |  |  | 0.04 | % |  |  | 0.03 | % |  |  |      |  
|6     |  |      | 0.21 | %    |  |      | 0.27 | %    |  |      | 0.28 | %    |  |      | 0.15 | %    |  |      | 0.18 | %    |  |      | 0.17 | %    |  |      | 0.11 | %    |  |      | 0.15 | %    |  |      | 0.12 | %    |  |      | 0.18 | %    |  |  | 0.11 | % |  |  | 0.08 | % |  |  | 0.07 | % |  |  | 0.10 | % |  |  | 0.11 | % |  |  | 0.07 | % |  |  | 0.07 | % |  |  | 0.06 | % |  |  | 0.08 | % |  |  |      |  
|7     |  |      | 0.35 | %    |  |      | 0.43 | %    |  |      | 0.47 | %    |  |      | 0.24 | %    |  |      | 0.37 | %    |  |      | 0.30 | %    |  |      | 0.26 | %    |  |      | 0.26 | %    |  |      | 0.20 | %    |  |      | 0.30 | %    |  |  | 0.18 | % |  |  | 0.14 | % |  |  | 0.12 | % |  |  | 0.17 | % |  |  | 0.17 | % |  |  | 0.15 | % |  |  | 0.11 | % |  |  | 0.12 | % |  |  |      |   |  |  |      |  
|8     |  |      | 0.49 | %    |  |      | 0.60 | %    |  |      | 0.64 | %    |  |      | 0.43 | %    |  |      | 0.63 | %    |  |      | 0.44 | %    |  |      | 0.41 | %    |  |      | 0.39 | %    |  |      | 0.31 | %    |  |      | 0.39 | %    |  |  | 0.29 | % |  |  | 0.22 | % |  |  | 0.19 | % |  |  | 0.23 | % |  |  | 0.26 | % |  |  | 0.30 | % |  |  | 0.17 | % |  |  | 0.21 | % |  |  |      |   |  |  |      |  
|9     |  |      | 0.63 | %    |  |      | 0.85 | %    |  |      | 0.83 | %    |  |      | 0.59 | %    |  |      | 0.87 | %    |  |      | 0.67 | %    |  |      | 0.65 | %    |  |      | 0.50 | %    |  |      | 0.47 | %    |  |      | 0.50 | %    |  |  | 0.38 | % |  |  | 0.32 | % |  |  | 0.26 | % |  |  | 0.33 | % |  |  | 0.34 | % |  |  | 0.37 | % |  |  | 0.24 | % |  |  |      |   |  |  |      |   |  |  |      |  
|10    |  |      | 0.81 | %    |  |      | 1.07 | %    |  |      | 1.09 | %    |  |      | 0.76 | %    |  |      | 1.05 | %    |  |      | 0.90 | %    |  |      | 0.85 | %    |  |      | 0.65 | %    |  |      | 0.60 | %    |  |      | 0.65 | %    |  |  | 0.48 | % |  |  | 0.44 | % |  |  | 0.34 | % |  |  | 0.41 | % |  |  | 0.42 | % |  |  | 0.44 | % |  |  | 0.31 | % |  |  |      |   |  |  |      |   |  |  |      |  
|11    |  |      | 1.04 | %    |  |      | 1.34 | %    |  |      | 1.31 | %    |  |      | 0.99 | %    |  |      | 1.27 | %    |  |      | 1.11 | %    |  |      | 1.08 | %    |  |      | 0.85 | %    |  |      | 0.77 | %    |  |      | 0.77 | %    |  |  | 0.59 | % |  |  | 0.51 | % |  |  | 0.39 | % |  |  | 0.49 | % |  |  | 0.51 | % |  |  | 0.51 | % |  |  | 0.39 | % |  |  |      |   |  |  |      |   |  |  |      |  
|12    |  |      | 1.29 | %    |  |      | 1.56 | %    |  |      | 1.47 | %    |  |      | 1.20 | %    |  |      | 1.59 | %    |  |      | 1.38 | %    |  |      | 1.29 | %    |  |      | 1.03 | %    |  |      | 0.95 | %    |  |      | 0.89 | %    |  |  | 0.70 | % |  |  | 0.59 | % |  |  | 0.48 | % |  |  | 0.58 | % |  |  | 0.60 | % |  |  | 0.59 | % |  |  | 0.44 | % |  |  |      |   |  |  |      |   |  |  |      |  
|13    |  |      | 1.49 | %    |  |      | 1.79 | %    |  |      | 1.62 | %    |  |      | 1.41 | %    |  |      | 1.82 | %    |  |      | 1.57 | %    |  |      | 1.42 | %    |  |      | 1.25 | %    |  |      | 1.14 | %    |  |      | 1.04 | %    |  |  | 0.78 | % |  |  | 0.69 | % |  |  | 0.56 | % |  |  | 0.68 | % |  |  | 0.70 | % |  |  | 0.67 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|14    |  |      | 1.72 | %    |  |      | 1.90 | %    |  |      | 1.77 | %    |  |      | 1.52 | %    |  |      | 2.03 | %    |  |      | 1.84 | %    |  |      | 1.65 | %    |  |      | 1.41 | %    |  |      | 1.31 | %    |  |      | 1.19 | %    |  |  | 0.89 | % |  |  | 0.77 | % |  |  | 0.64 | % |  |  | 0.75 | % |  |  | 0.79 | % |  |  | 0.75 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|15    |  |      | 1.90 | %    |  |      | 2.08 | %    |  |      | 2.00 | %    |  |      | 1.70 | %    |  |      | 2.25 | %    |  |      | 2.08 | %    |  |      | 1.93 | %    |  |      | 1.62 | %    |  |      | 1.47 | %    |  |      | 1.33 | %    |  |  | 1.00 | % |  |  | 0.85 | % |  |  | 0.74 | % |  |  | 0.84 | % |  |  | 0.89 | % |  |  | 0.79 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|16    |  |      | 2.10 | %    |  |      | 2.23 | %    |  |      | 2.08 | %    |  |      | 2.00 | %    |  |      | 2.48 | %    |  |      | 2.26 | %    |  |      | 2.16 | %    |  |      | 1.86 | %    |  |      | 1.64 | %    |  |      | 1.43 | %    |  |  | 1.11 | % |  |  | 0.94 | % |  |  | 0.83 | % |  |  | 0.93 | % |  |  | 0.98 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|17    |  |      | 2.26 | %    |  |      | 2.42 | %    |  |      | 2.29 | %    |  |      | 2.17 | %    |  |      | 2.64 | %    |  |      | 2.42 | %    |  |      | 2.42 | %    |  |      | 2.04 | %    |  |      | 1.78 | %    |  |      | 1.55 | %    |  |  | 1.23 | % |  |  | 1.03 | % |  |  | 0.91 | % |  |  | 1.02 | % |  |  | 1.07 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|18    |  |      | 2.46 | %    |  |      | 2.63 | %    |  |      | 2.48 | %    |  |      | 2.40 | %    |  |      | 2.80 | %    |  |      | 2.69 | %    |  |      | 2.65 | %    |  |      | 2.20 | %    |  |      | 1.96 | %    |  |      | 1.67 | %    |  |  | 1.34 | % |  |  | 1.10 | % |  |  | 1.00 | % |  |  | 1.10 | % |  |  | 1.16 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|19    |  |      | 2.59 | %    |  |      | 2.71 | %    |  |      | 2.61 | %    |  |      | 2.61 | %    |  |      | 2.98 | %    |  |      | 2.96 | %    |  |      | 2.97 | %    |  |      | 2.41 | %    |  |      | 2.10 | %    |  |      | 1.80 | %    |  |  | 1.45 | % |  |  | 1.19 | % |  |  | 1.12 | % |  |  | 1.16 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|20    |  |      | 2.71 | %    |  |      | 2.89 | %    |  |      | 2.73 | %    |  |      | 2.87 | %    |  |      | 3.25 | %    |  |      | 3.20 | %    |  |      | 3.25 | %    |  |      | 2.60 | %    |  |      | 2.25 | %    |  |      | 1.94 | %    |  |  | 1.58 | % |  |  | 1.30 | % |  |  | 1.20 | % |  |  | 1.26 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|21    |  |      | 2.83 | %    |  |      | 3.08 | %    |  |      | 2.92 | %    |  |      | 3.05 | %    |  |      | 3.52 | %    |  |      | 3.44 | %    |  |      | 3.48 | %    |  |      | 2.75 | %    |  |      | 2.36 | %    |  |      | 2.09 | %    |  |  | 1.71 | % |  |  | 1.39 | % |  |  | 1.27 | % |  |  | 1.34 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|22    |  |      | 2.88 | %    |  |      | 3.21 | %    |  |      | 3.07 | %    |  |      | 3.20 | %    |  |      | 3.69 | %    |  |      | 3.69 | %    |  |      | 3.70 | %    |  |      | 2.92 | %    |  |      | 2.49 | %    |  |      | 2.23 | %    |  |  | 1.84 | % |  |  | 1.51 | % |  |  | 1.39 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|23    |  |      | 3.03 | %    |  |      | 3.31 | %    |  |      | 3.22 | %    |  |      | 3.33 | %    |  |      | 3.91 | %    |  |      | 3.94 | %    |  |      | 3.95 | %    |  |      | 3.03 | %    |  |      | 2.61 | %    |  |      | 2.35 | %    |  |  | 1.92 | % |  |  | 1.59 | % |  |  | 1.49 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|24    |  |      | 3.21 | %    |  |      | 3.43 | %    |  |      | 3.32 | %    |  |      | 3.53 | %    |  |      | 4.12 | %    |  |      | 4.18 | %    |  |      | 4.18 | %    |  |      | 3.16 | %    |  |      | 2.75 | %    |  |      | 2.47 | %    |  |  | 2.02 | % |  |  | 1.67 | % |  |  | 1.60 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|25    |  |      | 3.28 | %    |  |      | 3.55 | %    |  |      | 3.43 | %    |  |      | 3.70 | %    |  |      | 4.32 | %    |  |      | 4.39 | %    |  |      | 4.37 | %    |  |      | 3.32 | %    |  |      | 2.86 | %    |  |      | 2.57 | %    |  |  | 2.13 | % |  |  | 1.73 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|26    |  |      | 3.34 | %    |  |      | 3.67 | %    |  |      | 3.65 | %    |  |      | 3.88 | %    |  |      | 4.52 | %    |  |      | 4.57 | %    |  |      | 4.54 | %    |  |      | 3.45 | %    |  |      | 3.01 | %    |  |      | 2.67 | %    |  |  | 2.25 | % |  |  | 1.80 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|27    |  |      | 3.47 | %    |  |      | 3.77 | %    |  |      | 3.79 | %    |  |      | 4.03 | %    |  |      | 4.71 | %    |  |      | 4.74 | %    |  |      | 4.74 | %    |  |      | 3.59 | %    |  |      | 3.12 | %    |  |      | 2.77 | %    |  |  | 2.33 | % |  |  | 1.89 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|28    |  |      | 3.61 | %    |  |      | 3.88 | %    |  |      | 3.90 | %    |  |      | 4.22 | %    |  |      | 4.87 | %    |  |      | 4.91 | %    |  |      | 4.88 | %    |  |      | 3.71 | %    |  |      | 3.27 | %    |  |      | 2.87 | %    |  |  | 2.43 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|29    |  |      | 3.67 | %    |  |      | 4.01 | %    |  |      | 4.03 | %    |  |      | 4.42 | %    |  |      | 5.04 | %    |  |      | 5.07 | %    |  |      | 5.03 | %    |  |      | 3.86 | %    |  |      | 3.41 | %    |  |      | 2.96 | %    |  |  | 2.52 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|30    |  |      | 3.78 | %    |  |      | 4.14 | %    |  |      | 4.19 | %    |  |      | 4.58 | %    |  |      | 5.23 | %    |  |      | 5.22 | %    |  |      | 5.18 | %    |  |      | 4.00 | %    |  |      | 3.52 | %    |  |      | 3.04 | %    |  |  | 2.62 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|31    |  |      | 3.85 | %    |  |      | 4.25 | %    |  |      | 4.28 | %    |  |      | 4.71 | %    |  |      | 5.35 | %    |  |      | 5.36 | %    |  |      | 5.33 | %    |  |      | 4.09 | %    |  |      | 3.60 | %    |  |      | 3.11 | %    |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|32    |  |      | 3.96 | %    |  |      | 4.37 | %    |  |      | 4.43 | %    |  |      | 4.84 | %    |  |      | 5.48 | %    |  |      | 5.53 | %    |  |      | 5.43 | %    |  |      | 4.20 | %    |  |      | 3.69 | %    |  |      | 3.19 | %    |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|33    |  |      | 4.07 | %    |  |      | 4.49 | %    |  |      | 4.60 | %    |  |      | 4.98 | %    |  |      | 5.61 | %    |  |      | 5.67 | %    |  |      | 5.57 | %    |  |      | 4.28 | %    |  |      | 3.78 | %    |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|34    |  |      | 4.18 | %    |  |      | 4.55 | %    |  |      | 4.71 | %    |  |      | 5.11 | %    |  |      | 5.74 | %    |  |      | 5.80 | %    |  |      | 5.67 | %    |  |      | 4.39 | %    |  |      | 3.87 | %    |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|35    |  |      | 4.25 | %    |  |      | 4.66 | %    |  |      | 4.83 | %    |  |      | 5.21 | %    |  |      | 5.85 | %    |  |      | 5.91 | %    |  |      | 5.77 | %    |  |      | 4.47 | %    |  |      | 3.93 | %    |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|36    |  |      | 4.32 | %    |  |      | 4.79 | %    |  |      | 4.95 | %    |  |      | 5.32 | %    |  |      | 5.96 | %    |  |      | 6.04 | %    |  |      | 5.90 | %    |  |      | 4.55 | %    |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|37    |  |      | 4.37 | %    |  |      | 4.86 | %    |  |      | 5.00 | %    |  |      | 5.46 | %    |  |      | 6.06 | %    |  |      | 6.15 | %    |  |      | 5.99 | %    |  |      | 4.64 | %    |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|38    |  |      | 4.44 | %    |  |      | 4.94 | %    |  |      | 5.07 | %    |  |      | 5.55 | %    |  |      | 6.16 | %    |  |      | 6.24 | %    |  |      | 6.09 | %    |  |      | 4.73 | %    |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|39    |  |      | 4.51 | %    |  |      | 5.00 | %    |  |      | 5.15 | %    |  |      | 5.63 | %    |  |      | 6.25 | %    |  |      | 6.35 | %    |  |      | 6.17 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|40    |  |      | 4.56 | %    |  |      | 5.05 | %    |  |      | 5.22 | %    |  |      | 5.71 | %    |  |      | 6.33 | %    |  |      | 6.43 | %    |  |      | 6.24 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|41    |  |      | 4.66 | %    |  |      | 5.12 | %    |  |      | 5.30 | %    |  |      | 5.78 | %    |  |      | 6.41 | %    |  |      | 6.53 | %    |  |      | 6.31 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|42    |  |      | 4.69 | %    |  |      | 5.17 | %    |  |      | 5.36 | %    |  |      | 5.84 | %    |  |      | 6.48 | %    |  |      | 6.60 | %    |  |      | 6.39 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|43    |  |      | 4.72 | %    |  |      | 5.21 | %    |  |      | 5.42 | %    |  |      | 5.89 | %    |  |      | 6.54 | %    |  |      | 6.67 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|44    |  |      | 4.77 | %    |  |      | 5.23 | %    |  |      |      |      |  |      | 5.95 | %    |  |      | 6.59 | %    |  |      | 6.76 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|45    |  |      |      |      |  |      |      |      |  |      |      |      |  |      | 5.99 | %    |  |      | 6.62 | %    |  |      | 6.82 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|46    |  |      |      |      |  |      |      |      |  |      |      |      |  |      | 6.02 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  

32



---



##### Table of Contents



Liquidity and Capital Resources

The Company requires substantial cash and capital
resources to operate its business. Its primary uses of cash
include: (i) acquisition of Contracts; (ii) payments
of dealer participation; (iii) securitization costs;
(iv) settlements of hedging transactions;
(v) operating expenses; and (vi) interest expense. The
capital resources available to the Company include:
(i) interest income during the warehousing period;
(ii) servicing fees; (iii) releases from spread
accounts; (iv) settlements of hedging transactions;
(v) sales of Contracts in securitizations; and
(vi) borrowings under its credit facilities. Management
believes that the resources available to the Company will
provide the needed capital to fund Contract purchases,
investments in origination and servicing capabilities, and
ongoing operations.

The Companys primary source of funds from
continuing operations is securitization proceeds. The Company
uses the cash generated from securitizations to pay down
outstanding warehouse facilities. These facilities are then used
to fund the purchase of Contracts. Although the Company has
historically operated on a negative cash flow basis, excluding
the effects of securitization transactions, from operating
activities, the Company generated positive cash flow beginning
in the fourth quarter of 2003 and expects to continue to
generate positive cash flow on a quarterly basis provided the
volume of Contract purchases remains steady on an annual basis.
The Company finances dealer participation payments and daily
operations principally through credit facilities collateralized
by its retained interest in securitized assets, proceeds from
subordinated debt offerings, and cash from operating activities.
Cash used in operating activities was $16.8 million for the
year ended December 31, 2003, compared to
$25.4 million provided by operating activities in 2002 and
$24.7 million used in 2001. The decrease in cash provided
by operating activities for 2003 is principally due to payments
on trade accounts during the year versus 2002. The change in
cash used in operating activities is largely dependent upon the
amount of cash released from spread accounts, the timing and
size of securitization transactions including whether they
include pre-funding agreements, the relative size of clean-up
calls executed during the respective periods and the size of
securitizations executed relative to the volume of Contracts
originated during the warehouse period.

The Company continued to focus its efforts on
building and maintaining its dealer relations through its
existing branch locations and did not open any new branches in
2003. Following a review of market conditions, the Company plans
to open an Auto Finance Center in New York in the second
quarter of 2004. Capital expenditures of $1.1 million and
$593 thousand during the years ended December 31, 2003 and
2002, respectively, were due to the ongoing maintenance and
upgrade of the Companys servicing infrastructure.

CP Facilities:As of
December 31, 2003, the Company was party to two warehouse
facilities. The Companys primary warehouse facility was a
$300 million facility (the Triple-A CP
Facility), with Triple-A One Funding Corporation
(Triple-A). Onyx Acceptance Financial Corporation
(Finco), a special purpose subsidiary of the
Company, is the borrower under the Triple-A CP Facility. The
Triple-A CP Facility is used to fund the purchase or origination
of Contracts. Triple-A is a rated commercial paper asset-backed
conduit sponsored by MBIA Insurance Corporation
(MBIA). MBIA provides credit enhancement for the
facility by issuing a financial guarantee insurance policy
covering all principal and interest obligations owed for the
borrowings under the facility. The Company pledges certain of
its Contracts held for sale to borrow from Triple-A. The
Triple-A CP Facility was renewed in November 2001 for a
three-year term, subject to annual renewals by liquidity
providers. During 2003, the size of the Triple-A CP Facility was
reduced from $355.0 million to $300.0 million in
conjunction with the acquisition of the CDC CP Facility
described below.

In January 2003, a subsidiary of the Company,
Onyx Acceptance Receivables Corporation (OARC),
executed a $150 million warehouse facility with CDC
Financial Products Inc. (CDC) which provides
warehouse funding for the purchase or origination of Contracts
and has been used in concert with the Triple-A CP Facility. XL
Capital Assurance Inc. provides credit enhancement for the
facility by issuing a financial guarantee insurance policy
covering all principal and interest obligations owed for
borrowings under the facility. The Company pledges certain of
its Contracts held for sale to borrow under the CDC CP Facility.
The CDC CP Facility was renewed and expanded to
$300 million in January 2004 with the addition of another
lending group. The facility is now set to expire in January 2005.

33



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The Residual Lines:As of December 31, 2003, the Company, through a special
purpose subsidiary of the Company, Onyx Acceptance Funding
Corporation (Fundco), had two residual financing
facilities: a $35 million line with Merrill Lynch
International, as buyer (MLI), and Merrill Lynch,
Pierce, Fenner & Smith Inc., as agent
(Merrill), and a $21.4 million facility with
Credit Suisse First Boston (Europe) Limited, as buyer
(CSFB-Europe), and Credit Suisse First Boston
Corporation, as agent (CSFB). The MLI facility was
executed in April 2003, and replaced a $50.0 million
residual line with Salomon Smith Barney Realty Corporation
(SBRC). Each loan under the MLI line has a
nine-month revolver period followed by a twelve-month
amortization period. The CSFB-Europe line was renewed in October
2003, at which time the facility size was reduced from
$35 million to $21.4 million, until January 2004. In
January 2004, the line was extended through April 2004 as a
$20 million facility. The Company expects to renew the line
at the $20 million level for another year at that time. The
reductions in the CSFB-Europe line were related to the Company
entering into a $30 million residual financing facility
with Galleon Capital, LLC (Galleon), in January
2004. (The Galleon facility together with the MLI facility and
the CSFB-Europe facility are sometimes referred to herein as the
Residual Lines). The Galleon facility provides for a
twelve-month revolving period followed by an accelerated
amortization period.

Residual
Securitizations:As an additional
source of funds, the Company has utilized residual
securitizations to increase the Companys liquidity. During
the first quarter of 2000, the Company securitized the residual
cash flows from 15 of its then outstanding securitizations. The
proceeds of this transaction were used by the Company to pay
down two residual financing facilities and pay off another
residual financing facility. The Company refinanced this
residual securitization in the amount of $21.0 million
during the second quarter of 2002 and in the amount of
$9.2 million during the fourth quarter of 2002. During the
first quarter of 2002, the Company completed its second residual
interest securitization for the purpose of providing additional
borrowing capacity under its Residual Lines. This transaction
generated approximately $75.0 million in proceeds. The
Company retired both of these residual securitizations in 2003.

Subordinated Debt:As of December 31, 2003, the Company had outstanding
approximately $51.1 million of subordinated debt,
$12.0 million of which has a stated interest rate of 12.5%
and a maturity of June 2006. The remaining balance of
$39.1 million was raised through the Companys
renewable unsecured subordinated note program launched during
the first quarter of 2002. The weighted average interest rate on
the balance of the renewable notes outstanding as of
December 31, 2003 was approximately 8.5%. The renewable
notes have varying maturities ranging from three months to ten
years.

The facilities and lines above contain
affirmative, negative and financial covenants typical of such
credit facilities. The Company was in compliance with these
covenants as of December 31, 2003.

Hedging and Interest Rate Risk
Management:The Company employs a
hedging strategy that is intended to minimize the risk of
interest rate fluctuations. Such transactions involve the
execution of forward interest rate swaps and/or the use of a
pre-funding structure for the Companys securitizations.
The Company is not required to maintain collateral on the
outstanding hedging program until the point where the fair value
declines below ($1.0) million.

Securitizations

Off-balance sheet arrangements are used in the
ordinary course of business. Generally, these transactions are
structured as off balance sheet sales of Contracts. One of the
most common forms of off-balance sheet arrangements is Contract
securitizations. Regular Contract securitizations are an
integral part of the Companys business plan because they
allow the Company to increase its liquidity, provide for
redeployment of its capital and reduce risks associated with
interest rate fluctuations. The Company has developed a
securitization program that involves selling interests in pools
of its Contracts to investors through the public issuance of
AAA/ Aaa rated asset-backed securities. Automobile
securitizations are used by many financial institutions and are
part of a $90 billion annual market for asset-backed
securities. As part of this process, management considers the
relative risks and returns prior to initiating each
securitization. These risks include, but are not limited to,
interest rate fluctuations during the warehouse period,
increased prepayments speeds and losses, loss of credit
enhancement for the underlying securitization, loss of servicing
rights and adverse

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##### Table of Contents



economic conditions. These factors are explained
in further detail in the section Business Risks. The
table below provides information about the trusts assets
and liabilities as of December 31, 2003 and 2002.


|                  |  |                |       |      |  |   |       | 
|----------------- |  | -------------- | ----- | ---- |  | - | ----- | 
|                  |  |               
|                  |  | December 31,  
|                  |  |               
|                  |  | 2002           |       | 2003
|                  |  |                |       |     
|                  |  |               
|                  |  | (In thousands)
|Total assets      |  | $              | 2,805 |      |  | $ | 2,750 | 
|Total liabilities |  | $              | 2,695 |      |  | $ | 2,642 | 

The Company completed four AAA/ Aaa rated
publicly underwritten asset-backed securitizations in the total
amount of $1.6 billion in 2003. Since 1994, the Company has
securitized $10.0 billion of its Contracts in 34 separate
transactions. In each of its securitizations, the Company has
sold its Contracts to a newly formed grantor or owner trust,
which issued certificates or notes in an amount equal to the
aggregate principal balance of the Contracts. The net proceeds
of these securitizations were used to pay down outstanding
indebtedness incurred under the Companys warehouse credit
facilities to purchase Contracts, thereby creating availability
for the purchase of additional Contracts.

To improve the level of profitability from the
sale of securitized Contracts, the Company arranges for credit
enhancement to achieve an improved credit rating on the
asset-backed securities issued. This credit enhancement has
taken the form of a financial guaranty insurance policy (the
Financial Guarantee Insurance Policy) insuring the
payment of principal and interest due on the asset-backed
securities.

The Company receives servicing fees for its
duties relating to the accounting for and collection of the
Contracts. In addition, the Company is entitled to the future
excess cash flows arising from the trusts. Generally, the
Company sells the Contracts at face value and without recourse,
except that certain representations and warranties with respect
to the Contracts are provided by the Company as the servicer and
Finco as the seller to the trusts.

Gains on sale of Contracts arising from
securitizations provide a significant portion of the
Companys revenues. Several factors affect the
Companys ability to complete securitizations of its
Contracts, including conditions in the securities markets
generally, conditions in the asset-backed securities market
specifically, the credit quality of the Companys portfolio
of Contracts and the Companys ability to obtain credit
enhancement.

Interest Rate Exposure and Hedging

The Company is able through the use of varying
maturities on advances from the CP Facilities to lock in rates
during the warehousing period, when in managements
judgment it is appropriate to limit interest rate exposure
during such period (See Business Risks 
Interest Rate Risk).

The Company has the ability to move rates upward
in response to rising borrowing costs because the Company
currently does not originate loans near the maximum rates
permitted by law. Further, the Company employs a hedging
strategy which primarily consists of the execution of forward
interest rate swaps. These hedges are entered into by the
Company in numbers and amounts which generally correspond to the
anticipated principal amount of the related securitization.
Gains and losses relative to these hedges are recognized in full
at the time of securitization as an adjustment to the gain on
sale of the Contracts.

Management monitors the Companys hedging
activities on a frequent basis to ensure that the value of
hedges, their correlation to the Contracts being hedged and the
amounts being hedged continue to provide effective protection
against interest rate risk. The Companys hedging strategy
requires estimates by management of monthly Contract acquisition
volume and timing of its securitizations. If such estimates are
materially inaccurate, then the Companys gains on sales of
Contracts and results of operations and cash flows could be
adversely affected. The amount and timing of hedging
transactions are determined by senior management based upon the
amount of Contracts purchased and the interest rate environment.
Senior management currently expects to hedge substantially all
of the Contracts pending securitization.

35



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##### Table of Contents



Contractual Obligations

The table below provides information about the
Companys contractual obligations by category and expected
maturity date, weighted average interest rate and fair value, as
of December 31, 2003 (dollars in thousands).

Contractual Obligations Due by
Period

|                       |  |          |     |            |  |       |         |      |  |           |         |           |  |            |         |  |  |   |        |  |  |   |     |  |  |   |     | 
|---------------------- |  | -------- | --- | ---------- |  | ----- | ------- | ---- |  | --------- | ------- | --------- |  | ---------- | ------- |  |  | - | ------ |  |  | - | --- |  |  | - | --- | 
|                       |  | Weighted |     |            |  |       |         |      |  |           |         |           |  |           
|                       |  | Average  |     |            |  |       |         |      |  |           |         |           |  |           
|                       |  | Interest |     |            |  |       |         |      |  |           |         |           |  |           
|                       |  | Rate     |     | Fair Value |  | Total |         | 2004 |  | 2005-2008 |         | 2009-2012 |  | After 2012
|                       |  |          |     |            |  |       |         |      |  |           |         |           |  |           
|Commercial Paper       |  |          | 1.2 | %          |  | $     | 183,008 |      |  | $         | 183,008 |           |  | $          | 183,008 |  |  |   |        |  |  |   |     |  |  |   |     | 
|Subordinated Financing |  |          | 9.5 | %          |  |       | 51,077  |      |  |           | 51,077  |           |  |            | 23,689  |  |  | $ | 27,025 |  |  | $ | 363 |  |  |   |    | 
|Residual Lines         |  |          | 6.2 | %          |  |       | 30,697  |      |  |           | 30,697  |           |  |            | 30,697  |  |  |   |       |  |  |   |    |  |  |   |    | 
|Capital Leases         |  |          | 9.0 | %          |  |       | 1,063   |      |  |           | 1,063   |           |  |            | 690     |  |  |   | 373    |  |  |   |    |  |  |   |    | 
|                       |  |          |     |            |  |       |         |      |  |           |         |           |  |            |         |  |  |   |        |  |  |   |     |  |  |   |     | 
|Total Obligations      |  |          |     |            |  | $     | 265,845 |      |  | $         | 265,845 |           |  | $          | 238,084 |  |  | $ | 27,398 |  |  | $ | 363 |  |  |   |    | 
|                       |  |          |     |            |  |       |         |      |  |           |         |           |  |            |         |  |  |   |        |  |  |   |     |  |  |   |     | 
|Operating Leases       |  |          |     |            |  |       |         |      |  | $         | 13,115  |           |  | $          | 3,499   |  |  | $ | 9,456  |  |  |   |     |  |  | $ | 160 | 
|                       |  |          |     |            |  |       |         |      |  |           |         |           |  |            |         |  |  |   |        |  |  |   |     |  |  |   |     | 

Recent Accounting Pronouncements

In May of 2003, the Financial Accounts Standards
Board (FASB) issued Statement of Financial
Accounting Standards No. 150, (FAS 150)
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.
This Statement establishes standards for the classification and
measurement of certain financial instruments having the
characteristics of both a liability and equity. This Statement
is effective for financial instruments entered into after
May 31, 2003, or modified thereafter. The adoption of
FAS-150 did not have a material effect on the Companys
consolidated financial statements.

In April of 2003, the Financial Accounts
Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 149, (FAS 149)
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This Statement amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging
Activities. The changes in this Statement improve
financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. This Statement is
generally effective for contracts entered into or modified after
June 30, 2003. The adoption of FAS-149 did not have a
material effect on the Companys consolidated financial
statements.

In January of 2003, the Emerging Issues Task
Force further discussed Issue No. 02-09, Accounting
for Changes That Result in a Transferor Regaining Control of
Financial Assets Sold. The Task Force reached a consensus
that upon application of paragraph 55 of FASB Statement
No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, when
the transferors contingent right becomes exercisable, no
gain or loss should be recognized in earnings with respect to
any beneficial interests retained by the transferor. The Task
Force plans to consider further the accounting for the
application of paragraph 55 when an entire SPE is
disqualified. Paragraph 55 of Statement 140 requires a
transferor to recognize in its financial statements assets
previously accounted for appropriately as having been sold when
one or more of the conditions in paragraph 9 are no longer
met. The transferor recognizes those assets together with
liabilities to the former transferee(s) in those assets and
initially measures the assets and liabilities at fair value on
the date of the change, as if the transferor purchased them on
that date. The issue is how to apply the accounting requirements
of paragraph 55 with respect to beneficial interests held
by the transferor and loans that do not meet the definition of
security, including whether the transferor should
recognize a gain or loss when paragraph 55 is applied. The
Company adopted EITF 02-09 in the fourth quarter of 2002.
The adoption of EITF 02-09 had no material effect on the
Companys financial position or results of operations.

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##### Table of Contents



In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others (FIN 45), which
is an interpretation of SFAS No. 5; Accounting
for Contingencies, SFAS No. 57; Related
Party Disclosures, and SFAS No. 107;
Disclosures About Fair Value of Financial
Instruments. FIN 45 clarifies the disclosure and
liability recognition requirements relating to guarantees issued
by an entity. Specifically, FIN 45 clarifies that entities
are required to record guarantees at their fair values,
including the value of the obligation to stand ready to perform
over the term of the guarantee in the event the specified
triggering events or conditions occur, regardless of whether the
occurrence of the triggering events or conditions is deemed
probable of occurring. FIN 45 was effective for new
guarantees issued or modification of guarantees made after
December 31, 2002. FIN 45s disclosure
requirements were effective for financial statements of interim
or annual periods ending after December 15, 2002. The
adoption of FIN 45s measurement requirements did not
have a significant impact on the Companys financial
position or results of operations.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46), which is an
interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements. FIN 46
requires business enterprises to consolidate variable interest
entities which have one or more of the following characteristics:

1. The equity investment at risk is not
sufficient to permit the entity to finance its activities
without additional subordinated financial support from other
parties.

2. The equity investors lack one or more of
the following essential characteristics of a controlling
financial interest:



| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | a. The direct or indirect ability to make
    decisions about the entitys activities through voting
    rights or similar rights.
|
| | b. The obligation to absorb the expected
    losses of the entity if they occur.                                                  
|
| | c. The right to receive expected residual
    returns of the entity if they occur.                                                

FIN 46 excludes qualifying special purpose
entities subject to the reporting requirements of SFAS 140.
FIN 46 applies upon formation to variable interest entities
created after January 31, 2003, and to all variable
interest entities in the first fiscal year or interim period
beginning after June 15, 2003. At December 31, 2003,
the Companys corporate structure included either companies
whose accounts were consolidated into the Companys
financial statements or which were classified as qualifying
special purpose entities under SFAS 140. Therefore, the
adoption of FIN 46 did not have an impact on the
Companys financial statements.

Forward Looking Information

The preceding Managements Discussion and
Analysis of the Companys Financial Condition and Results
of Operations contain certain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology such as may,
will, expect, anticipate,
estimate, should or continue
or the negative thereof or other variations thereon or
comparable terminology. Cautionary statements identifying
important factors with respect to such forward-looking
statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those in
such forward-looking statements are included in this Annual
Report,, including, without limitation, in Item 1, shown
under the heading Risk Factors.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

The Companys earnings are affected by
changes in interest rates as a result of its dependence upon the
issuance of interest-bearing securities and the incurrence of
debt to fund its lending activities. Several factors can
influence the Companys ability to manage interest rate
risk. First, Contracts are purchased at fixed interest rates,
while the amounts borrowed under the warehouse credit facilities
bear interest at variable rates that are subject to frequent
adjustment to reflect prevailing market interest rates. Second,
the interest rate demanded by investors in a securitization is a
function of prevailing market rates for comparable transactions

37



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##### Table of Contents



and the general interest rate environment.
Because the Contracts purchased by the Company have fixed
interest rates, the Company bears the risk of smaller gross
interest rate spreads in the event interest rates increase
during the period between the date Contracts are purchased and
the completion and pricing of securitization transactions.


The Company uses several strategies to minimize
interest rate risk, including the utilization of derivative
financial instruments, the regular securitization of Contracts
and the use of pre-funding in securitization transactions.
Pre-funding securitizations is the practice of issuing more
asset-backed securities than the amount of Contracts initially
sold to the securitization trust. The proceeds from the
pre-funded portion are held in an escrow account until
additional Contracts are sold to the trust in amounts up to the
balance of the pre-funded escrow account. In pre-funded
securitizations, investor interest rates are locked in with
respect to the Contracts subsequently delivered to the
securitization trust. However, the Company incurs an expense in
pre-funded securitizations equal to the difference between the
money market yields earned on the proceeds held in escrow prior
to the subsequent delivery of Contracts and the interest rate
paid on the portion of the asset-backed securities related to
the pre-fund amount.

Derivative financial instruments are utilized to
manage the gross interest rate spread on the Companys
securitization transactions. The Company sells fixed rate
Contracts to the trusts that, in turn, sell fixed rate
securities to investors. The fixed rates on securities issued by
the trusts are indexed to swap rates on U.S. Treasury Notes
with similar average maturities or various London Interbank
Offered Rates (LIBOR). The Company periodically
executes the sale of forward swap agreements to lock in the
indexed rate for specific anticipated securitization
transactions. The Company utilizes these derivative financial
instruments to modify its net interest sensitivity to levels
deemed appropriate based on the Companys risk tolerance.
All transactions are entered into for purposes other than
trading and are settled quarterly upon pricing of the
securitization.

The Company remitted cash payments, net of
expenses, of approximately $2.2 million in 2003,
$3.6 million in 2002 and $6.6 million in 2001 to
settle forward interest rate swap agreements. These amounts were
included in the gain on sale of Contracts in securitization
transactions. Cash payments are recovered over time through a
higher gross interest rate spread on the related securitization
transaction, while cash receipts are offset through a lower
gross interest rate spread on the related securitization
transaction. As of December 31, 2003, the Company had
$150.0 million of forward interest rate swap agreements
outstanding.

The table below provides information about the
Companys derivative financial instruments by expected
maturity date as of December 31, 2003 (dollars in
thousands). Notional amounts, which are used to calculate the
contractual payments to be exchanged under the agreements,
represent average amounts that will be outstanding for each of
the years included in the table. Notional amounts do not
represent amounts exchanged by parties and, thus, are not a
measure of the Companys exposure to loss through its use
of the agreements.

|                         |                                   |      |   |          |   |      |   |          |   |      |   |            |   |  |   |          |   |  |   |          |   |  |  |     | 
|------------------------ | --------------------------------- | ---- | - | -------- | - | ---- | - | -------- | - | ---- | - | ---------- | - |  | - | -------- | - |  | - | -------- | - |  |  | --- | 
|Years Ended December 31, |                                   | 2004 |   | 2005     |   | 2006 |   | 2007     |   | 2008 |   | Fair Value
|                         |                                   |      |   |          |   |      |   |          |   |      |   |           
|Interest Rate Swaps:     |                                   |      |   |          |   |      |   |          |   |      |   |            |   |  |   |          |   |  |   |          |   |  |  |    
|                         | Average Notional Amounts ($000s) |      | $ | 122,311  |   |      | $ | 82,720   |   |      | $ | 43,360     |   |  | $ | 15,388   |   |  | $ | 3,886    |   |  |  | $31 | 
|                         | Average interest rate paid        |      |   | 2.45     | % |      |   | 2.45     | % |      |   | 2.45       | % |  |   | 2.45     | % |  |   | 2.45     | % |  |  |     | 
|                         | Average interest rate received    |      |   | Variable |   |      |   | Variable |   |      |   | Variable   |   |  |   | Variable |   |  |   | Variable |   |  |  |     | 

There can be no assurance that the Companys
strategies will be effective in minimizing interest rate risk or
that increases in interest rates will not have a material
adverse effect on the Companys profitability.






|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

The Companys financial statements, as
listed under Item 15, appear in a separate section of this
Annual Report on Form 10-K beginning on page F-1.

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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure

On December 10, 2003, the Audit Committee of
the Board of Directors dismissed PricewaterhouseCoopers LLP
(PwC) as the Companys independent auditors and
appointed Grant Thornton LLP as the Companys independent
auditors, effective on such date. Other than an explanatory
paragraph relating to a restatement of the 2002 financial
statements, PwCs audit reports on the Companys
financial statements for the most recent two fiscal years, which
ended December 31, 2002 and 2001, respectively, did not
contain an adverse opinion or a disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or
accounting principles.

In connection with its audits of the
Companys financial statements for the two most recent
fiscal years, and through December 10, 2003:



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | there were no disagreements between the Company
    and PwC on any matter of accounting principles or practices,
    financial statement disclosure or auditing scope or procedure,
    which disagreements, if not resolved to PwCs satisfaction,
    would have caused PwC to make reference to the subject matter of
    the disagreements in connection with its reports on the
    financial statements; and
|
| | b) | there were no reportable events (as specified in
    Item 304(a) (1) (v) of Regulation S-K) except for the
    item discussed below as described in the 10-Q/ As for the
    periods ended September 30, 2002 and March 31, 2003
    and for the 10-K/ A for the period ended December 31, 2002.                                                                                                                  

During the second quarter of 2003, PwC advised
the Company of a reportable condition relating to its internal
control structure as it relates to the use of cash flow models.
The cash flow estimates provided by these models support the
Companys income recognition and impairment calculations.
The models are complex and require manual intervention, both of
which are factors that increase the propensity for human error.
During the second quarter of 2003, the Company identified
instances where errors were made in the estimated cash flows and
therefore in the residual interest in securitized assets
valuation computations for the third and fourth quarters of
2002. In addition, the Company revised the method for amortizing
loan premium amortization on contracts acquired in connection
with clean-up calls exercised on the Companys
securitization pools. In response to the above, management now
prepares a detailed analysis of loan premium amortization and
factors underlying any significant changes in estimated cash
flows for each trust during the current reporting period versus
the previous periods estimated cash flows to further
double-check the evaluation process.

On December 10, 2003, the Audit Committee of
the Board of Directors of Onyx Acceptance Corporation approved
the selection of the Companys new independent auditors.
The Board of Directors ratified the selection of Grant Thornton
LLP to replace PwC.

On December 10, 2003, the Company executed a
formal engagement letter with Grant Thornton LLP to serve as the
Companys independent public accountants, effective
immediately.

During the Companys two most recent fiscal
years through December 10, 2003, neither the Company nor
anyone acting on its behalf consulted Grant Thornton LLP
regarding any of the matters specified in Item 304(a)(2) of
Regulation S-K.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

The Company maintains disclosure controls and
procedures that are designed to ensure that information required
to be disclosed in the Companys Exchange Act reports is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms and that such information is
accumulated and communicated to the Companys management,
including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow for timely decisions regarding
required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its
judgment in evaluating the cost-benefit relationship of possible
controls and procedures.

39



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##### Table of Contents



As required by SEC Rule 13a-15(b), the
Company carried out an evaluation, under the supervision and
with the participation of the Companys management,
including the Companys Chief Executive Officer and the
Companys Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure
controls and procedures as of the end of the fiscal period
covered by this report. Based on the foregoing, except as
discussed below, the Companys Chief Executive Officer and
Chief Financial Officer concluded that the Companys
disclosure controls and procedures were effective at the
reasonable assurance level.

As part of our year end audit for 2003, an item
was identified as a material weakness in internal controls
related to cash cut off procedures which resulted in
restatements to previously issued financial statements. The
cut-off issues that led to the restatement relate to cash
transactions executed by the Company in January that were
recorded as of December 31.

A material weakness is defined as a significant
deficiency in which the design or operation of one or more of
the internal control components does not reduce to a relatively
low level the risk that misstatements caused by error or fraud
in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing
their assigned functions.

The Company has implemented necessary controls to
remediate any potential deficiency related to cash cut off
procedures on a continuing basis. This matter and its resolution
have been discussed with the Companys Audit Committee.

Apart from the cut off procedures described
above, there has been no change in the Companys internal
control over financial reporting during the Companys most
recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.



PART III





|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

Information regarding the directors and officers
of the Company is incorporated herein by reference to the
descriptions set forth under the captions Election of
Directors, Management and
Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement to be filed with the
Securities and Exchange Commission for the Annual Meeting of
Stockholders currently expected to be held May 26, 2004
(the 2004 Proxy Statement).





|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Information regarding executive compensation is
incorporated herein by reference to the descriptions to be set
forth under the caption Executive Compensation in
the 2004 Proxy Statement.





|         |                                                                                                        
|-------- | -------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management, and Related Stockholder
    Matters

Information regarding security ownership of
certain beneficial owners and management of the Company is
incorporated herein by reference to the information to be set
forth under the caption Security Ownership of Certain
Beneficial Owners and Management in the 2004 Proxy
Statement.





|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

Information regarding certain relationships and
related transactions with the Company is incorporated herein by
reference to the information to be set forth under the caption
Certain Transactions and Related Transactions in the
2004 Proxy Statement.





|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

Information regarding certain relationships and
related transactions with the Company is incorporated herein by
reference to the information to be set forth under the caption
Certain Transactions and Related Transactions in the
2004 Proxy Statement.

40



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##### Table of Contents






PART IV






|         |                                     
|-------- | ------------------------------------
|Item 15. | Exhibits and Reports on
    Form 8-K

(a)(1) Financial Statements:

The Companys financial statements appear in
a separate section of this Annual Report beginning on the pages
referenced below:

|                                                                                                             |  |      |     | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                             |  | Page
|                                                                                                             |  |     
|Report of Independent Certified Public
    Accountants  Grant Thornton LLP                                  |  |      | F-2 | 
|Report of Independent Accountants 
    PricewaterhouseCoopers LLP                                           |  |      | F-3 | 
|Consolidated Statements of Financial Condition as
    of December 31, 2003 and 2002                          |  |      | F-4 | 
|Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001                   |  |      | F-5 | 
|Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2003, 2002
    and 2001 |  |      | F-6 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001               |  |      | F-7 | 
|Notes to Consolidated Financial Statements                                                                   |  |      | F-8 | 

(a)(2) Exhibits

The following Exhibits are attached hereto and
incorporated herein by reference.

INDEX TO EXHIBITS

|        |    |             |  |                                                                                                                                                                                                                                                                                                          
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1          |  | Certificate of Incorporation of the Company.(1)                                                                                                                                                                                                                                                          
|        | 3  | .2          |  | Bylaws of the Company.(1)                                                                                                                                                                                                                                                                                
|        | 4  | .1          |  | Rights Agreement dated as of July 8, 1997,
    between the Company and American Stock Transfer and Trust
    Company, as Rights Agent (which includes the form of Certificate
    of Designation for the Series A Participating Preferred
    Stock and the form of Rights Certificate of the Company.(2)
|        | 10 | .1          |  | Form of Indemnification Agreement of the
    Company.(1)                                                                                                                                                                                                                                                 
|        | 10 | .2         |  | Second Amended and Restated 1994 Stock Option
    Plan.(1)                                                                                                                                                                                                                                               
|        | 10 | .3         |  | Form of Notice of Grant of Stock Option under
    Second Amended and Restated 1994 Stock Option Plan.(1)                                                                                                                                                                                                 
|        | 10 | .4         |  | Form of Stock Option Agreement under Second
    Amended and Restated 1994 Option Plan.(1)                                                                                                                                                                                                                
|        | 10 | .5         |  | Form of Stock Purchase Agreement under Second
    Amended and Restated 1994 Stock Option Plan.(1)                                                                                                                                                                                                        
|        | 10 | .6         |  | 1994 Special Performance Option Grant Plan.(1)                                                                                                                                                                                                                                                           
|        | 10 | .7         |  | Form of Notice of Grant of Stock Option under
    1994 Special Performance Option Grant Plan.(1)                                                                                                                                                                                                         
|        | 10 | .8         |  | Form of Stock Option Agreement under 1994 Special
    Performance Option Grant Plan.(1)                                                                                                                                                                                                                  
|        | 10 | .9         |  | Form of Stock Purchase Agreement under 1994
    Special Performance Option Grant Plan.(1)                                                                                                                                                                                                                
|        | 10 | .10         |  | Third Amendment to Amended and Restated
    Investors Rights Agreement between and among Onyx
    Acceptance Corporation and the Investors identified therein
    dated as of November 27, 1995.(1)                                                                                                     
|        | 10 | .11         |  | Senior Subordinated Note and Warrant Purchase
    Agreement between and among Onyx Acceptance Corporation, Capital
    Resource Lenders II, L.P. and Dominion Fund III, L.P.,
    dated as of November 17, 1994.(1)                                                                                      
|        | 10 | .12         |  | Warrant to purchase Common Stock in favor of
    Capital Resource Lenders II, L.P. from Onyx Acceptance
    Corporation dated as of November 17, 1994.(1)                                                                                                                                                

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|        |    |             |  |                                                                                                                                                                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .13         |  | Warrant to purchase Common Stock in favor of
    Dominion Fund III, L.P. from Onyx Acceptance Corporation
    dated as of November 17, 1994.(1)                                                                                                                                              
|        | 10 | .14         |  | Amended and Restated Co-Sale and First Refusal
    Agreement between and among Onyx Acceptance Corporation and the
    Shareholders identified therein dated as of November 17,
    1994.(1)                                                                                                 
|        | 10 | .15         |  | Amended and Restated Investors Rights
    Agreement between and among Onyx Acceptance Corporation, the
    Investors and the Management Holders identified therein dated as
    of November 17, 1994.(1)                                                                                    
|        | 10 | .16         |  | Amended and Restated Voting Agreement between and
    among Onyx Acceptance Corporation and the Shareholders
    identified therein dated as of November 17, 1994.(1)                                                                                                                        
|        | 10 | .20         |  | Sublease and Administrative Services Agreement
    between Onyx Acceptance Corporation and Onyx Acceptance
    Financial Corporation dated as of September 8, 1994.(1)                                                                                                                       
|        | 10 | .21         |  | Tax Allocation Agreement between Onyx Acceptance
    Corporation and Onyx Acceptance Financial Corporation dated as
    of September 1, 1994.(1)                                                                                                                                             
|        | 10 | .22         |  | Corporate Separateness Agreement between Onyx
    Acceptance Corporation and Onyx Acceptance Financial Corporation
    dated September 8, 1994.(1)                                                                                                                                           
|        | 10 | .24         |  | First Amendment to Amended and Restated
    Investors Rights Agreement between and among Onyx
    Acceptance Corporation and certain Investors identified therein
    dated as of December 15, 1994.(1)                                                                                     
|        | 10 | .25         |  | Master Lease Agreement between Onyx Acceptance
    Corporation and Comdisco, Inc. dated January 7,
    1994.(1)                                                                                                                                                                              
|        | 10 | .29         |  | Second Amendment to Amended and Restated
    Investors Rights Agreement between and among Onyx
    Acceptance Corporation and the Investors identified therein
    dated as of November 3, 1995.(1)                                                                                         
|        | 10 | .32        |  | Option Agreement between Onyx Acceptance
    Corporation and John W. Hall dated as of December 20,
    1994.(1)                                                                                                                                                                              
|        | 10 | .33        |  | Promissory Note in favor of Onyx Acceptance
    Corporation from John Hall dated as of December 20, 1994.(1)                                                                                                                                                                                 
|        | 10 | .34        |  | Option Agreement between Onyx Acceptance
    Corporation and Brian MacInnis dated as of December 20,
    1994.(1)                                                                                                                                                                            
|        | 10 | .35        |  | Promissory Note in favor of Onyx Acceptance
    Corporation from Brian MacInnis dated as of December 20,
    1994.(1)                                                                                                                                                                        
|        | 10 | .36        |  | Stock Purchase Agreement between and among Brian
    MacInnis and certain Investors identified therein dated as of
    June 7, 1995.(1)                                                                                                                                                      
|        | 10 | .37        |  | Stock Purchase Agreement between and among John
    W. Hall and certain Investors identified therein dated as of
    June 7, 1995.(1)                                                                                                                                                        
|        | 10 | .41         |  | Onyx Acceptance Corporation 401(k) Plan dated
    January 1, 1994.(1)                                                                                                                                                                                                                        
|        | 10 | .46         |  | Subordination and Intercreditor Agreement by and
    among State Street Bank and Trust Company, The First National
    Bank of Boston, Capital Resource Lenders II, L.P., Dominion
    Fund III and Onyx Acceptance Corporation dated as of
    January 31, 1996.(1)                         
|        | 10 | .50        |  | 1996 Stock Option/Stock Issuance Plan.(1)                                                                                                                                                                                                                                                    
|        | 10 | .73         |  | First Amendment to Loan Agreement and
    Confirmation of Pledge and Security Agreement dated
    June 29, 1999.(7)                                                                                                                                                                          
|        | 10 | .74         |  | Amended and Restated Sale and Servicing Agreement
    between Onyx Acceptance Corporation and Onyx Acceptance
    Financial Corporation dated as of September 4, 1998.(3)                                                                                                                    
|        | 10 | .75         |  | Amended and Restated Triple-A One Funding
    Corporation Credit Agreement between and among Onyx Acceptance
    Financial Corporation, Triple-A One Funding Corporation, CapMAC
    Financial Services, Inc. and Capital Markets Assurance
    Corporation dated as of September 4, 1998.(3)
|        | 10 | .76         |  | Amended and Restated Triple-A One Funding
    Corporation Security Agreement between and among Onyx Acceptance
    Financial Corporation, Triple-A One Funding Corporation and
    Capital Markets Assurance Corporation dated as of
    September 4, 1998.(3)                               

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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                    
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .77         |  | Amended and Restated Subordinated Security
    Agreement between Onyx Acceptance Corporation and Onyx
    Acceptance Financial Corporation dated as of September 4,
    1998.(3)                                                                                                                                                                   
|        | 10 | .78         |  | Amended and Restated Insurance and Indemnity
    Agreement between and among Onyx Acceptance Corporation, Capital
    Markets Assurance Corporation, Onyx Acceptance Financial
    Corporation and Triple-A One Funding Corporation dated as of
    September 4, 1998.(3)                                                                          
|        | 10 | .79         |  | Master Loan Agreement between Onyx Acceptance
    Financial Corporation and Salomon Brothers Realty Corp. dated
    September 3, 1998.(3)                                                                                                                                                                                                          
|        | 10 | .85         |  | Amendment Number One dated December 22, 1998
    to Amended and Restated Onyx Warehouse Facility and Assignment
    and Assumption Agreement.(5)                                                                                                                                                                                                   
|        | 10 | .86         |  | Amendment No. 2 to the Amended and Restated
    Onyx Warehouse Facility effective as of March 30, 1999 by
    and among Onyx Acceptance Corporation, Onyx Acceptance Financial
    Corporation, Triple-A One Funding Corporation, Capital Markets
    Assurance Corporation, CapMAC Financial Services, Inc. and
    MBIA Insurance Corporation.(6)
|        | 10 | .92         |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and Chase Manhattan Bank in connection with the Onyx Acceptance
    Owners Trust 1999-A.(9)                                                                                                                                
|        | 10 | .93         |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and Chase Manhattan Bank in connection with the Onyx Acceptance
    Owners Trust 1999-B.(10)                                                                                                                               
|        | 10 | .94         |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and Chase Manhattan Bank in connection with the Onyx Acceptance
    Owners Trust 1999-C.(11)                                                                                                                               
|        | 10 | .95         |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and Chase Manhattan Bank in connection with the Onyx Acceptance
    Owners Trust 1999-D.(12)                                                                                                                               
|        | 10 | .96         |  | Consent and Amendment Agreement between and among
    Onyx Acceptance Corporation and State Street Bank and Trust
    Company, BankBoston and the Travelers Insurance Company.(8)                                                                                                                                                                  
|        | 10 | .97         |  | Sale and Assignment Agreement dated
    March 29, 2000 among Onyx Acceptance Residual Funding Owner
    Trust 2000-A as Issuer, Onyx Acceptance Financial Corporation as
    Seller, and The Chase Manhattan Bank as Indenture Trustee and as
    Trust Agent.(13)                                                                                 
|        | 10 | .98         |  | Indenture dated March 29, 2000 between Onyx
    Acceptance Residual Funding Owner Trust 2000-A as Issuer, and
    The Chase Manhattan Bank, as Indenture Trustee.(13)                                                                                                                                                                              
|        | 10 | .99         |  | Trust Agreement dated March 29, 2000 among
    Onyx Acceptance Financial Corporation, as Depositor, Bankers
    Trust as Owner Trustee and The Chase Manhattan Bank as Trust
    Agent.(13)                                                                                                                                                        
|        | 10 | .101        |  | Indenture dated as of April 17, 2000 between
    Onyx Acceptance Corporation, as Issuer and                                                                                                                                                                                                                                                        
|        | 10 | .102        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2000-A.(15)                                                                                                                            
|        | 10 | .103        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2000-B.(16)                                                                                                                            
|        | 10 | .104        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2000-C.(17)                                                                                                                            
|        | 10 | .105        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2000-D.(18)                                                                                                                            
|        | 10 | .106        |  | Master Repurchase Agreement dated
    October 13, 2000 by and between Credit Suisse First Boston
    (Europe) Limited, as buyer, Credit Suisse First Boston
    Corporation, as Agent and Onyx Acceptance Funding Corporation,
    as Seller.(19)                                                                                                  

43



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|        |    |             |  |                                                                                                                                                                                                                                                                               
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .107       |  | Onyx Acceptance Corporation Non-Qualified
    Deferred Compensation Plan.(20)                                                                                                                                                                                                 
|        | 10 | .108       |  | The Onyx Acceptance Corporation Non-Qualified
    Deferred Compensation Plan Trust Agreement.(20)                                                                                                                                                                             
|        | 10 | .109        |  | Daybreak-The Big Picture Master License
    Agreement.(21)                                                                                                                                                                                                                    
|        | 10 | .110        |  | SuperSolutions Corporation Daybreak-The Big
    Picture Service Level Agreement.(21)                                                                                                                                                                                          
|        | 10 | .111        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2001-A.(22)                                                       
|        | 10 | .112        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2001-B.(23)                                                       
|        | 10 | .113        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and The Chase Manhattan Bank in connection with the Onyx
    Acceptance Owner Trust 2001-C.(24)                                                       
|        | 10 | .114        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation
    and Citibank N.A. in connection with the Onyx Acceptance Owner
    Trust 2001-D.(25)                                                                  
|        | 10 | .115        |  | Second Amended and Restated Triple-A One Credit
    Agreement, dated November 30, 2001 among Onyx Acceptance
    Financial Corporation, Triple-A One Funding Corporation, CapMac
    Financial Services, Inc., and Capital Markets Assurance
    Corporation.(26)             
|        | 10 | .116        |  | Second Amended and Restated Subordinated Security
    Agreement dated as of November 30, 2001 between Onyx
    Acceptance Financial Corporation and Onyx Acceptance
    Corporation.(26)                                                                                      
|        | 10 | .117        |  | Second Amended and Restated Triple-A One Security
    Agreement dated as of November 30, 2001 among Onyx
    Acceptance Financial Corporation, Onyx Acceptance Corporation,
    Triple-A One Funding Corporation and Capital Markets Assurance
    Corporation.(26)           
|        | 10 | .118        |  | Second Amended and Restated Sale and Servicing
    Agreement dated as of November 30, 2001 between Onyx
    Acceptance Financial Corporation and Onyx Acceptance
    Corporation.(26)                                                                                         
|        | 10 | .119        |  | Second Amended and Restated Definitions List
    dated as of November 30, 2001 among Onyx Acceptance
    Corporation, Onyx Acceptance Financial Corporation, MBIA
    Insurance Corporation, Capital Markets Assurance Corporation and
    CapMac Financial Services, Inc.(26)
|        | 10 | .120        |  | Sale and Assignment Agreement, dated
    March 15, 2002, among Onyx Acceptance Residual Funding
    Owner Trust 2002-A, as Issuer, Onyx Acceptance Financial
    Corporation, as Seller, and JPMorgan Chase Bank, as Indenture
    Trustee and as Trust Agent.(27)            
|        | 10 | .121        |  | Indenture, dated March 15, 2002, between
    Onyx Acceptance Residual Funding Owner Trust 2002-A, as Issuer,
    and JPMorgan Chase Bank, as Indenture Trustee.(27)                                                                                                           
|        | 10 | .122        |  | Trust Agreement, dated March 15, 2002, among
    Onyx Acceptance Financial Corporation, as Depositor, Bankers
    Trust, as Owner Trustee, and JPMorgan Chase Bank, as Trust
    Agent.(27)                                                                                   
|        | 10 | .123        |  | Amended and Restated Indenture, dated
    April 12, 2002, between Onyx Acceptance Residual Funding
    Owner Trust 2000-A1, as Issuer, and JPMorgan Chase Bank, as
    Indenture Trustee.(27)                                                                                 
|        | 10 | .124        |  | Amended and Restated Trust Agreement, dated
    April 12, 2002, among Onyx Acceptance Financial
    Corporation, as Depositor, Bankers Trust Company (Delaware,) as
    Owner Trustee, and JPMorgan Chase Bank, as Trust Agent.(27)                                           
|        | 10 | .125        |  | Distribution and Management Agreement, dated as
    of February 15, 2002, by and between Onyx Acceptance
    Corporation and Sumner Harrington Ltd., a Minnesota corporation,
    as agent.(28)                                                                               
|        | 10 | .125.1      |  | Indenture dated as of February 11, 2002
    between Onyx Acceptance Corporation and U.S. Bank National
    Association, as Indenture Trustee (41)                                                                                                                             
|        | 10 | .126        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2002-A, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and JPMorgan Chase
    Bank, in connection with the Onyx Acceptance Owner Trust
    2002-A.(29)                   

44



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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                       
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .127        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2002-B, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and Citibank, N.A., in
    connection with the Onyx Acceptance Owner Trust 2002-B.(30)                                                                                                    
|        | 10 | .128        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2002-C, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and JPMorgan Chase
    Bank, in connection with the Onyx Acceptance Owner Trust
    2002-C.(31)                                                                                           
|        | 10 | .129        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2002-D, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and Citibank, N.A., in
    connection with the Onyx Acceptance Owner Trust 2002-D.(32)                                                                                                    
|        | 10 | .130        |  | Amendment No. 1 to the Amended and Restated
    Indenture between Onyx Acceptance Residual Funding Owner Trust
    2000-A1, as Issuer, and JPMorgan Chase Bank, as Indenture
    Trustee, dated and effective as of April 15, 2002.*                                                                                                                  
|        | 10 | .131        |  | Amendment No. 2 to Amended and Restated
    Indenture between Onyx Acceptance Residual Funding Owner Trust
    2000-A1, as Issuer, and JPMorgan Chase Bank, as Indenture
    Trustee, dated and effective as of November 27, 2002.*                                                                                                                   
|        | 10 | .131.1      |  | Master Repurchase Agreement between Merrill Lynch
    International, as Buyer, Merrill Lynch, Pierce,
    Fenner & Smith Incorporated, as Agent, and Onyx
    Acceptance Funding Corporation as Seller dated April 30,
    2003.(33)                                                                                                                  
|        | 10 | .132        |  | Sale and Servicing Agreement dated
    January 9, 2003, between Onyx Acceptance Corporation, a
    Delaware corporation, as seller and as servicer, and Onyx
    Acceptance Receivables Corporation, a Delaware corporation, as
    purchaser.(34)                                                                                                    
|        | 10 | .133        |  | Credit Agreement, including definitions list,
    dated January 9, 2003, among Onyx Acceptance Receivables
    Corporation, a Delaware corporation (OARC), EIFFEL
    Funding, LLC, a Delaware limited liability company, as conduit
    lender and CDC Financial Products Inc., a Delaware corporation,
    as a lender and as program manager.(34)
|        | 10 | .134        |  | Security Agreement, dated January 9, 2003,
    among Onyx Acceptance Receivables Corporation, a Delaware
    corporation, Onyx Acceptance Corporation, as servicer and JP
    Morgan Chase Bank, a New York state banking corporation, as
    collateral agent on behalf of and for the benefit of the holders
    of the obligations.(34)            
|        | 10 | .135        |  | Subordinated Security Agreement dated
    January 9, 2003 between Onyx Acceptance Receivables
    Corporation, a Delaware corporation, and Onyx Acceptance
    Corporation, a Delaware corporation.(34)                                                                                                                                               
|        | 10 | .136        |  | Sale and Servicing Agreement dated
    January 9, 2003, between Onyx Acceptance Corporation and
    Onyx Acceptance Receivables Corporation.(34)                                                                                                                                                                                                      
|        | 10 | .137        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2003-A, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and JPMorgan Chase Bank
    in connection with the Onyx Acceptance Owner Trust 2003-A.(35)                                                                                                
|        | 10 | .138        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2003-B, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and Citibank, N.A. in
    connection with the Onyx Acceptance Owner Trust 2003-B.(36)                                                                                                     
|        | 10 | .139        |  | Amendment No. 1 to Sale and Servicing
    Agreement, dated as of November 14, 2003, between Onyx
    Acceptance Owner Trust 2003-B, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and Citibank, N.A.(37)                                                                                                                     
|        | 10 | .140        |  | Backup Servicing Agreement between the Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation,
    Citibank, N.A., MBIA Insurance Corporation, Onyx Acceptance
    Owner Trust 2003-B and Systems & Services
    Technologies, Inc. dated as of November 14, 2003.(37)                                                                
|        | 10 | .141        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2003-C, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and JPMorgan Chase in
    connection with the Onyx Acceptance Owner Trust 2003-C.(38)                                                                                                     

45



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                            
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .142        |  | Amendment No. 1 to Sale and Servicing
    Agreement, dated as of November 14, 2003, between Onyx
    Acceptance Owner Trust 2003-C, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and JPMorgan Chase
    Bank.(39)                                                
|        | 10 | .143        |  | Backup Servicing Agreement between the Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation,
    JPMorgan Chase Bank, XL Capital Assurance, Inc., Onyx
    Acceptance Owner Trust 2003-C and Systems & Services
    Technologies, Inc. dated as of November 14, 2003.(39)
|        | 10 | .144        |  | Form of Sale and Servicing Agreement between Onyx
    Acceptance Owner Trust 2003-D, Onyx Acceptance Financial
    Corporation, Onyx Acceptance Corporation and JPMorgan Chase in
    connection with the Onyx Acceptance Owner Trust 2003-D.(40)                                          
|        | 10 | .145        |  | Backup Servicing Agreement between the Onyx
    Acceptance Corporation, Onyx Acceptance Financial Corporation,
    JPMorgan Chase Bank, XL Capital Assurance, Inc., Onyx
    Acceptance Owner Trust 2003-D and Systems & Services
    Technologies, Inc. dated as of October 30, 2003.(40) 
|        | 10 | .146       |  | Onyx Acceptance Corporation 1996 Stock Option/
    Stock Issuance Plan (as Amended and Restated April 23, 1998
    and subsequently Amended and Restated March 31, 2000 and
    December 30, 2003).*                                                                                       
|        | 14 | .1          |  | Onyx Acceptance Corporation Code of Ethics.*                                                                                                                                                                                                                                               
|        | 21 | .1          |  | Subsidiaries of the Registrant.*                                                                                                                                                                                                                                                           
|        | 23 | .1          |  | Consent of Independent Certified Public
    Accountants-Grant Thornton LLP.*                                                                                                                                                                                                               
|        | 23 | .2          |  | Consent of Independent
    Accountants-PriceWaterhouseCoopers LLP.*                                                                                                                                                                                                                        
|        | 31 | .1          |  | Certification pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                              
|        | 31 | .2          |  | Certification pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                              
|        | 32 | .1          |  | Certification of the President, CEO and Principal
    Executive Officer pursuant to 18 U.S.C. Section 1350
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.*                                                                                                  
|        | 32 | .2          |  | Certification of the EVP, CFO and Principal
    Financial Officer pursuant to 18 U.S.C. Section 1350
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.*                                                                                                        



---



|  |                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Management contract or compensatory plan or
    arrangement required to be filed as an Exhibit to Form 10-K
    pursuant to Item 15(c) thereof.



|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Filed herewith                                                                                                                                       
|   
|(1) | Incorporated by reference from the Companys
    Registration Statement on Form S-1 (Registration
    No. 333-00680).                                
|   
|(2) | Incorporated by reference from the Companys
    Current Report on Form 8-K dated July 8, 1997.
    (File No. 000-28050).                            
|   
|(3) | Incorporated by reference from the Companys
    Form 10-Q for quarterly period ended September 30,
    1998. (File No. 000-28050).                  
|   
|(4) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Registration Statement on
    Form S-3 (Registration No. 333-51239).      
|   
|(5) | Incorporated by reference from the Companys
    Form 10-K for the year ended December 31, 1998.
    (File No. 000-28050).                           
|   
|(6) | Incorporated by reference from the Companys
    Form 10-Q for quarterly period ended March 31, 1999.
    (File No. 000-28050).                      
|   
|(7) | Incorporated by reference from the Companys
    Form 10-Q for the quarterly period ended June 30,
    1999. (File No. 000-28050).                   
|   
|(8) | Incorporated by reference from the Companys
    Form 10-Q for the quarterly period ended September 30,
    1999. (File No. 000-28050).              
|   
|(9) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated March 11, 1999. (File No. 333-28893).

46



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##### Table of Contents





|     |                                                                                                                                                          
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated May 28, 1999. (File No. 333-28893).      
|    
|(11) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated September 14, 1999. (File No. 333-28893).
|    
|(12) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated November 12, 1999. (File No. 333-28893). 
|    
|(13) | Incorporated by reference from the Companys
    Form 10-Q quarterly period ended June 30, 2000.
    (File No. 000-28050).                               
|    
|(14) | Incorporated by reference from the Companys
    Current Report on Form 8-K dated April 17, 2000
    (File No. 333-92573).                               
|    
|(15) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated February 28, 2000. (File No. 333-92245). 
|    
|(16) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated April 28, 2000. (File No. 333-92245).    
|    
|(17) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated July 27, 2000. (File No. 333-92245).     
|    
|(18) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    dated November 16, 2000. (File No. 333-92245). 
|    
|(19) | Incorporated by reference from the Companys
    Form 10-K for the year ended December 31, 2000.
    (File No. 000-28050).                               
|    
|(20) | Incorporated by reference from the Companys
    Form 10-Q for the quarterly period ended March 31,
    2001. (File No. 000-28050).                      
|    
|(21) | Incorporated by reference from the Companys
    Form 10-Q for the quarterly period ended June 30,
    2001. (File No. 000-28050).                       
|    
|(22) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed March 14, 2001. (File No. 333-51636).    
|    
|(23) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed May 31, 2001. (File No. 333-51636).      
|    
|(24) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed August 14, 2001. (File No. 333-51636).   
|    
|(25) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed October 31, 2001. (File No. 333-51636).  
|    
|(26) | Incorporated by reference from the Companys
    Form 10-K for the year ended December 31, 2001.
    (File No. 000-28050).                               
|    
|(27) | Incorporated by reference from the Companys
    Form 10-Q quarterly period ended March 31, 2002.
    (File No. 000-28050).                              
|    
|(28) | Previously filed with the Commission as an
    exhibit to the Registrants Form 8-K on March 1,
    2002.                                                
|    
|(29) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed February 7, 2002. (File No. 333-51636).  
|    
|(30) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed May 15, 2002 (File No. 333-28893).       
|    
|(31) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed August 1, 2002 (File No. 333-28893).     
|    
|(32) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed November 6, 2002 (File No. 333-28893).   
|    
|(33) | Incorporated by reference from the Companys
    Form 10-Q quarterly period ended June 30, 2003.
    (File No. 000-28050).                               

47



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##### Table of Contents





|     |                                                                                                                                                           
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(34) | Incorporated by reference from the Companys
    Form 10-Q quarterly period ended September 30, 2003.
    (File No. 000-28050).                           
|    
|(35) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed February 14, 2003 (File No. 333-28893)    
|    
|(36) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed May 30, 2003 (File No. 333-28893)         
|    
|(37) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed December 12, 2003 (File No. 333-103244-01)
|    
|(38) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed August 14, 2003 (File No. 333-28893)      
|    
|(39) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed December 12, 2003 (File No. 333-103244-02)
|    
|(40) | Incorporated by reference from Onyx Acceptance
    Financial Corporations Current Report on Form 8-K
    filed November 13, 2003 (File No. 333-28893)    
|    
|(41) | Incorporated by reference from the Companys
    Current Report on Form 8-K filed March 1, 2002
    (File No. 000-28050)                                  

(b) Exhibits on Form 8-K

None.

48



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly
authorized.



| |                            
| | ---------------------------
| | ONYX ACCEPTANCE CORPORATION



| |     |                 
| | --- | ----------------
| | By: | /s/ JOHN W. HALL

| |                                          
| | -----------------------------------------
| |                                          
| | John W. Hall                             
| | President and Chief Executive
    Officer
| | (Principal Executive Officer)            

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Annual Report on Form 10-K has
been signed by the following persons on behalf of the Registrant
in the capacities and on the date indicated.

|                                       |  |                                                                                                                      |  |                |  | 
|-------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                       |  |                                                                                                                      |  |               
|Signature                              |  | Title                                                                                                                |  | Date          
|                                       |  |                                                                                                                      |  |               
|                                      
|/s/ THOMAS C. STICKELThomas C. Stickel |  | Chairman of the Board of Directors                                                                                   |  | March 30, 2004
|                                      
|/s/ JOHN W. HALLJohn W. Hall           |  | President, Chief Executive Officer
    and Director(Principal Executive Officer)                                     |  | March 30, 2004
|                                      
|/s/ G. BRADFORD JONESG. Bradford Jones |  | Director                                                                                                             |  | March 30, 2004
|                                      
|/s/ C. THOMAS MEYERSC. Thomas Meyers   |  | Director                                                                                                             |  | March 30, 2004
|                                      
|/s/ DON P. DUFFYDon P. Duffy           |  | Executive Vice President, Chief Financial Officer
    and Director, (Principal Financial and
    Accounting Officer) |  | March 30, 2004

49



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

CONTENTS

|                                                                                                             |  |      |     | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                             |  | Page
|                                                                                                             |  |     
|Report of Independent Certified Public
    Accountants  Grant Thornton LLP                                  |  |      | F-2 | 
|Report of Independent Accountants 
    PricewaterhouseCoopers LLP                                           |  |      | F-3 | 
|Consolidated Statements of Financial Condition as
    of December 31, 2003 and 2002                          |  |      | F-4 | 
|Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001                   |  |      | F-5 | 
|Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2003, 2002
    and 2001 |  |      | F-6 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001               |  |      | F-7 | 
|Notes to Consolidated Financial Statements                                                                   |  |      | F-8 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

Board of Directors and Stockholders

Onyx Acceptance Corporation


We have audited the accompanying consolidated
statement of financial condition of Onyx Acceptance Corporation
and its subsidiaries (the Company) as of
December 31, 2003 and the related consolidated statements
of income, stockholders equity, and cash flows for the
year then ended. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Onyx Acceptance Corporation
and its subsidiaries as of December 31, 2003 and the
consolidated results of their operations and their consolidated
cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.

GRANT THORNTON LLP

Irvine, California

February 13, 2004


F-2



---



##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders

Onyx Acceptance Corporation


In our opinion, the accompanying consolidated
statements of financial condition and the related consolidated
statements of income, stockholders equity and cash flows present
fairly, in all material respects, the financial position of Onyx
Acceptance Corporation and its subsidiaries (the Company) as of
December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Company s management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

As discussed in Note 4 and Note 7 to
the consolidated financial statements, the Company was required
to adopt the provisions of Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended and Emerging Issues Task
Force 99-20, Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized
Financial Assets.

As discussed in Note 2, certain amounts
within the 2002 consolidated balance sheet and the 2002 and 2001
consolidated cash flow statement have been restated.

PRICEWATERHOUSECOOPERS LLP



|                                                                                                                               | 
|------------------------------------------------------------------------------------------------------------------------------ | 
|Orange County, California                                                                                                      | 
|February 13, 2003, except for the effects of
    the restatement described in Note 2, for which the date is
    March 30, 2004 | 

F-3



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION

|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |        |        |         | 
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------------------------ | ---------- | ------ | ------- | ------- | ------ | ------ | ------- | 
|                                                              |                                                                                                                                                                                                   |               
|                                                              |                                                                                                                                                                                                   | December 31,  
|                                                              |                                                                                                                                                                                                   |               
|                                                              |                                                                                                                                                                                                   | 2003           |                                            | 2002      
|                                                              |                                                                                                                                                                                                   |                |                                            | (Restated)
|                                                              |                                                                                                                                                                                                   |                |                                            |           
|                                                              |                                                                                                                                                                                                   |               
|                                                              |                                                                                                                                                                                                   | (In thousands)
|ASSETS                                                       
|Cash and cash equivalents                                     |                                                                                                                                                                                                   | $              | 15,434                                     |            |        | $       | 8,231   |       
|Restricted cash                                               |                                                                                                                                                                                                   |                | 500                                        |            |        |         | 3,868   |       
|Contracts held for sale                                       |                                                                                                                                                                                                   |                | 195,347                                    |            |        |         | 176,679 |       
|Contracts held for investment (net of allowance)              |                                                                                                                                                                                                   |                | 8,812                                      |            |        |         | 6,555   |       
|Credit enhancement assets, at fair value                      |                                                                                                                                                                                                   |                | 182,344                                    |            |        |         | 183,564 |       
|Furniture and equipment (net of accumulated
    depreciation) |                                                                                                                                                                                                   |                | 2,632                                      |            |        |         | 3,069   |       
|Other assets                                                  |                                                                                                                                                                                                   |                | 8,746                                      |            |        |         | 8,978   |       
|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                              |                                                                                                                                                                                                   |                | Total Assets                               |            | $      | 413,815 |         |        | $      | 390,944 | 
|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                             
|LIABILITIES                                                  
|Accounts payable                                              |                                                                                                                                                                                                   | $              | 21,064                                     |            |        | $       | 47,507  |       
|Warehouse borrowings                                          |                                                                                                                                                                                                   |                | 183,008                                    |            |        |         | 166,007 |       
|Residual lines                                                |                                                                                                                                                                                                   |                | 30,697                                     |            |        |         | 49,103  |       
|Subordinated financing                                        |                                                                                                                                                                                                   |                | 51,077                                     |            |        |         | 27,449  |       
|Capital lease obligations                                     |                                                                                                                                                                                                   |                | 1,063                                      |            |        |         | 854     |       
|Accrued interest payable                                      |                                                                                                                                                                                                   |                | 1,806                                      |            |        |         | 612     |       
|Deferred taxes payable                                        |                                                                                                                                                                                                   |                | 30,585                                     |            |        |         | 20,578  |       
|Other liabilities                                             |                                                                                                                                                                                                   |                | 14,596                                     |            |        |         | 13,921  |       
|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                              |                                                                                                                                                                                                   |                | Total Liabilities                          |            |        | 333,896 |         |        |        | 326,031 | 
|Commitments and Contingencies (Note-11)                       |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                             
|STOCKHOLDERS EQUITY                                         
|Common stock                                                  |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                              | Par value $0.01 per share; authorized 15,000,000
    shares; issued and outstanding 5,141,566 as of December 31,
    2003 and issued and outstanding 5,086,793 shares as of
    December 31, 2002 |                |                                            | 51         |        |         |         | 51     |       
|                                                              | Additional paid in capital                                                                                                                                                                        |                |                                            | 32,880     |        |         |         | 32,652 |       
|                                                              | Retained earnings                                                                                                                                                                                 |                |                                            | 33,561     |        |         |         | 27,843 |       
|Accumulated other comprehensive income, net of tax            |                                                                                                                                                                                                   |                | 13,427                                     |            |        |         | 4,367   |       
|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                              |                                                                                                                                                                                                   | Total Equity   |                                            |            | 79,919 |         |         |        | 64,913 |        
|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       
|                                                              |                                                                                                                                                                                                   |                | Total Liabilities and Stockholders Equity |            | $      | 413,815 |         |        | $      | 390,944 | 
|                                                              |                                                                                                                                                                                                   |                |                                            |            |        |         |         |       

See accompanying notes to consolidated financial
statements.

F-4



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |        | 
|------------------------------------ | --------------------------------------------- | ------------------------------------- | --------- | ------ |  | ---- | --------- | ------ | - | - | --------- | ------ | 
|                                     |                                               |                                      
|                                     |                                               | For the Year Ended December 31,      
|                                     |                                               |                                      
|                                     |                                               | 2003                                  |           | 2002   |  | 2001
|                                     |                                               |                                       |           |        |  |     
|                                     |                                               |                                      
|                                     |                                               | (In thousands, except per share data)
|Revenues:                            |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|                                     | Interest income                               |                                       | $         | 39,466 |  |      | $         | 37,992 |   |   | $         | 25,805 | 
|                                     | Interest expense-warehouse and residual lines |                                       |           | 7,569  |  |      |           | 11,535 |   |   |           | 12,824 | 
|                                     | Interest expense  other                      |                                       |           | 7,167  |  |      |           | 4,255  |   |   |           | 2,917  | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Net Interest Income                  |                                               |                                       | 24,730    |        |  |      | 22,202    |        |   |   | 10,064    |       
|                                     | Gain on sale of contracts                     |                                       |           | 35,505 |  |      |           | 28,873 |   |   |           | 34,105 | 
|                                     | Impairment                                    |                                       |           | 8,606  |  |      |           | 15,178 |   |   |           | 3,340  | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Net Gain on Sale                     |                                               |                                       | 26,899    |        |  |      | 13,695    |        |   |   | 30,765    |       
|                                     | Servicing fee income                          |                                       |           | 53,083 |  |      |           | 51,973 |   |   |           | 57,256 | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Total Revenue                        |                                               |                                       | 104,712   |        |  |      | 87,870    |        |   |   | 98,085    |       
|Expenses:                            |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|                                     | Provision for credit losses                   |                                       |           | 3,216  |  |      |           | (8     | ) |   |           | 1,079  | 
|Operating Expenses:                  |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|                                     | Salaries and benefits                         |                                       |           | 54,831 |  |      |           | 53,565 |   |   |           | 52,848 | 
|                                     | Systems and servicing                         |                                       |           | 4,307  |  |      |           | 3,146  |   |   |           | 4,258  | 
|                                     | Telephone and data lines                      |                                       |           | 3,114  |  |      |           | 3,382  |   |   |           | 5,014  | 
|                                     | Depreciation                                  |                                       |           | 2,443  |  |      |           | 3,431  |   |   |           | 4,644  | 
|                                     | General and administrative expenses           |                                       |           | 27,179 |  |      |           | 21,136 |   |   |           | 22,771 | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Total Operating Expenses             |                                               |                                       | 91,874    |        |  |      | 84,660    |        |   |   | 89,535    |       
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Total Expenses                       |                                               |                                       | 95,090    |        |  |      | 84,652    |        |   |   | 90,614    |       
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Income Before Income Taxes           |                                               |                                       | 9,622     |        |  |      | 3,218     |        |   |   | 7,471     |       
|                                     | Income taxes                                  |                                       |           | 3,904  |  |      |           | 1,335  |   |   |           | 3,061  | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Net Income                           |                                               | $                                     | 5,718     |        |  | $    | 1,883     |        |   | $ | 4,410     |       
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Net Income per share of Common Stock |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|                                     | Basic                                         |                                       | $         | 1.12   |  |      | $         | 0.37   |   |   | $         | 0.88   | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|                                     | Diluted                                       |                                       | $         | 1.01   |  |      | $         | 0.36   |   |   | $         | 0.84   | 
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Basic shares outstanding             |                                               |                                       | 5,101,862 |        |  |      | 5,085,384 |        |   |   | 5,026,087 |       
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       
|Diluted shares outstanding           |                                               |                                       | 5,682,690 |        |  |      | 5,179,098 |        |   |   | 5,232,390 |       
|                                     |                                               |                                       |           |        |  |      |           |        |   |   |           |       

See accompanying notes to consolidated financial
statements.

F-5



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |       |        | 
|---------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | ----- | ---------- |  | -------- | -- | -------------- |  | ------------- | ------ | ------ |  | - | ------ |  |  | - | ------ | ----- | - | - | ------ | ----- | ------ | 
|                                                                             |                                                                               |                            |       |            |  |          |    | Accumulated    |  |              
|                                                                             |                                                                               | Common Stock               |       | Additional |  | Retained |    | Comprehensive  |  | Total        
|                                                                             |                                                                               |                            |       | Paid in    |  | Earnings |    | Income (Loss), |  | Stockholders
|                                                                             |                                                                               | Shares                     |       | Amount     |  | Capital  |    | (Deficit)      |  | Net of Tax    |        | Equity
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |       
|                                                                             |                                                                               |                           
|                                                                             |                                                                               | (In thousands)            
|Balance, December 31, 2000                                                   |                                                                               |                            | 4,990 |            |  | $        | 50 |                |  | $             | 32,601 |        |  | $ | 21,550 |  |  | $ | 1,392  |       |   | $ | 55,593 |      
|Issuance of Common Stock                                                     |                                                                               |                            | 88    |            |  |          | 1  |                |  |               | 46     |        |  |   |        |  |  |   |        |       |   |   | 47     |      
|Comprehensive income:                                                        |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|                                                                             | Unrealized loss in credit enhancement assets, net
    of tax of $242 thousand |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        | (349  | ) |   |        | (349  | )     
|                                                                             | Adoption of FAS 133, net of tax of $596 thousand                              |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        | (840  | ) |   |        | (840  | )     
|Loss on derivatives reclassified to earnings net
    of tax of $596 thousand |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   | 840    |       |   |   | 840    |      
|Net Income                                                                   |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   | 4,410  |  |  |   |        |       |   |   | 4,410  |      
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|                                                                             |                                                                               | Total Comprehensive Income |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |       | 4,061  | 
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|Balance, December 31, 2001                                                   |                                                                               |                            | 5,078 |            |  |          | 51 |                |  |               | 32,647 |        |  |   | 25,960 |  |  |   | 1,043  |       |   |   | 59,701 |      
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|Issuance of Common Stock                                                     |                                                                               |                            | 9     |            |  |          |    |                |  |               | 5      |        |  |   |        |  |  |   |        |       |   |   | 5      |      
|Comprehensive income:                                                        |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|                                                                             | Unrealized gain in credit enhancement assets, net
    of tax of $2.8 million  |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        | 4,031 |   |   |        | 4,031 |       
|Deferred loss on derivatives, net of tax of $502
    thousand                |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   | (707   | )     |   |   | (707   | )    
|Net Income                                                                   |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   | 1,883  |  |  |   |        |       |   |   | 1,883  |      
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|                                                                             |                                                                               | Total Comprehensive Income |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |       | 5,207  | 
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|Balance, December 31, 2002                                                   |                                                                               |                            | 5,087 |            |  | $        | 51 |                |  | $             | 32,652 |        |  | $ | 27,843 |  |  | $ | 4,367  |       |   | $ | 64,913 |      
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|Issuance of Common Stock                                                     |                                                                               |                            | 55    |            |  |          |    |                |  |               | 228    |        |  |   |        |  |  |   |        |       |   |   | 228    |      
|Comprehensive income:                                                        |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|                                                                             | Unrealized gain in credit enhancement assets, net
    of tax of $5.9 million  |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        | 8,353 |   |   |        | 8,353 |       
|Loss on derivatives reclassified to earnings net
    of tax of $502 thousand |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   | 707    |       |   |   | 707    |      
|Net Income                                                                   |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   | 5,718  |  |  |   |        |       |   |   | 5,718  |      
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|                                                                             |                                                                               | Total Comprehensive Income |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |       | 14,778 | 
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      
|Balance, December 31, 2003                                                   |                                                                               |                            | 5,142 |            |  | $        | 51 |                |  | $             | 32,880 |        |  | $ | 33,561 |  |  | $ | 13,427 |       |   | $ | 79,919 |      
|                                                                             |                                                                               |                            |       |            |  |          |    |                |  |               |        |        |  |   |        |  |  |   |        |       |   |   |        |      

See accompanying notes to consolidated financial
statements.

F-6



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |            |        |            |  
|----------------------------------------------------- | ----------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------- | ------ | ---------- | ------- | ---------- | ------ | ---------- | ------ | ---------- | ------ | ---------- | -
|                                                      |                                                 |                                                                                  
|                                                      |                                                 | For the Year Ended December 31,                                                  
|                                                      |                                                 |                                                                                  
|                                                      |                                                 |                                                                                   |                                                                                                | 2002       |        | 2001      
|                                                      |                                                 | 2003                                                                              |                                                                                                | (Restated) |        | (Restated)
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |           
|                                                      |                                                 |                                                                                  
|                                                      |                                                 | (In thousands)                                                                   
|Operating Activities                                  |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|                                                      | Net Income                                      |                                                                                   | $                                                                                              | 5,718      |        |            | $       | 1,883      |        |            | $      | 4,410      |       
|                                                      |                                                 | Adjustments to reconcile net income to net cash
    used in operating activities: |                                                                                                |            |        |            |         |            |        |            |        |            |        |           
|                                                      |                                                 |                                                                                   | Sale of retained interest in securitized assets                                                |            |        | 0          |         |            |        | 13,761     |        |            |        | 0          |  
|                                                      |                                                 |                                                                                   | Proceeds from the securitization of contracts
    held for sale                                |            |        | 1,600,000  |         |            |        | 1,675,000  |        |            |        | 1,600,000  |  
|                                                      |                                                 |                                                                                   | Purchase of contracts held for sale                                                            |            |        | (1,596,720 | )       |            |        | (1,614,041 | )      |            |        | (1,606,330 | )
|                                                      |                                                 |                                                                                   | Repurchase of trust contracts                                                                  |            |        | (177,247   | )       |            |        | (109,624   | )      |            |        | (56,007    | )
|                                                      |                                                 |                                                                                   | Principal payments received on contracts held on
    balance sheet                             |            |        | 149,426    |         |            |        | 60,812     |        |            |        | 39,892     |  
|                                                      |                                                 |                                                                                   | Amortization of retained interest in securitized
    assets                                    |            |        | 0          |         |            |        | 0          |        |            |        | 14,552     |  
|                                                      |                                                 |                                                                                   | Decrease in retained interest in securitized
    assets                                        |            |        | (85,825    | )       |            |        | (76,992    | )      |            |        | (91,059    | )
|                                                      |                                                 |                                                                                   | Cash released from securitization spread accounts                                              |            |        | 99,597     |         |            |        | 63,494     |        |            |        | 38,402     |  
|                                                      |                                                 |                                                                                   | Write-off of dealer participation on securitized
    loans                                     |            |        | 26,426     |         |            |        | 28,934     |        |            |        | 31,526     |  
|                                                      |                                                 |                                                                                   | Provision for credit losses                                                                    |            |        | 3,216      |         |            |        | (8         | )      |            |        | 1,079      |  
|                                                      |                                                 |                                                                                   | Depreciation                                                                                   |            |        | 2,443      |         |            |        | 3,431      |        |            |        | 4,644      |  
|                                                      |                                                 |                                                                                   | Decrease (increase) in trust receivable                                                        |            |        | (3,494     | )       |            |        | 474        |        |            |        | (182       | )
|                                                      |                                                 |                                                                                   | Decrease (increase) in other assets                                                            |            |        | 232        |         |            |        | (4,660     | )      |            |        | 240        |  
|                                                      |                                                 |                                                                                   | (Decrease) Increase in accounts payable                                                        |            |        | (26,443    | )       |            |        | 1,886      |        |            |        | 20,463     |  
|                                                      |                                                 |                                                                                   | (Decrease) increase in accrued interest payable                                                |            |        | 1,194      |         |            |        | 163        |        |            |        | (291       | )
|                                                      |                                                 |                                                                                   | Increase in deferred tax payable                                                               |            |        | 10,007     |         |            |        | 2,676      |        |            |        | 4,233      |  
|                                                      |                                                 |                                                                                   | Increase (decrease) in other liabilities                                                       |            |        | 675        |         |            |        | 5,467      |        |            |        | 1,089      |  
|                                                      |                                                 |                                                                                   | Payments of participation to dealers (net of
    chargeback collections and amortized expense) |            |        | (26,026    | )       |            |        | (27,220    | )      |            |        | (31,422    | )
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|                                                      | Cash provided by (used in) operating activities |                                                                                   |                                                                                                | (16,821    | )      |            |         | 25,436     |        |            |        | (24,761    | )     
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|Investing Activities                                  |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|                                                      | Purchase of furniture and equipment             |                                                                                   |                                                                                                | (1,121     | )      |            |         | (593       | )      |            |        | (2,158     | )     
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|Cash used in investing activities                     |                                                 |                                                                                   | (1,121                                                                                         | )          |        |            | (593    | )          |        |            | (2,158 | )         
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|Financing Activities                                  |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|                                                      | Payments on capital leases                      |                                                                                   |                                                                                                | (676       | )      |            |         | (443       | )      |            |        | (267       | )     
|                                                      | Proceeds from warehouse line                    |                                                                                   |                                                                                                | 1,576,711  |        |            |         | 1,608,761  |        |            |        | 1,209,809  |       
|                                                      | Payments on warehouse line                      |                                                                                   |                                                                                                | (1,559,709 | )      |            |         | (1,632,763 | )      |            |        | (1,192,310 | )     
|                                                      | Proceeds from drawdown on residual lines        |                                                                                   |                                                                                                | 34,398     |        |            |         | 91,580     |        |            |        | 46,200     |       
|                                                      | Payments to paydown residual lines              |                                                                                   |                                                                                                | (52,804    | )      |            |         | (110,832   | )      |            |        | (18,983    | )     
|                                                      | Proceeds from subordinated debt                 |                                                                                   |                                                                                                | 35,291     |        |            |         | 15,022     |        |            |        | 0          |       
|                                                      | Principal payments on subordinated debt         |                                                                                   |                                                                                                | (11,662    | )      |            |         | (4,125     | )      |            |        | (3,273     | )     
|                                                      | Proceeds from exercise of options/warrants      |                                                                                   |                                                                                                | 228        |        |            |         | 4          |        |            |        | 47         |       
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|Cash (used in) provided by financing activities       |                                                 |                                                                                   | 21,777                                                                                         |            |        |            | (32,796 | )          |        |            | 41,223 |           
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|(Decrease) increase in cash and cash equivalents      |                                                 |                                                                                   | 3,835                                                                                          |            |        |            | (7,953  | )          |        |            | 14,304 |           
|(Increase) decrease in restricted cash                |                                                 |                                                                                   | 3,368                                                                                          |            |        |            | (3,868  | )          |        |            |        |           
|Cash and cash equivalents at beginning of period      |                                                 |                                                                                   | 8,231                                                                                          |            |        |            | 20,052  |            |        |            | 5,748  |           
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|Cash and cash equivalents at end of period            |                                                 | $                                                                                 | 15,434                                                                                         |            |        | $          | 8,231   |            |        | $          | 20,052 |           
|                                                      |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|Supplemental disclosure of cash flow
    information: |                                                 |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |           
|                                                      | Noncash activities:                             |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |            |       
|                                                      |                                                 | Additions to capital leases                                                       |                                                                                                | $          | 885    |            |         | $          | 900    |            |        | $          | 415    |           
|                                                      | Cash paid:                                      |                                                                                   |                                                                                                |            |        |            |         |            |        |            |        |            |       
|                                                      |                                                 | Interest                                                                          |                                                                                                | $          | 13,542 |            |         | $          | 15,627 |            |        | $          | 16,032 |           
|                                                      |                                                 | Income taxes                                                                      |                                                                                                | $          | 844    |            |         | $          | 4,851  |            |        | $          | (2,316 | )         

See accompanying notes to consolidated financial
statements.

F-7



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|         |                     
|-------- | --------------------
|Note 1  | Nature of Operations

Onyx Acceptance Corporation, a Delaware
Corporation, (Onyx), and its wholly owned special
purpose finance subsidiaries Onyx Acceptance Financial
Corporation (OAFC), Onyx Acceptance Funding
Corporation (OFC), and Onyx Acceptance Receivables
Corporation (OARC), its wholly owned subsidiary,
ABNI Inc. (ABNI), and its majority owned subsidiary,
Credit Union Acceptance Corporation, (CUAC),
(collectively, the Company), is a specialized
consumer finance company engaged in the purchase, securitization
and servicing of motor vehicle retail installment contracts
originated by franchised and select independent automobile
dealerships (collectively the Contracts). Onyx was
incorporated on August 17, 1993, and commenced operations
in February 1994. Onyx provides an independent source to
automobile dealers to finance their customers purchases of
new and used vehicles throughout the United States. The Company
attempts to meet the needs of dealers through consistent buying
practices, competitive rates, a dedicated customer service
staff, fast turnaround time and systems designed to expedite the
processing of credit applications.



|         |                                               
|-------- | ----------------------------------------------
|Note 2  | Summary of Significant Accounting
    Policies

Principles of
Consolidation:The accompanying
consolidated financial statements include the accounts of Onyx,
OAFC, OFC, OARC, ABNI and CUAC. All significant intercompany
accounts and transactions have been eliminated upon
consolidation.

The Company has formed special purpose entities
(securitization trusts) for the purpose of facilitating the sale
of its loans. The beneficial interests in these entities are
held by third-parties. The structure of these entities limits
their activities to holding the transferred assets and
transferring cash collected to the entities beneficial
interest holders. These special purpose entities meet the
definition of qualifying special purpose entities
(QSPEs) as defined in Statement of Financial Accounting
Standards No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS 140) and the accounts
of these QSPEs are not included in the consolidated financial
statements.

Pervasiveness of
Estimates:In conformity with
generally accepted accounting principles, management utilizes
assumptions and estimates that affect the reported values of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses for each reporting
period. The more significant estimates made in the preparation
of the Companys consolidated financial statements relate
to the credit enhancement assets and the gain on sale of motor
vehicle retail installment sales and loan contracts
(Contracts). Such assumptions include, but are not
limited to, estimates of loan prepayments, defaults, recovery
rates and present value discount rates. The Company uses a
combination of its own historical experience and expectation of
future performance to determine such estimates. Actual results
may differ from the Companys estimates due to numerous
factors both within and beyond the control of Company management
and it is reasonably possible that a material change will occur
in the near term. Changes in these factors could require the
Company to revise its assumptions concerning the amount of
voluntary prepayments, the frequency and/or severity of defaults
and the recovery rates associated with the disposition of
repossessed vehicles.

Cash and Cash
Equivalents:The Company considers all
significant investments with an original maturity of three
months or less to be cash equivalents.

Restricted Cash:The
Companys restricted cash balance may, from time to time,
consist of one or more of the following components: funds held
in reserve accounts supporting an on balance sheet residual
securitization transaction or backup servicing arrangement; cash
collateral to meet margin requirements related to hedging
activities; and cash collateral to cure potential borrowing base
deficiencies associated with the Companys warehouse lines.

F-8



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Contracts Held for
Sale:Contracts held for sale are
carried at the lower of cost or market value on an aggregate
basis. Contracts held for sale include Contracts reacquired upon
the exercise of clean-up calls and are available for sale as
part of future securitizations. At the time of such clean-up
calls, the fair value of such Contracts is reclassified from
credit enhancements assets and accounted for as loan premium on
the reacquired Contracts. Loan premiums are amortized in a
manner that results in a constant effective yield over the
remaining life of the Contracts. In amortizing loan premium, the
Company anticipates prepayments will occur at a rate consistent
with that utilized in valuing its residual interests
(approximately 1.75 ABS) over the estimated remaining
contractual life of the Contracts at the date such Contracts are
reacquired. If the Companys actual prepayment experience
differs materially from anticipated prepayment experience, the
Company will recalculate the effective yield to reflect actual
payments to date and anticipated future payments. The
unamortized loan premium is adjusted, through a charge or credit
to interest income, to the amount that would have existed had
the new effective yield been applied since the acquisition of
the Contracts.

The Company defers certain Contract origination
fees and participation paid to dealers. At the time of sale or
securitization, these balances are written off and are included
as part of the computation of the gain on sale of Contracts.

Contracts Held for
Investment:Contracts held for
investment include Contracts that do not qualify for Contract
securitizations as a result of delinquency status, minimum
balance or minimum remaining term.

Allowance for Credit
Losses:The Company maintains an
allowance for credit losses to cover anticipated losses on the
Contracts held for investment on the statement of financial
condition. The allowance for credit losses is increased by
charging the provision for credit losses and decreased by actual
losses on the Contracts held for investment. The level of the
allowance is based principally on the outstanding balance of
Contracts held for investment and historical loss trends.

The current policy of the Company is to recognize
losses on repossessed vehicles in the month in which the vehicle
is sold or in which the scheduled payment becomes 120 days
delinquent, whichever occurs first. Losses may occur in
connection with delinquent Contracts for which the vehicle was
not repossessed, either because of a discharge of the
obligors indebtedness in a bankruptcy proceeding or due to
the Companys inability to locate the financed vehicle or
the obligor. In these cases, losses are recognized at the time a
Contract is deemed uncollectible or during the month a scheduled
payment under the Contract becomes 150 days past due,
whichever occurs first.

Sales of Contracts:The Company purchases Contracts which will be sold to investors
with servicing rights retained by the Company. The Company sells
a majority of its Contracts at or near par value. For Contracts
securitized, the Company retains a participation in the future
cash flows released by trusts, while for cash sales no
participation is retained in the future cash flows. As of
December 31, 2003 the Company was servicing all the
Contracts sold to the trusts. As of December 31, 2003 and
2002, 24% and 27% of the sold portfolio was originated in
California, respectively.

Sales, Securitizations and Servicing of
Financial Instruments:The Company
securitizes substantially all of the Contracts it purchases, and
sells those securities on a regular basis in the secondary
market. SFAS 140 establishes the criteria used to evaluate
whether a securitization transaction will be treated as either a
sale or a secured financing. The Company has structured their
securitizations so that sale treatment would result. By-products
of those securitizations are certain retained interests,
including servicing rights. When the Company securitizes
Contracts, it allocates the acquisition cost of the Contracts
between the security sold and the retained interests, based on
their relative fair values. The reported gain is the difference
between the cash proceeds from the sale of the security or
Contract and its allocated cost. The residual interests in the
securitized assets (RISA) represent the present
value of future cash flows to be generated by the Contracts in
excess of the interest paid on the securities issued in the
securitization and other costs of servicing the

F-9



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Contracts and completing the securitization. The
present value of the estimated future cash flows are determined
based upon a cash-out basis, net of charge-offs, dealer
participation, gains and losses on hedges and other items
associated with servicing the Contracts.

Under the servicing contract, Onyx performs loan
servicing functions in exchange for fees and other remuneration.
The servicing functions typically performed include: collecting
and remitting Contract payments, responding to borrower
inquiries, accounting for principal and interest, counseling
delinquent borrowers, supervising repossession and dispositions
of financed vehicles, and generally administering the Contracts.
For performing these functions, Onyx receives a servicing fee
generally approximating 1% annually on the remaining outstanding
principal balances of the Contracts. During 2003, Onyx earned
approximately $28.0 million in contractual service fee
income, versus $28.0 million and $27.0 million for the
years ended December 31, 2002 and 2001, respectively. In
addition, Onyx generally has the right to retain late charges,
documentation fees, deferment fees and other servicing related
fees collected.

The Company records a servicing asset if the
benefits of servicing exceed adequate compensation, as defined
by SFAS 140, and a liability if the benefits of servicing
are less than adequate compensation. Historically, any resulting
servicing asset or liability has not been significant. Servicing
fees and interest income on the Contracts are recognized over
the life of the securitization transaction as contractual
servicing income and interest income.

The Company uses available market data, along
with its own empirical data and discounted cash flow models, to
arrive at the estimated fair values of its retained interests.
Retained interests are periodically evaluated for impairment,
which is defined generally as a reduction in current fair value
below carrying value. If the RISA has impairment that is deemed
to be other than temporary, such impairment is recognized in
current-period earnings. Once permanently impaired, subsequent
increases in the value of retained interests are recognized in
earnings over the remaining life of the investment through a
higher effective yield.

RISA is classified as available-for-sale
securities and carried at estimated fair value. Unrealized gains
and losses, net of deferred income taxes, are excluded from
earnings and reported as accumulated other comprehensive income,
which is a separate component of stockholders equity. RISA
is included in credit enhancement assets in the statement of
financial condition.

Furniture and
Equipment:Furniture and equipment are
stated at cost less accumulated depreciation, and are
depreciated for financial reporting purposes on a straight-line
basis over a three year estimated life. Capitalized leased
assets are amortized over the lease term. Leasehold improvements
are amortized over a period not exceeding the term of the lease.

Interest and Fee
Income:Interest and fee income on
Contracts held for sale and investment are determined on a
monthly basis using methods which approximate the effective
yield method.

Income Taxes:The
Company utilizes Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes, which
requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined
based on the difference between the financial statements and the
tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be
realized. The provision for income taxes represents the tax
payable for the period and the change during the year in
deferred tax assets and liabilities. The Company files
consolidated federal and state tax returns.

Net Income Per
Share:Net income per share is
presented in dual format as basic and diluted earnings per
share. Basic earnings per share is based on the weighted average
number of common shares outstanding.

F-10



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Diluted earnings per share is based on the
weighted average number of common shares outstanding, adjusted
to include the impact of potential dilutive common stock options
and warrants outstanding.

Derivative Financial
Instruments:The Company maintains an
overall risk management strategy that incorporates the use of
interest rate and derivative financial instruments to mitigate
its exposure to significant unplanned fluctuations in earnings
caused by volatility in interest rates. Derivative instruments
that are used as part of the Companys interest rate
management strategy are generally forward interest rate swaps.
These instruments are designated as cash flow hedges. Onyx does
not use any of these instruments for trading or speculative
purposes.

The Company uses forward interest rate swaps to
hedge the variability in the forecasted future net cash flows it
will receive from the RISA attributable to the risk of changing
interest rates. The Companys interest rate swap agreements
involve arrangements to pay a fixed interest rate and receive a
floating interest rate, at specified intervals, calculated on
agreed-upon amortizing notional amounts. The debt and amounts
that the Company hedges are determined based on prevailing
market conditions and the current shape of the yield curve.
Interest rate swap agreements are executed as an integral part
of specific securitization transactions. Interest rate swap
agreements are unwound upon securitization, whereby the gain or
loss on the hedge is recorded to income and the associated
component of the gain or loss previously recorded in other
comprehensive income is reversed.

All derivatives are recognized on the balance
sheet at their fair value. On the date that the Company enters
into a derivative contract, it designates the derivative as a
hedge of a forecasted transaction of the variability of cash
flows that are to be received or paid in connection with the
securitization (a cash flow hedge). Changes in the
fair value of a derivative that are highly effective and
previously designated to qualify as a cash flow hedge to the
extent that the hedge is effective, are recorded in other
comprehensive income until earnings are affected by the
variability of cash flows of the hedged transaction (e.g., until
periodic settlements of a variable asset or liability are
recorded in earnings). Any hedge ineffectiveness (which
represents the amount by which the changes in the fair value of
the derivative exceed the variability in the cash flows of the
forecasted transaction) is recorded in current-period earnings.

Derivative instruments used by Onyx involve, to
varying degrees, elements of credit risk in the event a
counterparty should default and market risk as the instruments
are subject to rate and price fluctuations. Credit risk is
managed through the use of credit standard guidelines,
counterparty diversification, monitoring of counterparty
financial condition and rating and International Swap Dealers
Association master netting agreements in place with all
derivative counterparties.

The Company formally documents all relationships
between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various
hedge transactions. This process includes linking all
derivatives that are designated as cash flow hedges to specific
firm commitments or forecasted transactions. The Company also
formally assesses (both at the hedges inception and on an
ongoing basis) whether the derivatives that are used in hedging
transactions have been highly effective in offsetting changes in
the cash flows of hedged items and whether those derivatives may
be expected to remain highly effective in future periods. When
it is determined that a derivative is not, or has ceased to be,
highly effective as a hedge, the Company discontinues hedge
accounting prospectively, as discussed below.

The Company will discontinue hedge accounting
prospectively when (1) it determines that the derivative is
no longer highly effective in offsetting changes in the cash
flows of a hedged item such as a firm commitment or a forecasted
transaction; (2) it is no longer probable that the
forecasted transaction will occur; (3) the derivative
expires or is sold, terminated, or exercised; or
(4) management determines that designating the derivative
as a hedging instrument is no longer appropriate.

At December 31, 2003, the Company had
entered into a four year amortizing forward swap agreement with
a notional face amount outstanding of $150.0 million with
the cash flows to be received from the RISA

F-11



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

being hedged. At December 31, 2003, these
agreements had a fair value of $31 thousand. At
December 31, 2002, the Company had forward swap agreements
outstanding totaling $150 million with a fair value of
($1.2) million.

Gain on Sale of Contracts for the year ended
December 31, 2003, included a loss, net of expenses, of
$2.2 million related to hedging activities. Included in
Gain on Sale of Contracts for the years ended December 31,
2002 and December 31, 2001 were hedging losses, net of
expenses, of $3.6 million and $6.6 million,
respectively.

Stock-based
Compensation:Statement of Financial
Accounting Standards No. 123, Accounting for Stock
Based Compensation (SFAS No. 123),
and Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure, an amendment of FASB Statement
No. 123 encourages, but does not require, companies
to recognize compensation expense associated with stock based
compensation plans over the anticipated service period based on
the fair value of the award on the date of grant. As allowed by
SFAS 123 and 148, however, the Company has elected to
continue to report Stock-Based Compensation under the guidelines
of APB-25, and has included the additional disclosure
requirements under FAS-148.

The fair value of the options was estimated at
date of grant using a Black-Scholes single option pricing model
using the following assumptions:

|                                |  |              |            |      |  |      |            |   |  |  |            |  
|------------------------------- |  | ------------ | ---------- | ---- |  | ---- | ---------- | - |  |  | ---------- | -
|                                |  |             
|                                |  | December 31,
|                                |  |             
|                                |  | 2003         |            | 2002 |  | 2001
|                                |  |              |            |      |  |     
|Risk free interest rate         |  |              | 2.2        | %    |  |      | 3.8        | % |  |  | 4.6        | %
|Expected stock price volatility |  |              | 80.0       | %    |  |      | 87.6       | % |  |  | 75.0       | %
|Expected life of options        |  |              | four years |      |  |      | four years |   |  |  | four years |  
|Expected dividends              |  |              | none       |      |  |      | none       |   |  |  | none       |  

The following table presents the pro forma
disclosures required for SFAS 123 and SFAS 148 for the
years ended December 31:

|                                                                                                                                                     |  |      |       |      |  |      |       |  |  |   |       | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                                                                                                                     |  | 2003 |       | 2002 |  | 2001
|                                                                                                                                                     |  |      |       |      |  |     
|Net income, as reported (in thousands)                                                                                                               |  | $    | 5,718 |      |  | $    | 1,883 |  |  | $ | 4,410 | 
|Stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects (in thousands) |  | $    | 440   |      |  | $    | 446   |  |  | $ | 529   | 
|                                                                                                                                                     |  |      |       |      |  |      |       |  |  |   |       | 
|Pro forma net income (in thousands)                                                                                                                  |  | $    | 5,278 |      |  | $    | 1,437 |  |  | $ | 3,881 | 
|                                                                                                                                                     |  |      |       |      |  |      |       |  |  |   |       | 
|Earnings per share:                                                                                                                                  |  |      |       |      |  |      |       |  |  |   |       | 
|Basic  as reported                                                                                                                                  |  | $    | 1.12  |      |  | $    | 0.37  |  |  | $ | 0.88  | 
|Basic  pro forma                                                                                                                                    |  | $    | 1.03  |      |  | $    | 0.28  |  |  | $ | 0.77  | 
|Diluted  as reported                                                                                                                                |  | $    | 1.01  |      |  | $    | 0.36  |  |  | $ | 0.84  | 
|Diluted  pro forma                                                                                                                                  |  | $    | 0.93  |      |  | $    | 0.28  |  |  | $ | 0.75  | 

Comprehensive
Income:Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS 130), establishes standards
for reporting comprehensive income and its components in a full
set of financial statements. The standard requires that all
items that are required to be recognized under accounting
standards as components of comprehensive income, including an
amount representing total comprehensive income, be reported in a
financial statement that is displayed with the same prominence
as other financial statements. Pursuant to SFAS 130, the
Company has reported comprehensive income in the accompanying
Consolidated Statements of Stockholders Equity.

F-12



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Collection costs:Direct collection costs related to defaulted contracts are
recorded by the Company as general and administrative expenses.

Reclassification and
Restatement:Certain amounts in the
prior year consolidated financial statements have been
reclassified to conform to the 2003 presentation. In addition,
the Company has restated the 2002 balance sheet and the 2002 and
2001 cash flow statements as follows:



|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The 2002 balance sheet and cash flow statements
    were restated to properly record the cut-off of cash
    transactions related to trust activity around December 31,
    2002.



|     |                                                                                                                                                          
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii) | The 2001 cash flow statement was restated to
    properly record the cut-off of cash transactions related to
    trust activity around December 31, 2001.

The table below presents the restatements made:

|                          |  |                        |         |              |  |  |         | 
|------------------------- |  | ---------------------- | ------- | ------------ |  |  | ------- | 
|                          |  | As of                  |         | As of       
|                          |  | December 31,           |         | December 31,
|                          |  | 2002                   |         | 2002        
|                          |  |                        |         |             
|                          |  | As reported            |         | Restated    
|                          |  |                        |         |             
|                          |  |                       
|                          |  | (Dollars in thousands)
|Cash and cash equivalents |  |                        | 72      |              |  |  | 8,231   | 
|                          |  |                        |         |              |  |  |         | 
|Restricted cash           |  |                        | 3,430   |              |  |  | 3,868   | 
|                          |  |                        |         |              |  |  |         | 
|Contracts held for sale   |  |                        | 170,353 |              |  |  | 176,679 | 
|                          |  |                        |         |              |  |  |         | 
|Credit enhancement assets |  |                        | 177,108 |              |  |  | 183,564 | 
|                          |  |                        |         |              |  |  |         | 
|Other assets              |  |                        | 6,570   |              |  |  | 8,978   | 
|                          |  |                        |         |              |  |  |         | 
|Total Assets              |  |                        | 367,157 |              |  |  | 390,944 | 
|                          |  |                        |         |              |  |  |         | 
|Accounts payable          |  |                        | 33,871  |              |  |  | 47,507  | 
|                          |  |                        |         |              |  |  |         | 
|Residual lines            |  |                        | 45,599  |              |  |  | 49,103  | 
|                          |  |                        |         |              |  |  |         | 
|Subordinated financings   |  |                        | 27,128  |              |  |  | 27,449  | 
|                          |  |                        |         |              |  |  |         | 
|Deferred taxes            |  |                        | (A)     |              |  |  | 20,578  | 
|Other liabilities         |  |                        | 28,173  |              |  |  | 13,921  | 
|                          |  |                        |         |              |  |  |         | 
|Total liabilities         |  |                        | 302,244 |              |  |  | 326,031 | 
|                          |  |                        |         |              |  |  |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | In addition, the Company has reclassified certain
    other prior year amounts to conform to the presentation of the
    2003 financial statements. These include a reclassification of
    deferred income tax liabilities of $20,578 at December 31,
    2002 from other liabilities to deferred taxes payable and a
    reclassification of dealer participation payable of
    $6.3 million at December 31, 2002 from Contracts held
    for sale to other liabilities.



|         |                                 
|-------- | --------------------------------
|Note 3  | Recent Accounting Pronouncements

In May of 2003, the Financial Accounts Standards
Board (FASB) issued Statement of Financial
Accounting Standards No. 150, (FAS 150)
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.
This Statement establishes standards for the classification and
measurement of certain financial instruments having the
characteristics of both a liability and equity. This Statement
is effective for financial instruments entered into after
May 31, 2003, or modified thereafter. The adoption of
FAS-150 did not have a material effect on the Companys
consolidated financial statements.

F-13



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In April of 2003, the Financial Accounts
Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 149, (FAS 149)
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This Statement amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging
Activities. The changes in this Statement improve
financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. This Statement is
generally effective for contracts entered into or modified after
June 30, 2003. The adoption of FAS-149 did not have a
material effect on the Companys consolidated financial
statements.

In January of 2003, the Emerging Issues Task
Force further discussed Issue No. 02-09, Accounting
for Changes That Result in a Transferor Regaining Control of
Financial Assets Sold. The Task Force reached a consensus
that upon application of paragraph 55 of FASB Statement
No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, when
the transferors contingent right becomes exercisable, no
gain or loss should be recognized in earnings with respect to
any beneficial interests retained by the transferor. The Task
Force plans to consider further the accounting for the
application of paragraph 55 when an entire SPE is disqualified.
Paragraph 55 of Statement 140 requires a transferor to
recognize in its financial statements assets previously
accounted for appropriately as having been sold when one or more
of the conditions in paragraph 9 are no longer met. The
transferor recognizes those assets together with liabilities to
the former transferee(s) in those assets and initially measures
the assets and liabilities at fair value on the date of the
change, as if the transferor purchased them on that date. The
issue is how to apply the accounting requirements of
paragraph 55 with respect to beneficial interests held by
the transferor and loans that do not meet the definition of
security, including whether the transferor should
recognize a gain or loss when paragraph 55 is applied. The
Company adopted EITF 02-09 in the fourth quarter of 2002.
The adoption of EITF 02-09 did not have a material affect
on the Companys consolidated financial statement.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others (FIN 45), which
is an interpretation of SFAS No. 5; Accounting
for Contingencies, SFAS No. 57; Related
Party Disclosures, and SFAS No. 107;
Disclosures About Fair Value of Financial
Instruments. FIN 45 clarifies the disclosure and
liability recognition requirements relating to guarantees issued
by an entity. Specifically, FIN 45 clarifies that entities
are required to record guarantees at their fair values,
including the value of the obligation to stand ready to perform
over the term of the guarantee in the event the specified
triggering events or conditions occur, regardless of whether the
occurrence of the triggering events or conditions is deemed
probable of occurring.

FIN 45 was effective for new guarantees
issued or modification of guarantees made after
December 31, 2002. FIN 45s disclosure
requirements were effective for financial statements of interim
or annual periods ending after December 15, 2002. The
adoption of FIN 45s measurement requirements did not
have a significant impact on the Companys financial
position or results of operations.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46), which is an
interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements. FIN 46 was
amended in December 2003. FIN 46 requires business
enterprises to consolidate variable interest entities which have
one or more of the following characteristics:

(1) The equity investment at risk is not
sufficient to permit the entity to finance its activities
without additional subordinated financial support from other
parties.

F-14



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(2) The equity investors lack one or more of
the following essential characteristics of a controlling
financial interest:



| |     |                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| | (a) | The direct or indirect ability to make decisions
    about the entitys activities through voting rights or
    similar rights.
|
| | (b) | The obligation to absorb the expected losses of
    the entity if they occur.                                                  
|
| | (c) | The right to receive expected residual returns of
    the entity if they occur.                                                

FIN 46 excludes qualifying special purpose
entities subject to the reporting requirements of SFAS 140.
FIN 46 applies upon formation to variable interest entities
created after January 31, 2003, and to all variable
interest entities in the first fiscal year or interim period
beginning after June 15, 2003. At December 31, 2003,
the Companys corporate structure included either companies
whose accounts were consolidated into the Companys
financial statements or which were classified as qualifying
special purpose entities under SFAS 140. Therefore, the
adoption of FIN 46 did not have an impact on the
Companys financial statements.



|         |                        
|-------- | -----------------------
|Note 4  | Contracts Held for Sale

Contracts held for sale are carried at the lower
of cost or market value on an aggregate basis. Contracts held
for sale include Contracts reacquired upon the exercise of clean
up calls and available for sale as part of future
securitizations. At the time of such calls, any unamortized RISA
balance, net of associated other comprehensive income remaining
in stockholders equity is reclassified from credit
enhancement assets and accounted for as loan premium on the
reacquired Contracts. Loan premiums are amortized in a manner
that results in a constant effective yield over the remaining
life of the Contracts. In amortizing loan premium, the Company
anticipates prepayments will occur at a rate consistent with
that utilized in valuing its residual interests (1.75 ABS) over
the estimated remaining contractual life of the Contracts at the
date such Contracts are reacquired. If the Companys actual
prepayment experience differs materially from anticipated
prepayment experience, the Company will recalculate the
effective yield to reflect actual payments to date and
anticipated future payments. The unamortized loan premium is
adjusted, through a charge or credit to interest income, to the
amount that would have existed had the new effective yield been
applied since the acquisition of the Contracts.

Contracts held for sale consist of the following:

|                              |       |                |         |         |  |   |         |         | 
|----------------------------- | ----- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|                              |       |               
|                              |       | December 31,  
|                              |       |               
|                              |       | 2003           |         | 2002   
|                              |       |                |         |        
|                              |       |               
|                              |       | (In thousands)
|Gross Contracts held for sale |       | $              | 189,561 |         |  | $ | 171,785 |        
|Less unearned interest        |       |                | (844    | )       |  |   | (1,265  | )      
|                              |       |                |         |         |  |   |         |        
|Net Contract balance          |       |                | 188,717 |         |  |   | 170,520 |        
|Loan Premium                  |       |                | 4,853   |         |  |   | 3,981   |        
|                              |       |                |         |         |  |   |         |        
|Contracts held for sale       |       |                | 193,570 |         |  |   | 174,501 |        
|Dealer participation          |       |                | 1,777   |         |  |   | 2,178   |        
|                              |       |                |         |         |  |   |         |        
|                              | Total |                | $       | 195,347 |  |   | $       | 176,679 | 
|                              |       |                |         |         |  |   |         |        

As of December 31, 2003 and 2002, 26% and
30% of Contracts held for sale were originated in California,
respectively.

Contracts serviced by the Company for the benefit
of others totaled approximately $3.0 billion and
$2.7 billion at December 31, 2003 and
December 31, 2002, respectively. These amounts are not
reflected in the accompanying consolidated financial statements.

F-15



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                              
|-------- | -----------------------------
|Note 5  | Contracts Held for Investment

Contracts held for investment are net of a
$2.5 million allowance for probable losses at
December 31, 2003 and a $1.9 million allowance at
December 31, 2002. Amounts held for investment include
Contracts that do not qualify for securitizations as a result of
delinquency status, minimum balance or minimum remaining term.
Contracts held for investment are carried at amortized cost
reduced by a valuation allowance for credit losses inherent in
the portfolio as of the balance sheet date.

Contracts held for investment consist of the
following:

|                                    |       |                |        |       |  |   |        |       | 
|----------------------------------- | ----- | -------------- | ------ | ----- |  | - | ------ | ----- | 
|                                    |       |               
|                                    |       | December 31,  
|                                    |       |               
|                                    |       | 2003           |        | 2002 
|                                    |       |                |        |      
|                                    |       |               
|                                    |       | (In thousands)
|Gross Contracts held for investment |       | $              | 11,312 |       |  | $ | 8,430  |      
|Less unearned interest              |       |                | (14    | )     |  |   | (24    | )    
|                                    |       |                |        |       |  |   |        |      
|Contracts held for investment       |       |                | 11,298 |       |  |   | 8,406  |      
|Allowance for credit losses         |       |                | (2,486 | )     |  |   | (1,851 | )    
|                                    |       |                |        |       |  |   |        |      
|                                    | Total |                | $      | 8,812 |  |   | $      | 6,555 | 
|                                    |       |                |        |       |  |   |        |      

Changes in the allowance for credit losses were
as follows:

|                               |  |                |        |      |  |      |        |   |  |   |        |  
|------------------------------ |  | -------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                               |  |               
|                               |  | December 31,  
|                               |  |               
|                               |  | 2003           |        | 2002 |  | 2001
|                               |  |                |        |      |  |     
|                               |  |               
|                               |  | (In thousands)
|Balance at beginning of period |  | $              | 1,851  |      |  | $    | 1,280  |   |  | $ | 1,175  |  
|Provision for credit losses    |  |                | 3,216  |      |  |      | (8     | ) |  |   | 1,079  |  
|Charged-off loans              |  |                | (7,424 | )    |  |      | (3,946 | ) |  |   | (2,121 | )
|Recoveries-tax refund          |  |                |       |      |  |      | 2,043  |   |  |   |       |  
|Recoveries-general             |  |                | 4,843  |      |  |      | 2,482  |   |  |   | 1,147  |  
|                               |  |                |        |      |  |      |        |   |  |   |        |  
|Balance at end of period       |  | $              | 2,486  |      |  | $    | 1,851  |   |  | $ | 1,280  |  
|                               |  |                |        |      |  |      |        |   |  |   |        |  

The provision for credit losses for the year
ended December 31, 2002 reflects a sales tax refund of
approximately $2.0 million. The refund has been treated as
a recovery as it relates to pro-rata sales taxes paid by Onyx in
financing the purchases of vehicles for which the related
Contracts have been previously charged-off.

At December 31, 2003, contractual maturities
of Contracts held for investment were as follows:

|                    |  |                   |        | 
|------------------- |  | ----------------- | ------ | 
|                    |  | (In thousands)(1)
|                    |  |                  
|2004                |  | $                 | 7,378  | 
|2005                |  |                   | 3,710  | 
|2006                |  |                   | 64     | 
|2007                |  |                   | 38     | 
|2008 and thereafter |  |                   | 108    | 
|                    |  |                   |        | 
|                    |  | $                 | 11,298 | 
|                    |  |                   |        | 



---



|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | Actual maturities may vary depending on
    prepayment speed, charge-offs and deferments.

F-16



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                          
|-------- | -------------------------
|Note 6  | Credit Enhancement Assets

SFAS 140 requires that following a transfer
of financial assets, an entity is to recognize the assets it
controls and the liabilities it has incurred, and derecognize
assets for which control has been surrendered and liabilities
that have been extinguished.

RISA, capitalized upon securitization of
Contracts, represents the present value of the estimated future
cash flows to be received by the Company from the excess spread
created in securitization transactions. Excess spread is
calculated by taking the difference between the weighted average
coupon rate of the Contracts sold and the weighted average
security rate paid to the investors less contractually specified
servicing and guarantor fees and projected credit losses, after
giving effect to estimated prepayments.

Prepayment and credit loss assumptions are
utilized to project future cash flows and are based on
historical experience. All assumptions are evaluated each
quarter and adjusted, if appropriate, to reflect the actual
performance of the underlying Contracts. Subsequent changes in
loss, prepayment and discount rate assumptions applied upon the
execution of the securitization could have a material effect on
gains on future securitizations.

Key economic assumptions used in determining the
fair value of RISA at the time of securitization are as follows:

|                            |  |                |  |                |  |              |              | 
|--------------------------- |  | -------------- |  | -------------- |  | ------------ | ------------ | 
|                            |  |               
|                            |  | Years Ending  
|                            |  |               
|                            |  | December 31,   |  | December 31,   |  | December 31,
|                            |  | 2003           |  | 2002           |  | 2001        
|                            |  |                |  |                |  |             
|Prepayment rate (ABS Speed) |  | 1.75           |  | 1.75           |  |              | 1.75         | 
|Cumulative credit losses    |  | 3.5% to 4.4%   |  | 3.8% to 4.4    |  |              | 4.3% to 4.7% | 
|Average Contract life       |  | 1.67 to 1.76   |  | 1.67 to 1.70   |  |              | 1.67 to 1.70 | 
|Discount rate               |  | 10.8% to 11.0% |  | 11.0% to 12.0% |  |              | 8.3% to 9.5% | 
|                            |  |                |  |                |  |              |              | 

Key economic assumptions used in determining the
fair value of the RISA at December 31, 2003, 2002 and 2001
are as follows:

|                            |  |              |               |              |  |              |               |  |  |  |              | 
|--------------------------- |  | ------------ | ------------- | ------------ |  | ------------ | ------------- |  |  |  | ------------ | 
|                            |  |             
|                            |  | Years Ending
|                            |  |             
|                            |  | December 31, |               | December 31, |  | December 31,
|                            |  | 2003         |               | 2002         |  | 2001        
|                            |  |              |               |              |  |             
|Prepayment rate (ABS Speed) |  |              | 1.65 to 2.14  |              |  |              | 1.67 to 2.16  |  |  |  | 1.75         | 
|Cumulative credit losses    |  |              | 2.8% to 6.6%  |              |  |              | 3.8% to 5.9%  |  |  |  | 3.5% to 4.6% | 
|Discount rate               |  |              | 8.5% to 11.0% |              |  |              | 8.5% to 11.0% |  |  |  | 9.5%         | 
|                            |  |              |               |              |  |              |               |  |  |  |              | 

The following table presents information about
delinquencies on Contracts that have been securitized:

|                                      |  |                       |       |              |  |   |       | 
|------------------------------------- |  | --------------------- | ----- | ------------ |  | - | ----- | 
|                                      |  |                      
|                                      |  | Years Ending         
|                                      |  |                      
|                                      |  | December 31,          |       | December 31,
|                                      |  | 2003                  |       | 2002        
|                                      |  |                       |       |             
|                                      |  |                      
|                                      |  | (Dollars in Millions)
|Total principal amount outstanding    |  | $                     | 2,643 |              |  | $ | 2,727 | 
|Principal delinquent thirty plus days |  | $                     | 33.9  |              |  | $ | 70.5  | 

The owner trusts incurred net credit losses of
$58.4 million and $80.4 million related to the
securitized Contracts above during the years ended
December 31, 2003 and 2002, respectively.

During the year ended December 31, 2003, the
Company recorded an impairment loss of $8.6 million,
compared to $15.1 million for the year ended
December 31, 2002. Impairment charges are netted against
gain on sale as reported in the statement of income.

F-17



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In initially valuing the RISA and determining
estimated cash flows, the Company establishes an off balance
sheet allowance for probable credit losses. The allowance is
based upon historical experience, the credit statistics of the
underlying portfolio and managements estimate of future
performance regarding credit losses. The amount is reviewed
periodically and adjustments are made if actual experience or
other factors indicate that future performance may differ from
managements prior estimates.

The following table presents the estimated future
cash flows to be received from securitizations. Estimated future
cash flows are calculated by taking the difference between the
weighted average coupon rate of the Contracts sold and the
weighted average security rate paid to the investors, less the
contractually specified servicing fee of 1.0%, financial
guaranty insurance premiums and other costs and fees, after
giving effect to estimated prepayments and assuming no losses.
To arrive at the RISA, this amount is reduced by the off balance
sheet allowance established for probable future losses and by
discounting to present value.

|                                                                  |  |                |           |              |  |   |           |  
|----------------------------------------------------------------- |  | -------------- | --------- | ------------ |  | - | --------- | -
|                                                                  |  | December 31,   |           | December 31,
|                                                                  |  | 2003           |           | 2002        
|                                                                  |  |                |           |             
|                                                                  |  |               
|                                                                  |  | (In thousands)
|Cash held in spread accounts                                      |  | $              | 108,667   |              |  | $ | 112,080   |  
|Estimated undiscounted RISA cash flows                            |  |                | 220,906   |              |  |   | 219,567   |  
|Off balance sheet allowance for losses                            |  |                | (101,894  | )            |  |   | (109,490  | )
|Discount to present value                                         |  |                | (45,335   | )            |  |   | (38,593   | )
|                                                                  |  |                |           |              |  |   |           |  
|Retained interest in securitized assets                           |  | $              | 182,344   |              |  | $ | 183,564   |  
|                                                                  |  |                |           |              |  |   |           |  
|Outstanding balance of Contracts sold through
    securitizations |  | $              | 2,643,431 |              |  | $ | 2,726,878 |  

At December 31, 2003, key economic
assumptions and the sensitivity of the current fair value of
residual cash flows to immediate 10% and 20% adverse changes in
those assumptions are as follows:

|                                              |  |                      
|--------------------------------------------- |  | ---------------------
|                                              |  | December 31, 2003    
|                                              |  |                      
|                                              |  | (Dollars in millions)
|Expected credit loss assumption (annual rate) |  | 1.73% to 3.74%       
|Impact to fair value of 10% adverse change    |  | $13.5                
|Impact to fair value of 20% adverse change    |  | $24.9                
|Expected prepayment rate assumption (ABS)     |  | 1.60 to 2.14         
|Impact to fair value of 10% adverse change    |  | $4.0                 
|Impact to fair value of 20% adverse change    |  | $5.7                 
|Expected discount rate on RISA (annual rate)  |  | 8.5% to 11.0%        
|Impact to fair value of 10% adverse change    |  | $2.4                 
|Impact to fair value of 20% adverse change    |  | $4.7                 

These sensitivities are hypothetical and should
be used with caution. As the figures indicate, changes in fair
value based on a 10 percent and 20 percent variation in
assumptions generally cannot be extrapolated because the
relationship of the change in assumption to the change in fair
value may not be linear. Also, in this table, the effect of the
variation in a particular assumption for the fair value of the
retained interest is calculated without changing any other
assumption; in reality, changes in one factor may result in
changes in another (for example, increases in market interest
rates may result in lower prepayments and increased credit
losses), which might magnify or counteract the sensitivities.

F-18



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                        
|-------- | -----------------------
|Note 7  | Furniture and Equipment

Furniture and equipment consisted of the
following:

|                                                |                        |                |         |        |        |   |         |        |        | 
|----------------------------------------------- | ---------------------- | -------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                |                        |               
|                                                |                        | December 31,  
|                                                |                        |               
|                                                |                        | 2003           |         | 2002  
|                                                |                        |                |         |       
|                                                |                        |               
|                                                |                        | (In thousands)
|Owned:                                          |                        |                |         |        |        |   |         |       
|                                                | Office furniture       |                | $       | 4,351  |        |   | $       | 4,390  |       
|                                                | Computer equipment     |                |         | 16,683 |        |   |         | 15,910 |       
|                                                | Leasehold improvements |                |         | 1,996  |        |   |         | 1,869  |       
|                                                |                        |                |         |        |        |   |         |       
|                                                |                        | Total          |         |        | 23,030 |   |         |        | 22,169 | 
|                                                |                        |                |         |        |        |   |         |       
|Capitalized leases:                             |                        |                |         |        |        |   |         |       
|                                                | Computer equipment     |                |         | 1,063  |        |   |         | 854    |       
|                                                |                        |                |         |        |        |   |         |       
|Total furniture and equipment                   |                        |                | 24,093  |        |        |   | 23,023  |       
|Less: accumulated depreciation and amortization |                        |                | (21,461 | )      |        |   | (19,954 | )     
|                                                |                        |                |         |        |        |   |         |       
|Furniture and equipment, net                    |                        | $              | 2,632   |        |        | $ | 3,069   |       
|                                                |                        |                |         |        |        |   |         |       



|         |                    
|-------- | -------------------
|Note 8  | Warehouse Borrowing

As of December 31, 2003, the Company was
party to two warehouse facilities. The Companys primary
warehouse facility was a $300 million facility (the
Triple-A CP Facility), with Triple-A One
Funding Corporation (Triple-A). Onyx Acceptance
Financial Corporation (OAFC), a special purpose
subsidiary of the Company, is the borrower under the Triple-A
CP Facility. The Triple-A CP Facility is used to fund
the purchase or origination of Contracts. Triple-A is a rated
commercial paper asset-backed conduit sponsored by MBIA
Insurance Corporation (MBIA). MBIA provides credit
enhancement for the facility by issuing a financial guarantee
insurance policy covering all principal and interest obligations
owed for the borrowings under the facility. The Company pledges
certain of its Contracts held for sale to borrow from Triple-A.
The Triple-A CP Facility was renewed in November 2001 for a
three-year term, subject to annual renewals by liquidity
providers. During 2003, the size of the Triple-A
CP Facility was reduced from $355 million to
$300 million in conjunction with the acquisition of the CDC
CP Facility described below.

In January 2003, a subsidiary of the Company,
Onyx Acceptance Receivables Corporation (OARC),
executed a $150 million warehouse facility (the CDC
CP Facility) with CDC Financial Products (CDC)
which provides warehouse funding for the purchase or origination
of Contracts and has been used in concert with the Triple-A CP
Facility. XL Capital Assurance Inc. provides credit enhancement
for the facility by issuing a financial guarantee insurance
policy covering all principal and interest obligations owed for
borrowings under the facility. The Company pledges certain of
its Contracts held for sale to borrow under the CDC
CP Facility. The CDC CP Facility was renewed and
expanded to $300 million in January 2004 with the addition
of another lending group. The facility is now set to expire in
January 2005.

The Company finances dealer participation
payments and daily operations principally through credit
facilities collateralized by its retained interest in
securitized assets, proceeds from subordinated debt offerings,
and cash from operating activities.

The facilities above contain affirmative,
negative and financial covenants typical of such credit
facilities. The Company was in compliance with these covenants
as of December 31, 2003.

F-19



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |               
|-------- | --------------
|Note 9  | Residual Lines

As of December 31, 2003, the Company,
through a special purpose subsidiary of the Company, Onyx
Acceptance Funding Corporation (OFC) had two
residual financing facilities: a $35 million line with
Merrill Lynch International, as buyer (MLI), and
Merrill Lynch, Pierce, Fenner & Smith Inc., as agent
(Merrill) and a $21.4 million facility with
Credit Suisse First Boston (Europe) Limited, as buyer
(CSFB-Europe), and Credit Suisse First Boston
Corporation, as agent (CSFB). The MLI facility was
executed in April 2003, and replaced a $50.0 million
residual line with Salomon Smith Barney Realty Corporation
(SBRC). Each loan under the MLI line has a
nine-month revolver period followed by a twelve-month
amortization period. The CSFB-Europe line was renewed in October
2003, at which time the facility size was reduced from
$35 million to $21.4 million, until January 2004. In
January 2004, the line was extended through April 2004 as a
$20 million facility. The Company expects to renew the line
at the $20 million level for another year at that time. The
reductions in the CSFB-Europe line were related to the Company
entering into a $30 million residual financing facility
with Galleon Capital, LLC (Galleon), also in January
2004. (The Galleon facility together with the MLI facility and
the CSFB-Europe facility are sometimes referred to herein as the
Residual Lines). The Galleon facility provides for a
twelve-month revolving period followed by an accelerated
amortization period. The residual lines are collateralized by
the Companys RISA.

Interest paid under each line is generally tied
to the 30 day Libor Rate. The average interest rates for
the year ending December 31, 2003 were 6.21% for the CSFB
facility, 6.37% for the Merrill facility and 3.84% for the SBRC
facility. For the year ending December 31, 2002, the
average interest rates were 4.29% for the SBRC facility and
4.82% for the CSFB facility. The increase in average interest
rates paid on the facilities from 2002 to 2003 reflects an
increase in the interest spread over the Libor Rate charged to
the Company.

As an additional source of funds, the Company has
in the past utilized residual securitizations to pay down its
residual financing facilities to increase the Companys
liquidity. During the first quarter of 2000, the Company
securitized the residual cash flows from 15 of its then
outstanding securitizations. The proceeds of this transaction
were used by the Company to pay down two residual financing
facilities and pay off another residual financing facility. The
Company refinanced this residual securitization in the amount of
$21.0 million during the second quarter of 2002 and in the
amount of $9.2 million during the fourth quarter of 2002.
During the first quarter of 2002, the Company completed its
second residual interest securitization for the purpose of
providing additional borrowing capacity under its Residual
Lines. This transaction generated approximately
$75.0 million in proceeds. The Company retired both of
these residual securitizations in 2003.

The facilities above contain affirmative,
negative and financial covenants typical of such credit
facilities. The Company was in compliance with these covenants
as of December 31, 2003.



|          |                       
|--------- | ----------------------
|Note 10  | Subordinated Financing

As of December 31, 2003, the Company had
outstanding approximately $51.1 million of subordinated
financings, $12.0 million of which has a stated interest
rate of 12.5% and a maturity of June 2006. The remaining balance
of $39.1 million was raised through the Companys
renewable unsecured subordinated note program launched during
the first quarter of 2002. The weighted average interest rate on
the balance of the renewable notes outstanding as of
December 31, 2003 was approximately 8.5%. The renewable
notes have varying maturities ranging from three months to ten
years.

F-20



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Maturities on the Companys unsecured
subordinated renewable notes are as follows as of
December 31, 2003 (dollars in thousands).

|                    |  |                |        | 
|------------------- |  | -------------- | ------ | 
|                    |  | (In thousands)
|                    |  |               
|2004                |  | $              | 23,689 | 
|2005                |  |                | 6,669  | 
|2006                |  |                | 5,760  | 
|2007                |  |                | 1,070  | 
|2008 and thereafter |  |                | 1,889  | 
|                    |  |                |        | 
|                    |  | $              | 39,077 | 
|                    |  |                |        | 

The subordinated financings above contain
affirmative, negative and financial covenants typical of such
credit facilities. The Company was in compliance with these
covenants as of December 31, 2003.



|          |                              
|--------- | -----------------------------
|Note 11  | Commitments and Contingencies

Leases:The Company
leases furniture, fixtures and equipment under capital leases
with terms in excess of one year. The Company leases its office
space under operating leases with options to renew. Certain
operating lease agreements provide for escalations based on
contractual provisions.

Future minimum lease payments required under
capital leases and non-cancelable operating leases are as
follows as of December 31, 2003:

|                                            |       |                |       |           |  |   |       |        | 
|------------------------------------------- | ----- | -------------- | ----- | --------- |  | - | ----- | ------ | 
|                                            |       | Capital        |       | Operating
|                                            |       | Leases         |       | Leases   
|                                            |       |                |       |          
|                                            |       |               
|                                            |       | (In thousands)
|2004                                        |       | $              | 693   |           |  | $ | 3,499 |       
|2005                                        |       |                | 380   |           |  |   | 3,151 |       
|2006                                        |       |                | 82    |           |  |   | 2,296 |       
|2007                                        |       |                | 0     |           |  |   | 2,059 |       
|2008 and thereafter                         |       |                | 0     |           |  |   | 2,110 |       
|                                            |       |                |       |           |  |   |       |       
|                                            | Total |                |       | 1,155     |  |   | $     | 13,115 | 
|                                            |       |                |       |           |  |   |       |       
|Less amounts representing interest          |       |                | (92   | )         |  |   |       |       
|                                            |       |                |       |           |  |   |       |       
|Present value of net minimum lease payments |       | $              | 1,063 |           |  |   |       |       
|                                            |       |                |       |           |  |   |       |       

Rental expenses for premises and equipment
amounted to approximately $3.9 million, $4.3 million
and $4.2 million for the years ended December 31,
2003, 2002, and 2001 respectively.



|          |                  
|--------- | -----------------
|Note 12  | Legal Proceedings

As a consumer finance company, the Company is
subject to various consumer claims and litigation seeking
damages and statutory penalties based upon, among other things,
disclosure inaccuracies and wrongful repossession, which could
take the form of a plaintiffs class action complaint. The
Company, as the assignee of Contracts originated by dealers, may
also be named as a co-defendant in lawsuits filed by consumers
principally against dealers. Finally, the Company also is
subject to other litigation common to the motor vehicle finance
industry and businesses in general. The damages and penalties
claimed by consumers and others in these types of matters can be
substantial. The relief requested by the plaintiffs varies but
includes requests for compensatory, statutory and punitive
damages.

F-21



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Management believes that the Company has taken
prudent steps to address the litigation risks associated with
the Companys business activities. However, there can be no
assurance that the Company will be able to successfully defend
against all such claims or that the determination of any such
claim in a manner adverse to the Company would not have a
material adverse effect on the Companys automobile finance
business.

In the opinion of management, the resolution of
the proceedings described in this section will not have a
material adverse effect on the Companys consolidated
financial position, results of operations or liquidity.



|          |                     
|--------- | --------------------
|Note 13  | Net Income Per Share

In accordance with Statement of Financial
Accounting Standards No. 128, the following is the dilutive
effect of the Companys potential common stock on net
income per share.

|                                                  |  |                           |       |      |  |      |       |  |  |   |       | 
|------------------------------------------------- |  | ------------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                  |  |                          
|                                                  |  | Year Ended December 31,  
|                                                  |  |                          
|                                                  |  | 2003                      |       | 2002 |  | 2001
|                                                  |  |                           |       |      |  |     
|                                                  |  |                          
|                                                  |  | (In thousands, except net
|                                                  |  | income per share)        
|Net income                                        |  | $                         | 5,718 |      |  | $    | 1,883 |  |  | $ | 4,410 | 
|                                                  |  |                           |       |      |  |      |       |  |  |   |       | 
|Weighted average shares outstanding               |  |                           | 5,102 |      |  |      | 5,085 |  |  |   | 5,026 | 
|Net effect of dilutive stock options/warrants     |  |                           | 581   |      |  |      | 94    |  |  |   | 206   | 
|                                                  |  |                           |       |      |  |      |       |  |  |   |       | 
|Fully diluted weighted average shares outstanding |  |                           | 5,683 |      |  |      | 5,179 |  |  |   | 5,232 | 
|                                                  |  |                           |       |      |  |      |       |  |  |   |       | 
|Net income per share                              |  | $                         | 1.12  |      |  | $    | 0.37  |  |  | $ | 0.88  | 
|                                                  |  |                           |       |      |  |      |       |  |  |   |       | 
|Net income per share assuming full dilution       |  | $                         | 1.01  |      |  | $    | 0.36  |  |  | $ | 0.84  | 
|                                                  |  |                           |       |      |  |      |       |  |  |   |       | 

As of December 31, 2003, 2002 and 2001,
235,000, 1.4 million and 2.4 million of combined
options and warrants, respectively, were not included in the
calculation of full dilution, as they were anti-dilutive.



|          |              
|--------- | -------------
|Note 14  | Stock Options

As of December 31, 2003, the Company has
reserved 2,077,433 shares for future issuance to certain
employees under its stock option plan. The options may be
exercised at prices ranging from $0.51 per share to
$11.50 per share at any time, in whole or part, within ten
years after the date of grant. Options available for grant
totaled 15,569 at December 31, 2003, 41,305 at
December 31, 2002 and 65,743 at December 31, 2001.

A summary of the status of the Companys
stock option plan as of December 31, 2003, 2002 and 2001,
and changes during the years ending on those dates is presented
below:

|                                 |  |        |           |          |  |        |      |          |  |        |           |          |  |   |      |  |  |  |           |   |  |   |      | 
|-------------------------------- |  | ------ | --------- | -------- |  | ------ | ---- | -------- |  | ------ | --------- | -------- |  | - | ---- |  |  |  | --------- | - |  | - | ---- | 
|                                 |  |        |           |          |  |       
|                                 |  | 2003   |           | 2002     |  | 2001  
|                                 |  |        |           |          |  |       
|                                 |  |        |           | Weighted |  |        |      | Weighted |  |        |           | Weighted
|                                 |  |        |           | Average  |  |        |      | Average  |  |        |           | Average 
|                                 |  |        |           | Exercise |  |        |      | Exercise |  |        |           | Exercise
|Options                          |  | Shares |           | Price    |  | Shares |      | Price    |  | Shares |           | Price   
|                                 |  |        |           |          |  |        |      |          |  |        |           |         
|Outstanding at beginning of year |  |        | 1,953,867 |          |  | $      | 4.70 |          |  |        | 1,785,835 |          |  | $ | 4.86 |  |  |  | 1,611,359 |   |  | $ | 5.22 | 
|Granted                          |  |        | 198,754   |          |  | $      | 2.95 |          |  |        | 244,250   |          |  | $ | 3.76 |  |  |  | 347,581   |   |  | $ | 3.73 | 
|Exercised                        |  |        | (54,773   | )        |  | $      | 4.18 |          |  |        | (8,747    | )        |  | $ | 0.51 |  |  |  | (11,111   | ) |  | $ | 4.27 | 
|Forfeited                        |  |        | (20,415   | )        |  | $      | 4.51 |          |  |        | (67,471   | )        |  | $ | 6.23 |  |  |  | (161,994  | ) |  | $ | 6.81 | 
|                                 |  |        |           |          |  |        |      |          |  |        |           |          |  |   |      |  |  |  |           |   |  |   |      | 
|Outstanding at end of year       |  |        | 2,077,433 |          |  | $      | 4.70 |          |  |        | 1,953,867 |          |  | $ | 4.70 |  |  |  | 1,785,835 |   |  | $ | 4.86 | 
|                                 |  |        |           |          |  |        |      |          |  |        |           |          |  |   |      |  |  |  |           |   |  |   |      | 
|Options exercisable at year end  |  |        | 1,606,957 |          |  | $      | 4.88 |          |  |        | 1,373,540 |          |  | $ | 5.05 |  |  |  | 1,127,364 |   |  | $ | 5.34 | 
|                                 |  |        |           |          |  |        |      |          |  |        |           |          |  |   |      |  |  |  |           |   |  |   |      | 

F-22



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
stock options outstanding at December 31, 2003:

|                         |  |                     |           |                     |  |                  |     |             |  |                  |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------------------- |  | ---------------- | --- | ----------- |  | ---------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  |                     |           |                    
|                         |  | Options Outstanding |           | Options Exercisable
|                         |  |                     |           |                    
|                         |  |                     |           | Weighted-Average    |  |                  |     |            
|                         |  | Number              |           | Remaining           |  |                  |     | Number      |  |                 
|                         |  | Outstanding         |           | Contractual Life    |  | Weighted-Average |     | Exercisable |  | Weighted-Average
|Range of Exercise Prices |  | at 12/31/03         |           | (in Years)          |  | Exercise Price   |     | at 12/31/03 |  | Exercise Price  
|                         |  |                     |           |                     |  |                  |     |             |  |                 
|$ 0.51                   |  |                     | 73,575    |                     |  |                  | 0.2 |             |  | $                | .51   |  |  |  | 73,575    |  |  | $ | .51   | 
|$ 2.70   3.76           |  |                     | 785,414   |                     |  |                  | 8.0 |             |  |                  | 3.45  |  |  |  | 360,152   |  |  |   | 3.64  | 
|$ 4.25   5.81           |  |                     | 1,131,970 |                     |  |                  | 5.0 |             |  |                  | 5.21  |  |  |  | 1,086,756 |  |  |   | 5.25  | 
|$ 6.75   9.13           |  |                     | 45,016    |                     |  |                  | 4.8 |             |  |                  | 7.63  |  |  |  | 45,016    |  |  |   | 7.63  | 
|$10.29  11.50           |  |                     | 41,458    |                     |  |                  | 3.5 |             |  |                  | 10.88 |  |  |  | 41,458    |  |  |   | 10.88 | 
|                         |  |                     |           |                     |  |                  |     |             |  |                  |       |  |  |  |           |  |  |   |       | 
|$ 0.51  11.50           |  |                     | 2,077,433 |                     |  |                  | 5.9 |             |  | $                | 4.55  |  |  |  | 1,606,957 |  |  | $ | 4.88  | 
|                         |  |                     |           |                     |  |                  |     |             |  |                  |       |  |  |  |           |  |  |   |       | 

Substantially all of the options granted by the
Company vest over a four year period, 25% after one year and the
remaining 75% ratably over the following 36 month period.
All of the options are granted at the closing price on the date
of the grant.



|          |         
|--------- | --------
|Note 15  | Warrants

At December 31, 2003, the Company had the
following warrants outstanding to purchase shares of common
stock:

|         |       |          |       |                |  |               |         |                |  |               |   |                |  |  |         |         |  |  |       |       |  |  |         |         | 
|-------- | ----- | -------- | ----- | -------------- |  | ------------- | ------- | -------------- |  | ------------- | - | -------------- |  |  | ------- | ------- |  |  | ----- | ----- |  |  | ------- | ------- | 
|         |       |          |       | Balance        |  | Net           |         | Balance        |  | Net           |   | Balance       
|         |       |          |       | Outstanding at |  | Reductions to |         | Outstanding at |  | Reductions to |   | Outstanding at
|         |       | Exercise |       | December 31,   |  | Outstanding   |         | December 31,   |  | Outstanding   |   | December 31,  
|         |       | Price    |       | 2001           |  | Warrants      |         | 2002           |  | Warrants      |   | 2003          
|         |       |          |       |                |  |               |         |                |  |               |   |               
|Warrants |       | $        | 17.15 |                |  |               | 3,791   |                |  |               | 0 |                |  |  | 3,791   |         |  |  | 3,791 |       |  |  | 0       |        
|Warrants |       | $        | 8.88  |                |  |               | 180,529 |                |  |               | 0 |                |  |  | 180,529 |         |  |  | 0     |       |  |  | 180,529 |        
|         |       |          |       |                |  |               |         |                |  |               |   |                |  |  |         |         |  |  |       |       |  |  |         |        
|         | Total |          |       |                |  |               |         | 184,320        |  |               |   | 0              |  |  |         | 184,320 |  |  |       | 3,791 |  |  |         | 180,529 | 
|         |       |          |       |                |  |               |         |                |  |               |   |                |  |  |         |         |  |  |       |       |  |  |         |        

At December 31, 2002, all the Companys
warrants outstanding to purchase shares of common stock were
exercisable. No warrants were exercised during 2003; 3,791
warrants expired during 2003.



|          |                                    
|--------- | -----------------------------------
|Note 16  | Employee 401K Deferred Savings Plan

The Company has established a salary deferral
savings program pursuant to IRS Code Section 401(k) (the
401(k) Plan) for qualified employees. Under this
plan, employees may contribute a percentage of their pre-tax
earnings to the 401(k) Plan. Effective July 1, 1998, the
Company amended the 401(k) Plan to permit matching Company
contributions. Employee contributions up to the lesser of
$12,000 or 6% of pre-tax earnings made after one year of service
may be matched by a Company contribution equal to 50% of the
employees contribution upon Board approval. Matching
contributions are made in the Companys common stock and
begin vesting 20% per year following the completion of one
year of service. Company expense related to the 401(k) Plan
totaled approximately $470,000 in 2003 and approximately
$439,000 in 2002.



|          |                     
|--------- | --------------------
|Note 17  | Shareholders Equity

Preferred Stock:The
Company has 3 million shares of preferred stock authorized
of which 200,000 shares have been designated Series A
participating Preferred Stock. No shares of preferred stock were
outstanding as of December 31, 2003 and December 31,
2002.

F-23



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In July 1997, the Companys Board of
Directors adopted a Stockholder Rights Plan (Plan)
in which preferred stock purchase rights were distributed as a
dividend at the rate of one preferred share purchase right (a
Right) for each outstanding share of common stock
held by stockholders of record on July 21, 1997. The Rights
are designed to guard against partial tender offers and other
abusive tactics that might be used in an attempt to gain control
of the Company or to deprive stockholders of their interest in
the long-term value of the Company. The Rights will be
exercisable only if a person or group acquires 15% or more of
the Companys common stock (subject to certain exceptions
stated in the Plan) or announces a tender offer, the
consummation of which would result in ownership by a person or
group of 15% or more of the Companys common stock. The
Rights will expire on July 20, 2007.

Dividends:The
Companys ability to pay or declare dividends is subject to
the terms of certain of its credit facilities.



|          |                  
|--------- | -----------------
|Note 18  | Share Repurchases

On May 31, 2000, the Companys Board of
Directors authorized a stock repurchase program to purchase up
to $7,500,000 of the Companys Common Stock. The Company
did not repurchase stock during 2003. As of December 31,
2003, 1,200,254 shares had been repurchased under the
program for an aggregate amount of $5.3 million.

Note 19  Income
Taxes

The following table presents the current and
deferred provision for federal and state income taxes for the
years ended December 31, 2003, 2002 and 2001:

|          |         |                |       |       |       |       |   |      |       |     |   |       |       |       | 
|--------- | ------- | -------------- | ----- | ----- | ----- | ----- | - | ---- | ----- | --- | - | ----- | ----- | ----- | 
|          |         | 2003           |       | 2002  |       | 2001 
|          |         |                |       |       |       |      
|          |         |               
|          |         | (In thousands)
|Current:  |         |                |       |       |       |       |   |      |       |     |   |      
|          | Federal |                | $     | 347   |       |       | $ | 65   |       |     | $ | 256   |      
|          | State   |                |       | 377   |       |       |   | 569  |       |     |   | 288   |      
|          |         |                |       |       |       |       |   |      |       |     |   |      
|          |         |                | Total |       |       | 724   |   |      |       | 634 |   |       |       | 544   | 
|          |         |                |       |       |       |       |   |      |       |     |   |      
|Deferred: |         |                |       |       |       |       |   |      |       |     |   |      
|          | Federal |                |       | 2,680 |       |       |   | 900  |       |     |   | 2,105 |      
|          | State   |                |       | 500   |       |       |   | (199 | )     |     |   | 412   |      
|          |         |                |       |       |       |       |   |      |       |     |   |      
|          |         |                | Total |       |       | 3,180 |   |      |       | 701 |   |       |       | 2,517 | 
|          |         |                |       |       |       |       |   |      |       |     |   |      
|          |         | Combined Total |       | $     | 3,904 |       |   | $    | 1,335 |     |   | $     | 3,061 |      
|          |         |                |       |       |       |       |   |      |       |     |   |      

The provision for income taxes differs from the
amount that would result from applying the federal statutory
rate as follows for the years ended December 31, 2003, 2002
and 2001:

|                                          |  |      |    |      |  |      |    |   |  |  |    |  
|----------------------------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                          |  | 2003 |    | 2002 |  | 2001
|                                          |  |      |    |      |  |     
|Statutory regular federal income tax rate |  |      | 34 | %    |  |      | 34 | % |  |  | 34 | %
|State taxes (net of federal benefit)      |  |      | 6  |      |  |      | 6  |   |  |  | 6  |  
|Other                                     |  |      | 0  |      |  |      | 1  |   |  |  | 1  |  
|                                          |  |      |    |      |  |      |    |   |  |  |    |  
|                                          |  |      | 40 | %    |  |      | 41 | % |  |  | 41 | %
|                                          |  |      |    |      |  |      |    |   |  |  |    |  

F-24



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The components of the deferred income tax
liability as of December 31, 2003 and 2002 are as follows:

|                                               |  |                |         |      |  |   |         |  
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                               |  | 2003           |         | 2002
|                                               |  |                |         |     
|                                               |  |               
|                                               |  | (In thousands)
|Property and equipment                         |  | $              | 1,416   |      |  | $ | 1,691   |  
|Accrued liabilities                            |  |                | 857     |      |  |   | 788     |  
|Allowance for credit losses                    |  |                | 998     |      |  |   | 746     |  
|Net operating losses                           |  |                | 7,410   |      |  |   | 9,686   |  
|Credit carryover                               |  |                | 223     |      |  |   | 223     |  
|State taxes                                    |  |                | 1,413   |      |  |   | 1,245   |  
|                                               |  |                |         |      |  |   |         |  
|Deferred tax asset                             |  |                | 12,317  |      |  |   | 14,379  |  
|Gain on sale of Contracts                      |  |                | (32,411 | )    |  |   | (31,532 | )
|Capitalized costs                              |  |                | (1,325  | )    |  |   | (1,050  | )
|Unrealized (loss) in credit enhancement assets |  |                | (9,166  | )    |  |   | (2,375  | )
|                                               |  |                |         |      |  |   |         |  
|Deferred tax liability                         |  |                | (42,902 | )    |  |   | (34,957 | )
|                                              
|Net deferred tax liability                     |  | $              | (30,585 | )    |  | $ | (20,578 | )
|                                               |  |                |         |      |  |   |         |  

As of December 31, 2003, the Company had net
operating loss carryforwards for federal and state purposes of
approximately $19.0 million and $16.4 million,
respectively. These carryforwards will begin to expire in 2020
and 2012 for federal and state taxes respectively.

Pursuant to sections 382 and 383 of the Internal
Revenue Code, the utilization of net operating loss and tax
credit carryforwards may be subject to substantial limitations
if ownership changes occur.

Note 20  Fair Value of
Financial Instruments

The estimated fair value of financial instruments
have been determined by the Company, using available market
information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.

The following methods and assumptions were used
to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:

Cash and Cash
Equivalents:The carrying amount
approximates fair value because of the short maturity of those
investments.

Restricted Cash:The
carrying amount approximates fair value because of the short
maturity of those investments.

Warehouse Borrowings, Residual Lines and
Subordinated Financing:The fair value
of the Companys debt is estimated based upon the quoted
market prices for the same or similar issues or on the current
rates offered to the Company for debt of the same remaining
maturities and characteristics.

Contracts Held for
Sale:The fair value of Contracts held
for sale is based on the estimated proceeds expected on
securitization of the Contracts held for sale.

Contracts Held for
Investment:The fair value of
Contracts held for investment is based on the estimated proceeds
expected on securitization of the Contracts held for investment.

F-25



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##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Credit Enhancement
Assets:The carrying amount is
accounted for at an estimated fair value which is calculated by
discounting the excess spread using a current market discount
rate.

Hedging.The fair
value of the Companys outstanding forward agreements are
estimated based on current rates offered to the Company for
forward agreements with similar terms and conditions.

The estimated fair values of the Companys
financial instruments are as follows at December 31:

|                              |  |          |        |               |  |          |        |       |  |   |        |   |  |   |        |  
|----------------------------- |  | -------- | ------ | ------------- |  | -------- | ------ | ----- |  | - | ------ | - |  | - | ------ | -
|                              |  |          |        |              
|                              |  | 2003     |        | 2002         
|                              |  |          |        |              
|                              |  | Carrying |        | Fair          |  | Carrying |        | Fair 
|                              |  | Amount   |        | Value         |  | Amount   |        | Value
|                              |  |          |        |               |  |          |        |      
|                              |  |          |        |               |  |         
|                              |  |          |        | (In millions) |  |         
|Cash and cash equivalents     |  | $        | 15.4   |               |  | $        | 15.4   |       |  | $ | 8.2    |   |  | $ | 8.2    |  
|Restricted cash               |  | $        | 0.5    |               |  | $        | 0.5    |       |  | $ | 3.9    |   |  | $ | 3.9    |  
|Contracts held for sale       |  | $        | 188.7  |               |  | $        | 198.7  |       |  | $ | 170.5  |   |  | $ | 184.6  |  
|Contracts held for investment |  | $        | 11.3   |               |  | $        | 11.8   |       |  | $ | 8.4    |   |  | $ | 8.9    |  
|Credit enhancement assets     |  | $        | 182.3  |               |  | $        | 182.3  |       |  | $ | 183.6  |   |  | $ | 183.6  |  
|Warehouse borrowings          |  | $        | (183.0 | )             |  | $        | (183.0 | )     |  | $ | (166.0 | ) |  | $ | (166.0 | )
|Residual lines                |  | $        | (30.7  | )             |  | $        | (30.7  | )     |  | $ | (49.1  | ) |  | $ | (49.1  | )
|Subordinated financing        |  | $        | (51.1  | )             |  | $        | (51.1  | )     |  | $ | (27.4  | ) |  | $ | (27.4  | )
|Hedging Forward agreements    |  | $        | (0.0   | )             |  | $        | (0.0   | )     |  | $ | (1.5   | ) |  | $ | (1.2   | )



|          |                           
|--------- | --------------------------
|Note 21  | Related Party Transactions

The Company has an unsecured note receivable from
a certain officer and shareholder in the amount of $175,000.
Principal and accrued interest under the terms of the note are
due on December 20, 2004.

F-26



---



##### Table of Contents



ONYX ACCEPTANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 22  Quarterly Results of
Operations (Unaudited)

|     |                                               |                                       |   |         |  |              |   |             |   |  |   |        |  |  |   |       | 
|---- | --------------------------------------------- | ------------------------------------- | - | ------- |  | ------------ | - | ----------- | - |  | - | ------ |  |  | - | ----- | 
|     |                                               |                                      
|     |                                               | Three Months Ended                   
|     |                                               |                                      
|     |                                               | March 31                              |   | June 30 |  | September 30 |   | December 31
|     |                                               |                                       |   |         |  |              |   |            
|     |                                               |                                      
|     |                                               | (In thousands, except per share data)
|2003 |                                               |                                       |   |         |  |              |   |             |   |  |   |        |  |  |   |      
|     | Interest income                               |                                       | $ | 10,639  |  |              | $ | 10,831      |   |  | $ | 8,670  |  |  | $ | 9,326 | 
|     | Interest expense-warehouse and residual lines |                                       |   | 3,499   |  |              |   | 3,650       |   |  |   | 3,916  |  |  |   | 3,671 | 
|     | Net interest income                           |                                       |   | 7,140   |  |              |   | 7,181       |   |  |   | 4,754  |  |  |   | 5,655 | 
|     | Provision for credit losses                   |                                       |   | 858     |  |              |   | 396         |   |  |   | 967    |  |  |   | 995   | 
|     | Income before income taxes                    |                                       |   | 1,252   |  |              |   | 1,575       |   |  |   | 3,142  |  |  |   | 3,653 | 
|     | Income taxes                                  |                                       |   | 520     |  |              |   | 654         |   |  |   | 1,304  |  |  |   | 1,426 | 
|     | Net income                                    |                                       |   | 732     |  |              |   | 921         |   |  |   | 1,838  |  |  |   | 2,227 | 
|     | Net income per common share (Basic)           |                                       | $ | 0.14    |  |              | $ | 0.18        |   |  | $ | 0.36   |  |  | $ | 0.44  | 
|     | Net income per common share (Diluted)         |                                       | $ | 0.14    |  |              | $ | 0.17        |   |  | $ | 0.31   |  |  | $ | 0.36  | 
|    
|2002 |                                               |                                       |   |         |  |              |   |             |   |  |   |        |  |  |   |      
|     | Interest income                               |                                       | $ | 8,308   |  |              | $ | 9,752       |   |  | $ | 10,145 |  |  | $ | 9,786 | 
|     | Interest expense-warehouse and residual lines |                                       |   | 3,633   |  |              |   | 4,454       |   |  |   | 4,070  |  |  |   | 3,633 | 
|     | Net interest income                           |                                       |   | 4,675   |  |              |   | 5,299       |   |  |   | 6,075  |  |  |   | 6,153 | 
|     | Provision for credit losses                   |                                       |   | 479     |  |              |   | (1,758      | ) |  |   | 818    |  |  |   | 453   | 
|     | Income before income taxes                    |                                       |   | 699     |  |              |   | 621         |   |  |   | 574    |  |  |   | 1,324 | 
|     | Income taxes                                  |                                       |   | 290     |  |              |   | 257         |   |  |   | 238    |  |  |   | 550   | 
|     | Net income                                    |                                       |   | 409     |  |              |   | 364         |   |  |   | 336    |  |  |   | 774   | 
|     | Net income per common share (Basic)           |                                       | $ | 0.08    |  |              | $ | 0.07        |   |  | $ | 0.07   |  |  | $ | 0.15  | 
|     | Net income per common share (Diluted)         |                                       | $ | 0.08    |  |              | $ | 0.07        |   |  | $ | 0.07   |  |  | $ | 0.14  | 

The Company has elected to reclassify other
miscellaneous income from interest income into service fee
income for the prior quarters.

Note 23  Subsequent
Events

In the first quarter of 2004, the Company
securitized Contracts in the amount of $450.0 million. In
addition, the Company expanded its borrowing capacity under its
CDC CP Facility line to $300 million as described in
Note 8 above. The Company also executed a residual line
with Galleon Capital, LLC, as described in Note 9 above, in
the amount of $30.0 million.

F-27



---



##### Table of Contents



INDEX TO EXHIBITS

|                            |         |             |  |                                                                                                                                                                                                      |  |  |  | 
|--------------------------- | ------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|                            |         |             |  | Sequentially                                                                                                                                                                                        
|Exhibit                     |         |             |  | Numbered                                                                                                                                                                                            
|Number                      |         | Description |  | Page                                                                                                                                                                                                
|                            |         |             |  |                                                                                                                                                                                                     
|                            | 3.1     |             |  | Certificate of Incorporation of the Company(1)                                                                                                                                                       |  |  |  | 
|                            | 3.2     |             |  | Bylaws of the Company(1)                                                                                                                                                                             |  |  |  | 
|10.1 through 10.145 omitted |         |             |  |                                                                                                                                                                                                     
|                            | 10.146 |             |  | Onyx Acceptance Corporation 1996 Stock Option/
    Stock Issuance Plan (as Amended and Restated April 23, 1998
    and subsequently Amended and Restated March 31, 2000 and
    December 30, 2003).* |  |  |  | 
|                            | 14.1    |             |  | Onyx Acceptance Corporation Code of Ethics*                                                                                                                                                          |  |  |  | 
|                            | 21.1    |             |  | Subsidiaries of the Registrant*                                                                                                                                                                      |  |  |  | 
|                            | 23.1    |             |  | Consent of Independent Certified Public
    Accountants  Grant Thornton LLP.*                                                                                                                       |  |  |  | 
|                            | 23.2    |             |  | Consent of Independent
    Accountants-PriceWaterhouseCoopers LLP.*                                                                                                                                  |  |  |  | 
|                            | 31.1    |             |  | Certification pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002.*                                                                                                                        |  |  |  | 
|                            | 31.2    |             |  | Certification pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002.*                                                                                                                        |  |  |  | 
|                            | 32.1    |             |  | Certification of the President, CEO and Principal
    Executive Officer pursuant to 18 U.S.C. Section 1350
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.*            |  |  |  | 
|                            | 32.2    |             |  | Certification of the EVP, CFO and Principal
    Financial Officer pursuant to 18 U.S.C. Section 1350
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.*                  |  |  |  | 



---



| |   |                
| | - | ---------------
| | * | Filed herewith.



|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference from the Companys
    Registration Statement on Form S-1 (Registration
    No. 333-00680).