United States Securities and Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)

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

                  For the quarterly period ended March 31, 2002

                                       or

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Transition Period from _____ to _____

                         Commission File Number: 0-26412

                          UNION ACCEPTANCE CORPORATION
             (Exact name of registrant as specified in its charter)


                  Indiana                                    35-1908796
 (State or other jurisdiction of incorporation   (I.R.S. Employer Identification
  or organization)                                Number)



 250 N. Shadeland Avenue, Indianapolis, IN                     46219
(Address of principal executive office)                      (Zip Code)



                                 (317) 231-6400
              (Registrant's telephone number, including area code)

     Indicate  by check  mark  whether  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
filing requirements for the past 90 days.

Yes (X)           No ( )

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

                   Class                             Outstanding at May 13, 2002

     Common Stock, without par value                   30,958,380


<PAGE>

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                      INDEX


                                                                            Page
Part I.  FINANCIAL INFORMATION

Item 1.  Consolidated Condensed Financial Statements (unaudited):

         Consolidated Condensed Balance Sheets as of
         March 31, 2002 and December 31, 2001                                  3

         Consolidated Condensed Statements of Earnings (Loss)
         for the Quarter Ended March 31, 2002 and 2001                         4

         Consolidated Condensed Statements of Cash Flows for the
         Quarter Ended March 31, 2002 and 2001                                 5

         Consolidated Condensed Statement of Shareholders' Equity for the
         Quarter Ended March 31, 2002                                          6

         Notes to Consolidated Condensed Financial Statements                  7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                  11

Item 3.  Quantitative and Qualitative Disclosures about Market Risk           26

Part II. OTHER INFORMATION                                                    27

         Signatures                                                           28

<PAGE>

<TABLE>
<CAPTION>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
                                                                      March 31,           December 31,
Assets                                                                  2002                  2001
                                                                  ------------------    ------------------
<S>                                                                        <C>                   <C>
Cash and cash equivalents                                          $         19,468      $         14,244
Restricted cash                                                               3,950                 4,650
Receivables held for sale, net                                               90,196               176,511
Retained interest in securitized assets                                     199,481               198,251
Accrued interest receivable                                                     612                 1,323
Property, equipment, and leasehold improvements, net                          8,183                 8,516
Other assets                                                                 33,642                33,661
                                                                  ------------------    ------------------

  Total Assets                                                     $        355,532      $        437,156
                                                                  ==================    ==================

Liabilities and Shareholders' Equity

Liabilities

Notes payable                                                      $         47,011      $        100,300
Term debt                                                                   111,333               133,000
Accrued interest payable                                                      1,860                 2,393
Amounts due to trusts                                                        19,481                18,610
Other payables and accrued expenses                                           6,454                 8,153
                                                                  ------------------    ------------------

  Total Liabilities                                                         186,139               262,456
                                                                  ------------------    ------------------

Commitments and Contingencies                                                      -                     -

Shareholders' Equity

Preferred Stock, without par value, authorized
   10,000,000 shares; none issued and outstanding                                 -                     -

Common Stock, without par value, authorized
   130,000,000 shares at March 31, 2002 and December 31, 2001;
   30,926,606 shares issued and outstanding at
   March 31, 2002 and December 31, 2001                                     145,374               145,374

Accumulated other comprehensive earnings, net of taxes                        2,070                   450
Retained earnings                                                            21,949                28,876
                                                                  ------------------    ------------------

   Total Shareholders' Equity                                               169,393               174,700
                                                                  ------------------    ------------------

   Total Liabilities and Shareholders' Equity                       $       355,532      $        437,156
                                                                  ==================    ==================
</TABLE>

See accompanying notes to consolidated condensed financial statements.


<PAGE>

<TABLE>
<CAPTION>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Earnings (Loss)
(Dollars in thousands, except share data)
(Unaudited)

                                                                                  Quarter Ended
                                                                                    March 31,
                                                                        -----------------------------------
                                                                             2002               2001
                                                                        ----------------   ----------------


<S>                                                                      <C>                <C>
Interest on receivables held for sale                                    $        5,771     $       10,727
Retained interest and other                                                       5,856              8,379
                                                                        ----------------   ----------------

   Total interest income                                                         11,627             19,106
Interest expense                                                                  4,301              8,903
                                                                        ----------------   ----------------

   Net interest margin                                                            7,326             10,203
Provision for estimated credit losses                                               962                300
                                                                        ----------------   ----------------
   Net interest margin after provision
     for estimated credit losses                                                  6,364              9,903

Gain (loss) on sales of receivables, net                                        (11,553)            12,880
Gain (loss) on interest rate derivatives on securitized receivables                (976)           (10,475)
Gain (loss) on interest rate derivatives on held for sale receivables              (404)             3,122
Servicing fee income                                                              6,802              7,805
Late charges and other fees                                                       2,262              1,924
                                                                        ----------------   ----------------

  Other revenues                                                                 (3,869)            15,256
                                                                        ----------------   ----------------

Salaries and benefits                                                             7,407              8,814
Other expenses                                                                    5,972              6,017
                                                                        ----------------   ----------------

  Total operating expenses                                                       13,379             14,831
                                                                        ----------------   ----------------

Earnings (loss) before provision (benefit) for income taxes                     (10,884)            10,328
Provision (benefit) for income taxes                                             (3,957)             3,794
                                                                        ----------------   ----------------

  Net earnings (loss)                                                    $       (6,927)    $        6,534
                                                                        ================   ================

  Net earnings (loss) per common share (basic and diluted)               $        (0.22)    $         0.49
                                                                        ================   ================

Basic weighted average number of common
  shares outstanding                                                         30,926,606         13,294,656

Dilutive effect of common stock options                                               -              3,826
                                                                        ----------------   ----------------

Diluted weighted average number of common
  shares outstanding                                                         30,926,606         13,298,482
                                                                        ================   ================
</TABLE>

See accompanying notes to consolidated condensed financial statements.


<PAGE>

<TABLE>
<CAPTION>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
                                                                                        Quarter Ended
                                                                                          March 31,
                                                                            ----------------------------------------
                                                                                  2002                  2001
                                                                            ------------------    ------------------
<S>                                                                          <C>                   <C>
Cash flows from operating activities:
   Net earnings (loss)                                                       $         (6,927)     $          6,534
     Adjustments to reconcile net earnings (loss) to net cash
       from operating activities:
         Purchases of receivables held for sale                                      (209,398)             (336,639)
         Principal collections on receivables held for sale,
           net of securitized receivables repurchased                                  (7,763)               18,713
         Dealer premiums paid, net on receivables held for sale                        (4,088)              (10,441)
         Proceeds from securitization of receivables held for sale                    300,000               430,003
         Gain on sales of receivables held for sale                                    (7,953)              (19,408)
         Impairment of retained interest in securitized assets                         18,836                 2,795
         Accretion of discount on retained interest in securitized assets              (5,773)               (8,148)
         Provision for estimated credit losses                                            962                   300
         Amortization and depreciation                                                  1,190                 1,353
         Restricted cash                                                                  700                 1,564
         Other assets and accrued interest receivable                                    (384)                  310
         Amounts due to trusts                                                            871                 2,223
         Other payables and accrued expenses                                           (3,399)                1,530
                                                                            ------------------    ------------------
                 Net cash provided by operating activities                             76,874                90,689
                                                                            ------------------    ------------------

Cash flows from investing activities:
   Collections on retained interest in securitized assets                               7,688                24,824
   Change in spread accounts                                                           (4,258)              (11,277)
   Capital expenditures                                                                  (109)                 (318)
                                                                            ------------------    ------------------
                 Net cash provided by investing activities                              3,321                13,229
                                                                            ------------------    ------------------

Cash flows from financing activities:
   Principal payment on term debt                                                     (21,667)                    -
   Net change in notes payable                                                        (53,289)             (105,035)
   Payment of borrowing fees                                                              (15)                    -
                                                                            ------------------    ------------------
                 Net cash used in financing activities                                (74,971)             (105,035)
                                                                            ------------------    ------------------

Change in cash and cash equivalents                                                     5,224                (1,117)

Cash and cash equivalents, beginning of period                                         14,244                 6,446
                                                                            ------------------    ------------------

Cash and cash equivalents, end of period                                     $         19,468      $          5,329
                                                                            ==================    ==================

Supplemental disclosures of cash flow information:
Income taxes paid                                                            $          2,187      $            429
Interest paid                                                                $          5,324      $          8,101

</TABLE>

See accompanying notes to consolidated condensed financial statements.

<PAGE>

<TABLE>
<CAPTION>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Quarter Ended March 31, 2002
(Dollars in thousands, except per share data)
(Unaudited)

                                                                        Accumulated
                                           Number of                       Other                          Total
                                         Common Stock      Common      Comprehensive      Retained    Shareholders'
                                         Outstanding        Stock         Earnings        Earnings        Equity
                                       ----------------  ------------ -----------------  ------------ ---------------
<S>                                        <C>           <C>              <C>              <C>           <C>
Balance at December 31, 2001               30,926,606    $  145,374       $       450      $  28,876     $   174,700

Comprehensive loss:
  Net loss                                          -             -                 -         (6,927)         (6,927)
  Net unrealized gain on retained
    interest in securitized assets                  -             -             2,551              -           2,551
  Income taxes related to unrealized
    gain in securitized assets                      -             -              (931)             -            (931)
                                                                                                        -------------
Total comprehensive loss                                                                                      (5,307)

                                        -------------   ------------     -------------    -----------   -------------
Balance at March 31, 2002                  30,926,606    $  145,374       $     2,070      $  21,949     $   169,393
                                        =============   ============     =============    ===========   =============

</TABLE>

See accompanying notes to consolidated condensed financial statements.



<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended March 31, 2002 and 2001
(Unaudited)

Note 1 - Basis of Presentation

The  foregoing   consolidated  condensed  financial  statements  are  unaudited.
However,  in the opinion of  management,  all  adjustments  necessary for a fair
presentation of the results of the interim period  presented have been included.
All  adjustments are of a normal and recurring  nature.  Results for any interim
period are not  necessarily  indicative  of results to be expected  for the year
ending  December 31,  2002.  The  consolidated  condensed  financial  statements
include  the  accounts  of  Union   Acceptance   Corporation   ("UAC")  and  its
subsidiaries (collectively, the "Company").

The consolidated  condensed interim  financial  statements have been prepared in
accordance  with Form 10-Q  specifications  and  therefore  do not  include  all
information  and footnotes  normally  shown in annual  financial  statements.  A
summary of the Company's  significant  accounting policies is set forth in "Note
1" of the "Notes to Consolidated  Financial  Statements" in the Company's Annual
Report on Form 10-K for the six month transition period ended December 31, 2001.
Certain  amounts for the prior period have been  reclassified  to conform to the
current period presentation.

Note 2 - Retained Interest in Securitized Assets

Retained Interest in Securitized Assets ("Retained  Interest") is recorded as an
"available  for sale"  security  and is recorded at fair value.  The  associated
unrealized gains and losses  attributable to changes in fair value net of income
taxes are recorded as a separate component of shareholders' equity ("accumulated
other  comprehensive  earnings").  Other than temporary  impairment  charges are
recorded through earnings as a component of gain on sale of receivables, net.

The average of the interest rates  received on receivables  exceeds the interest
rates paid on securities  issued in the  securitization.  Accordingly,  Retained
Interest is a significant asset of the Company. In determining the fair value of
the Retained Interest,  the Company must estimate the future prepayments,  rates
of gross credit  losses and credit loss  severity,  and  delinquencies,  as they
impact the amount and timing of the estimated cash flows.

During the quarter ended June 30, 2001, the Company  implemented new loss curves
which are based on the Company's  relational risk management database which goes
back  to  1992  and  currently  incorporates   approximately  670,000  consumers
representing over $10.0 billion in acquired receivables. The Company continually
assesses the adequacy of its retained interest cash flow model and if necessary,
adjusts its retained interest cash flow model in the following areas:

     o    credit loss assumptions
     o    interest collections assumptions
     o    prepayment assumptions
     o    cash accounts interest rate assumptions
     o    discount rate assumptions

During the quarter ended March 31, 2002,  the Company  recorded an $18.8 million
charge for the revaluation of Retained Interest, and this charge is reflected as
an other than temporary  impairment in the accompanying  Consolidated  Condensed
Statement  of Earnings  (Loss).  Approximately  $23.0  million of the charge for
other than temporary  impairment  related to increased loss rate estimates on 12
pools to  reflect  higher  losses the pools had  experienced  due  primarily  to
recessionary trends. In addition,  the Company changed its method of determining
a market discount rate to use in its valuation of Retained Interest. This change
in estimate increased the fair value of Retained Interest by $12.1 million as of
March  31,  2002,  and had the  effect of  reducing  the  other  than  temporary
impairment  for the quarter ended March 31, 2002 by $7.7 million.  Each estimate
used in the Retained Interest valuation is discussed in detail below.

<PAGE>


Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended March 31, 2002 and 2001
 (Unaudited)

Credit loss  assumptions - The Company  estimates gross credit losses and credit
loss severity using available  historical  loss data for comparable  receivables
and the specific  characteristics  of the receivables  purchased by the Company.
The  Company  implemented  new loss  curves in June 2001  which are based on the
Company's  relational  risk  management  database  which  dates back to 1992 and
incorporates  approximately 670,000 consumers representing over $10.0 billion in
acquired  receivables.  As of March 31,  2002,  the  Company  determined  it was
necessary to further adjust the expected loss rates on most pools to reflect the
loss  experience  in recent months which more fully  incorporate  the effects of
recent  economic  events and trends.  Although the existing  loss curves are the
basis for the changes in the expected loss rates, the Company also considers its
exposure  to  credit  losses in light of  current  delinquency  and loss  rates,
consumer  bankruptcy trends, and recessionary  economic trends and other events.
Except for the one Tier II pool,  the Company  used net credit loss  assumptions
ranging from 4.50% to 8.11% as a percentage  of the original  principal  balance
over the life of the  receivables to value Retained  Interest at March 31, 2002.
See the pool specific net credit loss assumptions in "Item 2 - Asset Quality."

Interest  collections  assumptions - As a result of changes in  delinquency  and
credit  loss  rates  and the  overall  condition  in the  economy,  the  Company
periodically  reviews  the impact on expected  future  interest  collections  on
securitized receivables.

Prepayment  assumptions  -  The  Company  estimates  prepayments  by  evaluating
historical  prepayment  performance of comparable  receivables and the impact of
events and trends in the  economy.  The  Company  utilizes  a  prepayment  curve
whereby the annual prepayment rate increases as the pool ages. Annual prepayment
rates within the curve range from 26.75% to 36.00% at March 31, 2002.

Cash accounts  interest rate assumptions - The Company reviews the current yield
on its cash and spread accounts to the yields originally  expected.  The current
economic and interest rate  environment is  significantly  different than it was
when most of the pools were  securitized.  Accordingly,  a forward interest rate
curve as of the balance  sheet date was  incorporated  into the cash flow models
which represents future yield expectations on such accounts.

Discount rate  assumptions - The Company  determines the estimated fair value of
its Retained  Interest by discounting  the expected cash flows released from the
Trust (the cash out method) using discount  rates which the Company  believes is
commensurate  with the risks involved.  During the quarter ended March 31, 2002,
the Company  changed its method of determining a market  discount rate to use in
its  valuation  of  Retained  Interest  from one that  primarily  considers  the
remaining  duration  of  the  cash  flows  to  a  methodology  that  takes  into
consideration  the  components of Retained  Interest (i.e.  spread  accounts and
estimated  future cash flows).  The weighted  average  discount rate used in the
valuation of Retained Interest at March 31, 2002 was 9.71% compared to 10.87% at
December 31, 2001.

<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended March 31, 2002 and 2001
 (Unaudited)

Retained Interest in Securitized Assets is as follows (in thousands) at:

                                                         March 31,  December 31,
                                                           2002         2001
                                                        -----------  -----------
Estimated gross interest spread from receivables,
  net of estimated prepayments and fees                 $   287,781  $  285,207
Estimated dealer premium rebates refundable                   8,087       9,335
Estimated credit losses on securitized receivables         (155,773)   (152,985)
Accelerated principal (1)                                    28,823      28,823
Spread accounts                                              95,651      91,393
                                                        -----------  -----------
  Total estimated future undiscounted cash flows            264,569     261,773
Less:  Discount to present value                            (65,088)    (63,522)
                                                        -----------  -----------
  Total Retained Interest in Securitized Assets         $   199,481  $  198,251
                                                        ===========  ===========

Outstanding balance of securitized receivables serviced $ 2,748,399  $2,788,006
                                                        ===========  ===========
Estimated credit losses as a percentage of
  securitized receivables serviced                            5.67%       5.49%
Weighted average discount rate                                9.71%      10.87%
Weighted average original contract life (in months)           75.3        75.3

(1)  Accelerated principal provides for the initial use of excess cash to reduce
     the principal balance of the asset-backed securities.

Note 3 - Notes Payable

Notes Payable is comprised of borrowings on warehouse credit facilities of $47.0
million  and  $100.3   million  at  March  31,  2002  and   December  31,  2001,
respectively.

Note 4 - Residual Facility

As part of the  Company's  overall  term  debt  refinancing  plan,  the  Company
established,  through a subsidiary, a $55.0 million residual funding facility in
April 2002, to be secured upon funding by residual interests in securitizations.
The facility has a 364-day revolving feature and requires a $5.0 million reserve
account  when  funded.  The Company  has not yet chosen to utilize the  residual
facility.

Note 5 - Term Debt

On May 1, 2002,  the Company  completed a private  placement of $11.0 million of
12.00% unsecured Senior Notes due April 30, 2007 with interest payable quarterly
and principal due at maturity. The Company has the option to call the notes with
60 days  notice  given,  with a premium  due in the event of a call prior to the
fourth year of the note term.


Note 6 - Segment Information

The Company has a single reportable segment which is acquiring, securitizing and
servicing  retail  automobile  installment  sales contracts and installment loan
agreements originated by dealerships  affiliated with major domestic and foreign
automobile manufacturers,  nationally recognized rental car outlets and used car
superstores.  The single segment is based on management's  approach to operating
decisions, assessing performance and reporting financial information.


<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended March 31, 2002 and 2001
(Unaudited)


Note 7 - Earnings Per Share

Options to purchase  shares of common stock are excluded from the calculation of
Earnings Per Share ("EPS")  assuming  dilution when the exercise prices of these
options are greater than the average market price of the common share during the
period or when the shares are  considered to be  anti-dilutive  as a result of a
net loss.  In January  2002,  the Company  issued  25,000 stock  options with an
option price of $5.00 per share.  In March 2002, the Company issued 10,000 stock
options with an option price of $5.025 per share and an additional  10,000 stock
options with an option price of $5.150 per share.  The following chart indicates
the numbers of shares which were excluded from the  calculation  of EPS assuming
dilution for the periods indicated:


                                                    Quarter ended March 31,
                                              ----------------------------------
                                                   2002                 2001
                                              ---------------     --------------

     Anti-dilutive effect (1)                            555                  -
     Exercise price greater than fair value          941,621          1,006,443
                                              ---------------     --------------
                                                     942,176          1,006,443
                                              ===============     ==============



(1) The calculation for dilutive  earnings per share for the quarter ended March
31, 2002 was based upon the common shares as the effect of the outstanding stock
options  for  which the fair  value is  greater  than the  exercise  price  were
anti-dilutive due to the net loss for the quarter ended March 31, 2002.

<PAGE>

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

General

Acquisition Volume and Pricing. The Company currently acquires receivables in 40
states  from over 5,800  retail  automobile  dealers.  The  Company  focuses its
efforts on acquiring receivables on late model used and, to a lesser extent, new
automobiles  from purchasers who exhibit a favorable  credit profile ("Tier I").
The Company  acquired  $209.4 million of receivables for the quarter ended March
31, 2002, a 16.3%  increase over the quarter  ended  December 31, 2001 of $180.0
million,  and a 37.8%  decrease  from the  $336.6  million  acquired  during the
quarter  ended March 31,  2001.  During the quarter  ended  December  31,  2001,
acquisition  volume  declined  with the economic  downturn  and because  captive
finance  companies of the auto  manufacturers  were offering 0% financing on new
car sales to buyers  that  exhibited  credit  quality  similar to the  Company's
customers.  As the economy has improved and auto  manufacturers  have  generally
discontinued  the  longer  term  0%  financing,  receivable  acquisition  volume
steadily  increased during the quarter ended March 31, 2002, and the Company saw
a positive trend in monthly volume as total acquisitions grew from $36.1 million
in December  2001 to $55.1  million,  $73.9  million,  and $80.4  million in the
months of January 2002, February 2002, and March 2002, respectively. Acquisition
volume in April  2002 was $67.7  million,  which is down  from  March  2002 as a
result of increased  competition  and dealers  submitting  applications to their
funding  sources  utilizing  internet based  application  processes.  Management
intends to continue  to steadily  increase  receivable  acquisitions  within the
Company's  risk-based  pricing  parameters  as well as adding the  capability to
accept  applications  submitted  over the  internet  from its dealer  base.  See
"Discussion of Forward-Looking Statements."

Beginning  in the  December  2001  quarter,  the  Company  tightened  its credit
standards given the recessionary  economic  environment,  which resulted in well
priced and high quality  receivables  with record  credit  scores and a weighted
average  loan to value ratio which was in line with  management's  expectations.
Although  the  Company  did not achieve its  acquisition  volume  targets,  this
tightening has resulted in two quarters of high quality receivables individually
priced at or about the Company's  targeted  minimum  after-tax  return on assets
("ROA")  of  1.50%.  This  tightening  was  accomplished   mainly  by  virtually
eliminating the number of contracts  purchased with credit scores less than 625,
by more carefully scrutinizing  receivables with credit scores above 625, and by
appropriately  pricing the major risk parameters in the Company's  chosen credit
grade.  Management  believes  that these  actions will have  positive  long-term
effects on the Company,  although these steps have initially negatively impacted
volume.  On a national  level,  new car sales  leveled off in the quarter  ended
March 31,  2002  since most  manufacturers  generally  ended the longer  term 0%
financing programs. See "Discussion of Forward-Looking Statements."

Each  application  the  Company  approves  is  priced  utilizing  the  Company's
proprietary  risk-based  pricing  model.  The Company began  development  of its
risk-based  pricing  model in June 2000  with  major  enhancements  periodically
implemented beginning in February 2001. The Company is continually enhancing its
pricing  model,  having  implemented  its fifth  version in the  September  2001
quarter.  The  Company's  risk-based  pricing  model is  designed  to price  new
receivables on the basis of mathematical  indicators  derived from the Company's
historical  database and incorporating  those parameters most predictive of loss
and profitability into the Company's chosen credit grades. Therefore,  customers
with good credit quality and other favorable  characteristics  are rewarded with
lower rates and higher risk accounts are priced at higher rates.  The use of the
refined  risk-based  pricing  model has resulted in favorable  trends in factors
such as credit  scores,  while at the same time allowing the Company to purchase
receivables projected to meet its targeted minimum after-tax ROA of 1.50%. Since
November  2001, the Company has been  consistently  acquiring  receivables  with
average  credit scores of over 700. The average  credit score of newly  acquired
receivables  was 706 and 685 for the  quarters  ended  March 31,  2002 and 2001,
respectively.  As of  March  31,  2002  approximately  29%  of  the  outstanding
portfolio  was  priced  at  or  above  the  1.50%   after-tax   minimum  target,
representing receivable acquisitions since February 2001. The risk-based pricing
model  is  considered  a key  component  of the  Company's  efforts  to  enhance
profitability and reduce the volatility of future earnings. A number of factors,
including  loss estimates and the Company's  future results of operations,  will
affect whether it can achieve that targeted  performance level and the number of
years it may take it to do so. See "Discussion of Forward-Looking Statements."

Critical Accounting Policies

In preparing  consolidated  financial  statements in conformity  with accounting
principles  generally  accepted  in the United  States of  America  and with the
general  practices  of those in the consumer  finance  industry,  management  is
required to make estimates and assumptions  that affect the reported  amounts of
assets and liabilities at the date of the consolidated  financial statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ significantly from those estimates.  See "Discussion
of Forward-Looking Statements."


The  Company  believes  the  application  of its  accounting  policies  and  the
estimates inherently required therein, are reasonable and generally accepted for
companies in the indirect automobile finance industry. The Company believes that
the  following  represents  the more  critical  accounting  policies used in the
preparation of its consolidated financial statements.

Retained  Interest in  Securitized  Assets and Gain on Sale of Receivables - The
Company  acquires  receivables  with the  intention  of  reselling  them through
securitizations.  In  the  securitization  transactions,  the  Company  sells  a
portfolio of receivables to a wholly owned special  purpose  subsidiary  ("SPS")
which has been  established  for the limited purpose of buying and reselling the
Company's receivables. The SPS transfers the same receivables to a trust vehicle
(the   "Trust"),   which  issues   interest-bearing   asset-backed   securities.
"Asset-backed  securities" is a general  reference to securities that are backed
by financial assets such as automobile receivables. The securities are generally
sold to investors in the public market.  The Company provides credit enhancement
for the  benefit of the  investors  in  various  forms.  The credit  enhancement
utilized in the  securitization  during the quarter ended March 31, 2002, was in
the form of a specific cash account  ("Spread  Account") held by the Trust and a
surety  bond.  The Spread  Accounts  are  required by the  applicable  servicing
agreement to be maintained at specified levels.

At the closing of each  securitization,  the Company  allocates its basis in the
receivables  between the portion of the receivables  sold through the securities
and the portion of the receivables retained from the securitizations  ("Retained
Interest")  based on the relative  fair values of those  portions at the date of
the  sale.  The fair  value is based  upon the cash  proceeds  received  for the
receivables sold and the estimated fair value of the Retained Interest. Retained
Interest  consists of the discounted  estimated cash flows to be received by the
Company.  The  excess  of the cash  received  over the  basis  allocated  to the
receivables sold, less transaction costs, equals the gain on sale of receivables
recorded by the Company.

The Company receives base servicing fees for the servicing and collection of the
receivables.  The Company is entitled to the residual  cash flows from the trust
(Retained  Interest) that represent  collections on the receivables in excess of
the amounts required to pay the principal and interest on the securities  issued
in the  securitization,  the base  servicing fees and certain other fees such as
credit  enhancement fees. In general,  at the end of each collection period, the
aggregate cash  collections from the receivables are allocated first to the base
servicing fees,  then to the security  holders for interest at the interest rate
on  the  securities  plus  principal  as  defined  in the  applicable  servicing
agreement,  and finally to the credit  enhancement  fees.  If the amount of cash
required  for the above  allocations  exceeds  the amount  collected  during the
collection period,  the shortfall is drawn from the Spread Account.  If the cash
collected  during  the  period  exceeds  the  amount  necessary  for  the  above
allocations,  and the related Spread Account is not at the required  level,  the
excess cash  collected  is retained in the Spread  Account  until the  specified
level is achieved. The cash in the Spread Accounts is restricted from use by the
Company with such amounts included as a component of the Retained Interest. Once
the required  Spread Account level is achieved,  the excess is released from the
Trust to the Company.  Cash held in the various  Spread  Accounts is invested in
high quality  liquid  investment  securities,  as  specified  in the  applicable
servicing agreement.  The specified credit enhancement levels are defined in the
applicable servicing agreement as the Spread Account balance and the subordinate
class of notes  expressed  generally as a percentage of the original  collateral
principal balance.

<PAGE>

The  average of the  interest  rates  received  on the  receivables  exceeds the
interest rates paid on the securities issued in the securitization. Accordingly,
the Retained Interest described above is a significant asset of the Company.  In
determining the fair value of the Retained  Interest,  the Company must estimate
the future  prepayments,  rates of gross credit losses and credit loss severity,
and  delinquencies,  as they impact the amount and timing of the estimated  cash
flows.

During the quarter ended June 30, 2001, the Company  implemented new loss curves
which are based on the Company's  relational risk management database which goes
back  to  1992  and  currently  incorporates   approximately  670,000  consumers
representing over $10.0 billion in acquired receivables. The Company continually
assesses the adequacy of its retained interest cash flow model and if necessary,
adjusts its retained interest cash flow model in the following areas:

     o    credit loss assumptions
     o    interest collections assumptions
     o    prepayment assumptions
     o    cash accounts interest rate assumptions
     o    discount rate assumptions

During the quarter ended March 31, 2002,  the Company  recorded an $18.8 million
charge for the revaluation of Retained Interest, and this charge is reflected as
an other than temporary  impairment in the accompanying  Consolidated  Condensed
Statement  of Earnings  (Loss).  Approximately  $23.0  million of the charge for
other than temporary  impairment  related to increased loss rate estimates on 12
pools to  reflect  higher  losses the pools had  experienced  due  primarily  to
recessionary trends. In addition,  the Company changed its method of determining
a market discount rate to use in its valuation of Retained Interest. This change
in estimate increased the fair value of Retained Interest by $12.1 million as of
March  31,  2002,  and had the  effect of  reducing  the  other  than  temporary
impairment  for the quarter ended March 31, 2002 by $7.7 million.  Each estimate
used in the Retained Interest valuation is discussed in detail below.

Credit loss  assumptions - The Company  estimates gross credit losses and credit
loss severity using available  historical  loss data for comparable  receivables
and the specific  characteristics  of the receivables  purchased by the Company.
The  Company  implemented  new loss  curves in June 2001  which are based on the
Company's  relational  risk  management  database  which  dates back to 1992 and
incorporates  approximately 670,000 consumers representing over $10.0 billion in
acquired  receivables.  As of March 31,  2002,  the  Company  determined  it was
necessary to further adjust the expected loss rates on most pools to reflect the
loss  experience  in recent months which more fully  incorporate  the effects of
recent  economic  events and trends.  Although the existing  loss curves are the
basis for the changes in the expected loss rates, the Company also considers its
exposure  to  credit  losses in light of  current  delinquency  and loss  rates,
consumer  bankruptcy trends, and recessionary  economic trends and other events.
Except for the one Tier II pool,  the Company  used net credit loss  assumptions
ranging from 4.50% to 8.11% as a percentage  of the original  principal  balance
over the life of the  receivables to value Retained  Interest at March 31, 2002.
See the pool specific net credit loss assumptions in the "Asset Quality" section
below.

Interest  collections  assumptions - As a result of changes in  delinquency  and
credit  loss  rates  and the  overall  condition  in the  economy,  the  Company
periodically  reviews  the impact on expected  future  interest  collections  on
securitized receivables.

Prepayment  assumptions  -  The  Company  estimates  prepayments  by  evaluating
historical  prepayment  performance of comparable  receivables and the impact of
events and trends in the  economy.  The  Company  utilizes  a  prepayment  curve
whereby the annual prepayment rate increases as the pool ages. Annual prepayment
rates within the curve range from 26.75% to 36.00% at March 31, 2002.

Cash accounts  interest rate assumptions - The Company reviews the current yield
on its cash and spread accounts to the yields originally  expected.  The current
economic and interest rate  environment is  significantly  different than it was
when most of the pools were  securitized.  Accordingly,  a forward interest rate
curve as of the balance  sheet date was  incorporated  into the cash flow models
which represents future yield expectations on such accounts.


<PAGE>

Discount rate  assumptions - The Company  determines the estimated fair value of
its Retained  Interest by discounting  the expected cash flows released from the
Trust (the cash out method) using discount  rates which the Company  believes is
commensurate  with the risks involved.  During the quarter ended March 31, 2002,
the Company  changed its method of determining a market  discount rate to use in
its  valuation  of  Retained  Interest  from one that  primarily  considers  the
remaining  duration  of  the  cash  flows  to  a  methodology  that  takes  into
consideration  the  components of Retained  Interest (i.e.  spread  accounts and
estimated  future cash flows).  The weighted  average  discount rate used in the
valuation of Retained Interest at March 31, 2002 was 9.71% compared to 10.87% at
December 31, 2001.

Retained  Interest  is  recorded  as an  "available  for sale"  security  and is
recorded at fair value. The associated  unrealized gains and losses attributable
to  changes  in fair  value  net of  income  taxes are  recorded  as a  separate
component of shareholders' equity ("accumulated other comprehensive  earnings").
Other than  temporary  impairment  charges are  recorded  through  earnings as a
component of gain on sale of receivables, net.

Results of Operations

Net earnings  (loss) are  summarized  in the table below.  The net loss was $6.9
million,  or $0.22 per  diluted  share,  for the quarter  ended March 31,  2002,
compared to net earnings of $6.5 million,  or $0.49 per diluted  share,  for the
quarter  ended March 31, 2001.  The decrease  from the same quarter of the prior
year is primarily due to a decrease in the net interest margin and a decrease in
the gain on sales of  receivables,  net. The decrease in the net interest margin
was primarily the result of lower  receivable  acquisitions in the quarter ended
March 31, 2002 when compared to the quarter  ended March 31, 2001.  The decrease
in the gain on sale of  receivables,  net is primarily  due to an $18.8  million
($12.0 million or $0.39 per share  after-tax)  other than  temporary  impairment
recorded  during the quarter  ended March 31,  2002.  Excluding  charges for the
other than temporary  impairment,  net earnings would have totaled $5.1 million,
or $0.16 per share,  for the  quarter  ended  March 31,  2002  compared  to $8.3
million,  or $0.62 per share  (also  excluding  the  charge  for the other  than
temporary impairment) for the quarter ended March 31, 2001.

                                           Quarter ended March 31,
                                   ----------------------------------------
                                         2002                   2001
                                   -----------------      -----------------
                               (Dollars in thousands, except per share amounts)

Net earnings (loss)                   $      (6,927)          $      6,534
Net earnings (loss) per share         $       (0.22)          $       0.49
  (basic and diluted)



Interest on receivables  held for sale  decreased  46.2% to $5.8 million for the
quarter  ended March 31, 2002,  compared to $10.7  million for the quarter ended
March 31, 2001.  The decrease from the prior quarter  related to a lower average
held for  sale  portfolio  and  decreased  weighted  average  contract  rates on
receivables  held for sale during the quarter  ended March 31, 2002  compared to
the quarter ended March 31, 2001 as shown in the following table:

                                               Quarter ended March 31,
                                       ----------------------------------------
                                             2002                   2001
                                       -----------------      -----------------

Average held for sale (in thousands)     $      207,574         $      327,421
Weighted average contract rate                   10.93%                 13.25%



Retained  interest and other interest income decreased 30.1% to $5.9 million for
the quarter ended March 31, 2001, compared to $8.4 million for the quarter ended
March 31, 2001. As a result of the other than temporary  impairment  recorded in
the  September 30, 2001  quarter,  the discount  accretion for the quarter ended
March 31, 2002  decreased  from the quarter  ended March 31, 2001 when the total
expected  cash flows on certain  pools was higher.  This  reduced  the  discount
accretion  on these pools and  resulted in a decrease in Retained  interest  and
other interest income. The individual  components of Retained interest and other
interest income are shown in the following table:

                                          Quarter ended March 31,
                                   -----------------------------------
                                        2002                2001
                                   ---------------     ---------------
                                             (In thousands)

Discount accretion                  $       5,784       $       8,270
Other interest income                          72                 109
                                   ---------------     ---------------
                                    $       5,856       $       8,379
                                   ===============     ===============

Interest expense decreased 51.7% to $4.3 million for the quarter ended March 31,
2002  compared to $8.9  million for the  corresponding  quarter  ended March 31,
2001.  The decrease was the result of the previously  mentioned  decrease in the
average held for sale receivable  balance  (resulting in lower borrowings on the
Company's credit facilities) and lower term debt interest expense as a result of
the required $22.0 million  principal  payment made on the senior debt in August
2001.

Provision  for  estimated  credit  losses  increased  220.7% to $962,000 for the
quarter  ended March 31, 2001,  compared to $300,000 for the quarter ended March
31, 2001. The increase from the quarter ended March 31, 2001 is primarily due to
the  change  in  the  composition  of  the  receivables   repurchased  from  the
securitization  trusts with a higher  concentration of receivables which are not
eligible  for resale  during the quarter  ended  March 31, 2002  compared to the
quarter ended March 31, 2001.  This was partially  offset by a 37.8% decrease in
the  receivables  acquired during the quarter ended March 31, 2002 over the same
period ended March 31, 2001.

Gain (loss) on sale of receivables,  net. The loss on sale of  receivables,  net
was $11.6  million for the quarter  ended March 31, 2002,  compared to a gain of
$12.9 million for the  corresponding  quarter ended March 31, 2001.  The loss on
sale of  receivables,  net for the quarter  ended  March 31,  2002 is  primarily
comprised of $7.2 million of gain on sale of  receivables  related to the 2002-A
securitization, net of $18.8 million of other than temporary impairment compared
to $15.7  million of gain on sale of  receivables,  net of $2.8 million of other
than temporary impairment for the quarter ended March 31, 2001. The gain on sale
of  receivables  for the  quarter  ended  March  31,  2002  was  lower  than the
comparable period ended March 31, 2001 as a result of lower volume,  lower gross
spreads,  and the  requirements  for an initial deposit into the spread account.
These factors were partially offset by the benefit of lower dealer reserve.  For
the quarter ended March 31, 2002, receivable acquisitions totaled $209.4 million
compared to $336.6  million for the quarter  ended March 31, 2001. On a periodic
basis, management reviews the fair value of the estimated recoverable cash flows
associated with the Retained Interest for other than temporary impairments. Some
of the factors  considered in this evaluation are discussed further in the Notes
to Consolidated Financial Statements. See "Critical Accounting Policies."

As  mentioned  above,  Gain (loss) on sale of  receivables,  net for the quarter
ended March 31, 2002  included a charge for other than  temporary  impairment of
$18.8  million.  Approximately  $23.0  million  of the  charge  for  other  than
temporary impairment related to increased loss rate estimates,  netted against a
benefit expected from increasing  reinvestment  income and a charge from
changes in the discount rate assumption. The Company implemented new loss curves
in June  2001  which  are  based on the  Company's  relational  risk  management
database  which  goes  back  to  1992  and  incorporates  approximately  670,000
consumers  representing over $10.0 billion in acquired receivables.  As of March
31, 2002, the Company determined it was necessary to further adjust the expected
loss rates on most pools to reflect the loss data  experienced  in recent months
which more fully reflect the effects of the recent  economic  events and trends.
Although the existing  loss curves are the basis for the changes in the expected
loss rates, the Company also considers its exposure to credit losses in light of
current delinquency and loss rates, consumer bankruptcy trends, and recessionary
economic events and trends. In addition,  the Company also changed its method of
determining a market discount rate to use in its valuation of Retained Interest.
This change in estimate  increased the fair value of Retained  Interest by $12.1
million  as of March 31,  2002,  and had the effect of  reducing  the other than
temporary  impairment  for the quarter  ended March 31,  2002,  by $7.7  million
pre-tax ($4.9 million net of taxes) or $0.16 per diluted share.  These modeling
enhancements  are  further  discussed  in  "Critical  Accounting  Policies"  and
"Discussion of Forward-Looking Statements."

The gain on sales of  receivables  continues to be a significant  element of the
Company's net earnings.  The gain on sales of receivables is affected by several
factors but is primarily affected by the amount of receivables securitized,  the
net spread,  the level of estimation of net credit  losses,  discount  rate, and
prepayment  rate.  The  Company  is  currently  evaluating  the  feasibility  of
accounting for future  securitizations  as on-balance  sheet secured  financings
rather than as sales of  receivables.  See  "Critical  Accounting  Policies" and
"Discussion of Forward-Looking Statements."

Selected Securitization Data (1):                     Quarter ended March 31,
                                                 -------------------------------
                                                       2002             2001
                                                 ---------------   -------------

                                                     2002 - A         2001 - A

Original amount (in millions) (2)                     $300.0           $573.0
Weighted average receivable rate                      11.02%           13.31%
Weighted average certificate rate                      4.11%            5.86%
Gross spread (3)                                       6.91%            7.45%
Net spread (4)                                         5.29%            5.09%
Weighted average remaining maturity (in months)        65.9             71.5
Weighted average estimated life (in years)             1.93             2.17
Annual credit loss assumption (5)                      2.33%            2.19%
Cumulative credit loss assumption                      4.50%            4.75%
Average prepayment speed assumption (6)               31.41%           25.00%
Discount rate assumption (7)                          11.64%           13.49%

(1)  Information at time of securitization.
(2)  For the  2001-A  securitization,  of the  $573  million  securitized,  $430
     million of receivables  were delivered in March 2001 and the remaining $143
     million were delivered in April 2001.
(3)  Difference  between weighted  average  receivable rate and weighted average
     certificate rate.
(4)  Gross  spread,  net  of  upfront  costs,  servicing  fees,  ongoing  credit
     enhancement fees, trustee fees and the economic hedging gains or losses.
(5)  Computed as the cumulative  credit loss assumption  divided by the weighted
     average estimated life.
(6)  In the quarter  ended June 30, 2001,  the Company  began using a prepayment
     curve rather than a static prepayment assumption.
(7)  During the quarter ended March 31, 2002, the Company  changed its method of
     determining  a market  interest  rate to use in its  valuation  of Retained
     Interest from one that  primarily  considers the remaining  duration of the
     cash flows to a methodology that takes into consideration the components of
     Retained  Interest (i.e.  spread accounts and estimated future cash flows).
     This is further discussed in "Critical Accounting Policies."

Gain (loss) on interest rate derivatives on securitized receivables. The loss on
interest rate derivatives on securitized receivables for the quarter ended March
31, 2002 was $1.0 million  compared to $10.5 million for the quarter ended March
31, 2001.  This decrease was  primarily the result of the current  interest rate
environment  compared to that in the  quarter  ended March 31, 2001 as well as a
new strategy that seeks the most effective  hedge  instrument  while  minimizing
cash  outflows  utilized  during  the  quarter  ended  March 31,  2002.  See the
"Financial  Condition"  section below for additional  discussions  regarding the
Company's interest rate derivative strategy.

Gain (loss) on interest rate derivatives on held for sale receivables. There was
a loss on interest rate derivatives on held for sale receivables of $404,000 for
the quarter ended March 31, 2002 compared to a gain on interest rate derivatives
on held for sale  receivables  of $3.1  million for the quarter  ended March 31,
2001. Gain (loss) on interest rate  derivatives on held for sale  receivables is
the result of a net increase  (decrease) in interest  rates from the time of the
initiation of the derivative  agreements.  See  "Discussion  of  Forward-Looking
Statements."

Servicing  fee  income  is  the  contractual  fee,   typically  one  percent  of
receivables  serviced,  earned from each trust.  Servicing fee income  decreased
12.9% to $6.8  million  for the quarter  ended  March 31, 2002  compared to $7.8
million for the quarter ended March 31, 2001.  The decrease in servicing fees is
a result of the 12.7% decrease in the average securitized servicing portfolio of
$2.7 billion for the quarter  ended March 31, 2002  compared to $3.1 billion for
the quarter ended March 31, 2001.

Late  charges  and other fees  increased  17.6% to $2.3  million for the quarter
ended March 31, 2002 from $1.9  million  for the quarter  ended March 31,  2001.
Other fees consist primarily of late charges,  phone pay fees, gross profit from
the  dealership  sales and other fee  income.  Beginning  in the  quarter  ended
December 31, 2001,  the Company  implemented  a new fee charged to customers for
making payments over the phone,  which are also referred to as "phone pay fees."
The  increase in the quarter  ended March 31, 2002 over the quarter  ended March
31, 2001 resulted primarily from increased phone pay fees and other income.

Total operating  expenses  (including  salaries and benefits) as a percentage of
the average servicing  portfolio was 1.86% for the quarter ended March 31, 2002,
compared  to 1.76%  for the same  period  of 2001.  The  increase  in  operating
expenses as a percentage of the average  servicing  portfolio for the March 2002
quarter can be attributed to a 15.0% decrease in the average servicing portfolio
over the prior quarter. Total operating expenses decreased 9.8% to $13.4 million
for the quarter  ended March 31, 2002  compared to $14.8 million for the quarter
ended March 31, 2001.  During the quarter  ended  December 31, 2001,  management
implemented several expense reduction  initiatives,  aimed at lowering operating
expenses through  operating  efficiencies,  improved  technology and appropriate
staffing levels.  A company wide  operational  review was performed and numerous
cost-saving   improvements  were  put  into  practice.  Total  staff  reductions
beginning  in  October  2001  and  continuing  through  March  2002  represented
approximately 14% of the Company workforce.

Salaries and  benefits  decreased  16.0% to $7.4  million for the quarter  ended
March 31,  2002,  from $8.8 million for the quarter  ended March 31,  2001.  The
decrease  was  primarily  related  to the staff  reductions  (discussed  above),
thereby  lowering  payroll and  related tax  expenses.  This  decrease  from the
quarter ended March 31, 2001 was  partially  offset by  non-recurring  severance
payments related to certain of the previously mentioned staff reductions.

Provision  for income taxes  changed to a $4.0  million  benefit for the quarter
ended March 31, 2002,  compared to $3.8 million of expense for the corresponding
quarter ended March 31, 2001.  The change for the quarter is the result of a net
loss before  income taxes of $10.9  million for the quarter ended March 31, 2002
compared to net earnings  before  income taxes of $10.3  million for the quarter
ended March 31, 2001.

Financial Condition

Receivables  held for sale, net and servicing  portfolio.  Receivables  held for
sale, net includes:

     o    the principal  balance of  receivables  held for sale, net of unearned
          discount
     o    allowance for estimated credit losses
     o    receivables in process
     o    dealer premiums


<PAGE>

The principal  balance for receivables  held for sale, net is lower at March 31,
2002 than at December 31, 2001 primarily because the Company elected to forego a
securitization  during the quarter ended December 31, 2001. Selected information
regarding the  Receivables  held for sale,  net and the  servicing  portfolio at
March 31, 2002 and December 31, 2001 is summarized in the following table:

                                              March 31,           December 31,
                                                2002                  2001
                                         --------------------  -----------------
                                                         (In thousands)

Receivables held for sale, net             $      90,196        $      176,511
Allowance for net credit losses                   (1,650)               (2,054)
Securitized assets serviced                    2,748,399             2,788,006
Total servicing portfolio                      2,838,440             2,962,075


Retained interest in securitized assets ("Retained Interest"). Retained Interest
increased $1.2 million to $199.5 million at March 31, 2002,  from $198.3 million
at December 31, 2001. The Retained  Interest  balance  increased or decreased by
the amounts  capitalized  upon  consummation  of the  securitization  during the
quarter  ended  March 31,  2002  including  estimated  dealer  premium  rebates,
collections,  accretion  of  discount,  change in spread  accounts,  other  than
temporary   impairment  and  net  change  in  unrealized   gain.  The  Company's
collections,  detailed in the table  below,  are the receipt of the net interest
spread,  including  dealer  rebates.  Some of the  receipts  related  to the net
interest  spread  may  remain  in  the  spread  account.   The  following  table
illustrates, in thousands, the components of the change in Retained Interest.

Balance at December 31, 2001                                      $   198,251

Amounts capitalized (including estimated dealer rebates)               15,172
Collections                                                            (7,688)
Accretion of discount                                                   5,773
Change in spread accounts                                               4,258
Other than temporary impairments                                      (18,836)
Net change in unrealized gain                                           2,551
                                                                 -------------

Balance at March 31, 2002                                         $   199,481
                                                                 =============

The following table illustrates,  in thousands,  the components of change in the
spread account.




Balance at December 31, 2001                                      $    91,393

Net excess cash flows deposited to spread accounts                      7,674
Initial spread account deposits                                         2,850
Interest earned on spread accounts                                        408
Less:  excess cash flows released to the Company                       (6,674)
                                                                 -------------

Balance at March 31, 2002                                         $    95,651
                                                                 =============

Allowance  for net credit  losses on  securitized  receivables  is included as a
component of Retained  Interest.  At March 31, 2002,  the allowance  relating to
securitized   receivables   totaled  $155.8  million,  or  5.67%  of  the  total
securitized  receivable  portfolio,  compared to $153.0  million,  or 5.49%,  at
December 31, 2001. See "Critical Accounting Policies" for additional discussions
regarding Retained Interest and "Discussion of Forward-Looking Statements."

Other Assets are as follows (in thousands):
<TABLE>
<CAPTION>

                                                     March 31,          December 31,
                                                        2002                2001
                                                  -----------------   -----------------
<S>                                                <C>                           <C>
Repossessed assets                                 $         7,924               9,566
Accrued servicing fees                                       3,176               3,086
Current and deferred income tax receivable                  15,680               9,201
Other                                                        6,862              11,808
                                                  -----------------   -----------------
                                                   $        33,642     $        33,661
                                                  =================   =================
</TABLE>

The  decrease  in the  repossessed  assets  is the  result  of a lower  level of
inventory of repossessed  vehicles.  The level of inventory is largely dependent
on factors such as the number of  repossessions  and  fluctuations  in the local
wholesale and retail markets.  The increase in current and deferred income taxes
receivable  is the result of the net loss for the quarter  ended March 31, 2002.
The  decrease  in other is  primarily  the  result of the  unwinding  of the cap
premiums and the change in the fair value of the interest  rate  derivatives  in
conjunction with the securitization  during the March 2002 quarter.  At December
31, 2001, the cost of the interest rate caps was approximately  $3.2 million and
was included on the balance sheet as an other asset. In addition, the fair value
of interest rate  derivatives  increased by $800,000 during the six months ended
December 31, 2001, resulting in a total fair value of approximately $4.0 million
at December 31, 2001.  At March 31,  2002,  the fair value of the interest  rate
derivatives  on held for  sale  receivables  was a  liability  of  approximately
$404,000 and was included in Other payables and accrued expenses.

In May 2001,  the Company  began the use of interest  rate caps.  These caps are
purchased to limit the  Company's  potential  cash outlays for its interest rate
derivatives  established in falling interest rate environments.  The cost of the
caps is recorded as the fair value of interest rate  derivatives  on the balance
sheet  and the  corresponding  liability  is  recorded  as an  other  liability.
Subsequent  changes  in the  fair  value of the  interest  rate  derivative  are
recorded on the balance  sheet and on the statement of earnings as a gain (loss)
on interest rate  derivatives on held for sale  receivables.  Since the interest
rates began to increase  during the quarter  ended March 31,  2002,  the Company
utilized  swaps  instead of caps and had no  outstanding  interest  rate caps at
March 31,  2002.  The  Company  will  utilize  the most cash and risk  efficient
hedging  mechanism  depending on  management's  assessment  of the interest rate
environment at the time. See "Discussion of Forward-Looking Statements."

Notes payable were $47.0 million at March 31, 2002,  compared to $100.3  million
at December 31, 2001. The decrease is the result of timing of the securitization
in the March 2002 quarter,  whereas there was no  securitization in the December
2001 quarter.

Term debt was $111.3  million at March 31, 2002,  compared to $133.0  million at
December 31, 2001. The decrease was the result of a required  principal  payment
made on the Company's Senior Notes in March 2002 of $21.7 million.

Current and  deferred  income taxes  payable.  There were no current or deferred
income  taxes  payable at March 31,  2002 and  December  31, 2001 due to the net
losses  recorded for both the six months ended December 31, 2001 and the quarter
ended March 31, 2002.


Liquidity and Capital Resources

Sources  and  Uses  of  Cash in  Operations.  Net  cash  provided  by  operating
activities  was $76.9 million and $90.7 million for the quarters ended March 31,
2002 and 2001,  respectively.  The change was  primarily  attributable  to lower
receivables  securitized  and acquired  during the quarter  ended March 31, 2002
compared to the quarter  ended March 31,  2001.  Net cash  provided by investing
activities  was $3.3 million and $13.2  million for the quarter  ended March 31,
2002 and  2001,  respectively.  The  decrease  from the prior  period  primarily
relates to the decrease in the  collections on retained  interest in securitized
assets but was  partially  offset by a smaller use of cash related to the spread
accounts.  Net cash used in financing activities for the quarter ended March 31,
2002 was $75.0  million  compared to $105.0  million for the quarter ended March
31, 2001.  The primary factor for this change is the difference in the timing of
the securitizations and volume subsequent to each securitization for the quarter
ended March 31, 2002  compared to the quarter  ended March 31, 2001 as well as a
principal payment of $21.7 million made on the Company's Senior notes.

The  Company  has  substantial  capital  requirements  to  support  its  ongoing
operations  and  anticipated  growth.  The  Company's  sources of liquidity  are
currently  funds  from  operations,  securitization  transactions  and  external
financing  including  term debt,  a residual  facility and  revolving  warehouse
credit  facilities  in addition to the  existing  cash  balances as of March 31,
2002.  Historically,  the Company has used the  securitization of receivables as
its primary source of term funding.  In August 1999, the Company  established an
additional  source of  liquidity  through a  securitization  arrangement  with a
commercial paper conduit. This facility has capacity of $550 million, and $388.2
million was utilized at March 31, 2002.  Securitization  transactions enable the
Company to  improve  its  liquidity,  to  recognize  gains from the sales of the
receivable pools while maintaining the servicing rights to the receivables,  and
to control  interest  rate risk by  matching  the  repayment  of amounts  due to
investors in the securitizations with the actual cash flows from the securitized
assets. Between securitization transactions, the Company relies primarily on the
revolving  warehouse credit facilities to fund ongoing  receivable  acquisitions
not including dealer premiums.  In addition to receivable  acquisition  funding,
the Company also  requires  substantial  capital on an ongoing basis to fund the
advances of dealer premiums,  securitization  costs,  servicing  obligations and
other cash requirements  previously  described.  The Company's ability to borrow
under  revolving  warehouse  credit  facilities is dependent upon its compliance
with the terms and conditions thereof. The Company's ability to obtain successor
facilities  or  similar  financing  will  depend on,  among  other  things,  the
willingness  of financial  institutions  to  participate  in funding  automobile
financing  business  and  the  Company's  financial  condition  and  results  of
operations.   Moreover,  the  Company's  growth  may  be  inhibited,   at  least
temporarily,  if the Company is not able to obtain  additional  funding  through
these or other  facilities,  or if it is unable to  satisfy  the  conditions  to
borrowing  under  revolving   warehouse   credit   facilities  or  the  recently
established residual facility discussed below. The Company consistently assesses
its long-term  receivable  funding  arrangements  with a view of optimizing cash
flows and reducing costs. The Company has several options for funding including,
but  not  limited  to,  a  public  asset-backed  securitization,  a sale  into a
commercial  paper  facility,   a  private  sale,  or  temporarily   holding  the
receivables.  The Company  continues to evaluate market conditions and available
liquidity  and could  decide to alter the timing of its  securitizations  in the
future  depending  on the  Company's  cash  position  and  available  short-term
funding.

Derivative financial instruments.  Derivative financial instrument  transactions
(generally,  a gain or loss on interest rate derivatives) may represent a source
or a use of cash  during a given  period  depending  on the  change in  interest
rates.  In the quarter  ended March 31, 2002,  derivative  financial  instrument
transactions  used cash of $1.0 million  compared to cash used of $10.5  million
during the quarter ended March 31, 2001.  This change is primarily the result of
the implementation of the use of interest rate caps in May 2001.

Warehouse   facilities.   The  Company  currently  has  credit  facilities  with
independent  financial  institutions  for a  total  of  $750.0  million  to fund
receivable acquisitions. A $350.0 million credit facility is insured by a surety
bond while the two $200.0 million credit  facilities are not. At March 31, 2002,
$42.1 million of the capacity was utilized,  and an additional $41.4 million was
available  to borrow  based on the  outstanding  principal  balance of  eligible
receivables.  At December 31, 2001, $100.3 million of the capacity was utilized,
and an additional $66.1 million was available to borrow based on the outstanding
principal balance of eligible  receivables.  The Company has notified one of its
independent  financial  institutions  that it will  terminate the $200.0 million
unwrapped  credit  facility  set to expire in May 2002.  The  Company  typically
attempts  to  maintain   warehouse   capacity  for  six  months  of   receivable
acquisitions.  Given the Company's projected receivable  acquisition growth over
the next six months, its existing financial resources,  and the cost to maintain
this facility,  it determined this $200.0 million  facility was not needed which
will result in remaining warehouse capacity of $550.0 million.  The Company will
continue  to  evaluate  its  future   warehouse   needs.   See   "Discussion  of
Forward-Looking Statements."


       Credit Facility          Outstanding              Expiration
          Capacity           at March 31, 2002              Date
      ------------------   -----------------------   -------------------
                       (in millions)
           $ 350.0                 $47.0                August 2002
           $ 200.0                  None                August 2002
           $ 200.0                  None                  May 2002


Residual Facility.  As part of the Company's overall term debt refinancing plan,
the Company established,  through a subsidiary, a $55.0 million residual funding
facility in April 2002,  to be secured  upon  funding by residual  interests  in
securitizations.  The  facility has a 364-day  revolving  feature and requires a
$5.0 million reserve account when funded.

Term debt.  The Company's  term debt consists of Senior and Senior  Subordinated
Notes.  The Company  issued  $110.0  million of 8.53% Senior Notes due August 1,
2002, in connection with the Company's initial public offering.  Interest on the
Notes is payable semiannually,  and principal payments of $22.0 million began on
August 1, 1998 and are due annually on August 1 until  maturity.  In April 1996,
the  Company  completed a private  placement  of $46.0  million of 9.99%  Senior
Subordinated  Notes due March 30, 2003,  with  interest  payable  quarterly  and
principal due at maturity.  In March 1997,  the Company  issued $65.0 million of
Senior Notes due  December 27, 2002.  The Notes were issued as "Series A" in the
principal  amount of $50.0  million  at 7.75%  interest  and  "Series  B" in the
principal  amount of $15.0 million at 7.97%  interest.  Interest on the Notes is
payable  semiannually,  and a principal  payment was made in March 2002,  in the
amount equal to approximately 33 1/3% of the stated original  balance,  or $21.7
million.  As an  additional  part of the Company's  refinancing  plan, on May 1,
2002,  the Company  completed  a private  placement  of $11.0  million of 12.00%
unsecured  Senior Notes due April 30, 2007 with interest  payable  quarterly and
principal due at maturity.  The Company has the option to call the notes with 60
days notice given, with a premium due in the event of a call prior to the fourth
year of the note term.

The Company's credit  agreements,  among other things,  require  compliance with
monthly and  quarterly  financial  maintenance  tests and restrict the Company's
ability to create liens, incur additional indebtedness, sell or merge assets and
make  investments.   The  Company  is  in  compliance  with  all  covenants  and
restrictions  imposed by the terms of indebtedness.  In addition,  the Company's
securitization  agreements  require  compliance  with  monthly,   quarterly  and
cumulative  tests.  If  certain  events  or  "triggers"  occur,  certain  of the
Company's future cash flows may be negatively impacted.  These triggering events
include, but are not limited to, greater than expected loss experience, negative
changes in the Company's credit ratings,  and for pools including and subsequent
to  2000-B,   non-compliance   with  certain  financial   covenants  within  the
securitization.  Hitting these triggers may result in a significant  restriction
on the  receipt of future  servicing  cash flows  from the  securitizations.  In
addition,  the  Company  may also  lose its  rights  to be the  servicer  of the
securitizations  along with the associated servicing fee income. The Company has
hit  certain  of these  triggers  from  time to time  which  have the  effect of
increasing credit enhancement requirements in the securitizations. The Company's
new residual funding facility contains similar provisions which may restrict the
availability of cash from securitizations in certain events. The Company has not
yet chosen to utilize the residual facility.

Capitalization  and Effect on Results of  Operations.  The Company is pursuing a
capital  strategy  intended  to enhance  its ratio of capital to managed  assets
(including  its  securitized   servicing  portfolio)  over  time.   Management's
objective is to raise the equity to managed assets of 5.46% as of March 31, 2002
to approximately 8.00% over the next few years. Additionally, if the Company can
effectively price receivable  acquisitions  relative to risk, management expects
that it should be able to  increase  its return on managed  assets and return on
equity over the next several  years.  As of March 31, 2002, the Company had term
debt obligations totaling  approximately $111.3 million, of which $22.0 million,
$43.3 million and $46.0  million is due in August 2002,  December 2002 and March
2003, respectively. As part of the Company's overall refinancing plan related to
its  term  debt,  its  current  capital  resources  include  available  cash and
warehouse capacity of approximately $60.9 million,  net borrowing capacity of up
to $50.0 million from the residual facility,  and approximately $11.0 million of
proceeds  from the private  placement  of the  unsecured  Senior Note  discussed
above.  Management  continues  to evaluate  proposals  to enhance the  Company's
long-term  capital  position,  including  possible issuance of additional equity
securities  and believes that such  arrangements  will be timely  implemented to
meet its obligations. It should be noted, however, that the cash requirements of
operations  depend  on a number  of  factors  that  are  difficult  to  predict,
including the costs of interest rate hedging  transactions,  the level of credit
enhancements  required to  securitize  receivables,  dealer  reserve  levels and
similar matters. See "Discussion of Forward-Looking Statements."

The Company  currently  intends to retain  earnings for use in the operation and
expansion  of its  business  and  therefore  does  not  anticipate  paying  cash
dividends on Common Stock in the foreseeable future. The payment of dividends is
within the  discretion  of the Board of Directors  and will depend,  among other
things, upon earnings,  capital requirements,  and financing agreement covenants
and the  financial  condition of the Company.  In  addition,  provisions  of the
Company's term notes limit distributions to shareholders.


Asset Quality

Set  forth  below  is  certain  information   concerning  the  credit  loss  and
delinquency experiences on the fixed rate retail automobile receivables serviced
by the Company.  The following credit loss and delinquency  statistics represent
Tier I and Tier II for all periods presented.  Previously,  only Tier I had been
presented. There can be no assurance that future delinquency and net credit loss
experience on the  receivables  will be comparable to that set forth below.  See
"Discussion of Forward-Looking Statements."
<TABLE>
<CAPTION>
                                                                    Credit Loss Experience
                                                                    For the Quarter Ended
                                      -----------------------------------------------------------------------------------

                                            March 31, 2002              December 31, 2001           March 31, 2001
                                      --------------------------- --------------------------  ---------------------------
                                                                     (Dollars in thousands)

                                        Number of                   Number of                   Number of
                                       Receivables    Amount       Receivables   Amount        Receivables    Amount
                                       -----------    ------       -----------   ------        -----------    ------
<S>                                      <C>        <C>              <C>       <C>                <C>       <C>
Average servicing portfolio              234,476    $   2,871,966    245,563   $   3,027,302      269,018   $   3,378,983

Gross charge-offs                          4,531    $      54,075      4,169   $      47,776        3,151   $      38,204
Recoveries                                                 20,101                     14,600                       16,137
                                                  ---------------             --------------               --------------
  Net charge-offs                                   $      33,974              $      33,176                $      22,067
                                                  ===============             ==============               ==============

Gross charge-offs as a percentage
  of average servicing portfolio (1)       7.73%            7.53%      6.79%           6.31%        4.69%           4.52%
Recoveries as a percentage of
  gross charge-offs                                        37.17%                     30.56%                       42.24%
Net charge-offs as a percentage
  of average servicing portfolio (1)                        4.73%                      4.38%                        2.61%
    (1) Annualized
</TABLE>
<TABLE>
<CAPTION>
                                                      Delinquency Experience
                             --------------------------------------------------------------------------

                                At March 31, 2002       At December 31, 2001      At March 31, 2001
                             ------------------------- -----------------------  -----------------------
                                                      (Dollars in thousands)

                               Number of                 Number of                Number of
                              Receivables   Amount      Receivables Amount       Receivables Amount
<S>                            <C>         <C>           <C>       <C>            <C>       <C>
Servicing portfolio            231,676     $2,838,139    241,178   $2,961,737     267,436   $3,350,427
Delinquencies:
  30-59 days                     5,665     $   66,393      7,329   $   84,748       4,868   $   56,187
  60-89 days                     2,641         33,105      3,605       44,100       2,639       33,254
  90 days or more                1,000         11,517      1,504       17,121       1,223       14,493
                             ----------   ------------  --------- ------------    -------- ------------
Total delinquencies              9,306     $  111,015     12,438   $  145,969       8,730   $  103,934
                             ==========   ============  ========= ============    ======== ============

Delinquency as a percentage
  of servicing portfolio         4.02%          3.91%      5.16%        4.93%       3.26%        3.10%

Delinquency as a percentage
  of servicing portfolio
  excluding bankruptcies                        3.11%                   4.09%                    2.37%
</TABLE>

<PAGE>

During the quarter  ended March 31, 2002,  net credit  losses as a percentage of
the average servicing  portfolio  increased to 4.73% compared to 4.38% and 2.61%
for the quarters ended December 31, 2001 and March 31, 2001,  respectively.  The
increase  in  losses  for the  quarter  ended  March 31,  2002 can be  primarily
attributed to the remaining  effects of a recessionary  economy.  These external
economic factors along with  seasonality and aging of the portfolio  combined to
increase the Company's net credit losses.  Although  losses for the quarter have
increased over prior quarters,  management  began to see the results of improved
collection  activities in credit loss  statistics in the month of February 2002.
During  April 2002,  management  continued to  experience  the benefits of these
improved  collection  activities as the net credit losses as a percentage of the
average servicing  portfolio  decreased to 4.03% even as the portfolio continues
to shrink.

Recoveries as a percentage of gross  charge-offs were 37.17%,  30.56% and 42.24%
for the  quarters  ended March 31,  2002,  December 31, 2001 and March 31, 2001,
respectively.  The used car market  became  saturated  with cars in the December
2001  quarter due to an influx of  trade-ins  from the 0%  financing  offered by
several car  manufacturers,  continuing  high volume of used vehicles coming off
leases  and the  bankruptcy  of a  rental  car  company  which  resulted  in the
liquidation  of much of its  inventory.  The increase of used cars in the market
had a negative  impact on  recovery  rates  during the  December  2001  quarter.
However,  during the March 2002  quarter,  the auto  manufacturers  ended the 0%
financing and dealers began pushing their  increased  used car  inventory,  thus
improving  recovery rates.  The improvement in recovery rates has contributed to
an overall  improvement  in net credit losses during the quarter ended March 31,
2002.

As  indicated  in the above  table,  delinquency  rates  based upon  outstanding
receivable  balances of accounts 30 days past due and over decreased to 3.91% at
March 31, 2002 compared to 4.93% at December 31, 2001 and  increased  from 3.10%
at March 31, 2001. The Company attributes the improvement this quarter primarily
to the Company's  technology  initiatives  instituted by the its new  collection
management, including the recent implementation of software designed to increase
the frequency of collectors being connected to the appropriate  party,  internet
and voice response payment  programs and a behavioral  scoring model. Due to the
timing  between  delinquency  and credit  losses,  the Company  expects that the
improvement  in  delinquency  trends will be reflected  in lower  credit  losses
beginning in the second quarter of 2002. During each month for the quarter ended
March  31,  2002,  the  collection   department   has   successfully   decreased
delinquencies,  thus  generating less accounts to roll into loss during the June
2002 quarter. One factor which serves to inflate the delinquency  percentage for
the quarter  ended March 31, 2002 compared to the same quarter of the prior year
is the declining  portfolio.  The total servicing portfolio has been on a steady
decline for four  quarters  dropping from $3.4 billion at March 31, 2001 to $2.8
billion at March 31, 2002. The total dollar  delinquencies  of $111.0 million at
March  31,  2002 are the  lowest  since  March  31,  2001.  See  "Discussion  of
Forward-Looking Statements."

Provisions  are made for estimated net credit  losses in  conjunction  with each
securitization. The cumulative credit loss assumption used on the securitization
during the quarter  ended  March 31,  2002 was 4.50%,  compared to 4.75% for the
prior year  corresponding  quarter.  The reduction in the credit loss assumption
from the prior year  quarter is due to  improved  credit  quality in  receivable
acquisitions.  See additional  discussions regarding the Company's credit scores
above.  The  allowance for estimated  credit losses on  securitized  receivables
(inherent in Retained  Interest) was 5.67% at March 31, 2002,  compared to 5.49%
at December 31, 2001 and 4.44% at March 31, 2001.

Over the past year,  the Company has put forth  extensive  effort to improve the
accuracy of cash flow projections related to the components of Retained Interest
and  to  fully  leverage  its  risk-based   relational  database.   The  Company
implemented  new loss  curves  in June 2001  which  are  based on the  Company's
relational  risk management  database which dates back to 1992 and  incorporates
approximately  670,000  consumers  representing  over $10.0  billion in acquired
receivables.  As of March 31, 2002,  the Company  determined it was necessary to
further  adjust the  expected  loss rates on most pools to reflect the loss data
experienced  in recent months which more fully reflect the effects of the recent
economic events and trends.  Although the existing loss curves are the basis for
the changes in the expected loss rates,  the Company also considers its exposure
to credit  losses  in light of  current  delinquency  and loss  rates,  consumer
bankruptcy  trends,  and recessionary  economic events and trends. See "Critical
Accounting Policies" and "Discussion of Forward-Looking Statements."
<PAGE>

Selected  information about the Company's active  securitizations  are presented
below:
<TABLE>
<CAPTION>
                                                               Remaining
                                                               Balance at   Net Loss       Expected
                                                Original       March 31,   to Original    Cumulative
       Securitizations                           Amount          2002        Balance       Net Loss
---------------------------------------------------------- -------------- -------------- -----------
                                                                               (1)            (2)
                                               (Dollars in thousands)
<S>                                          <C>            <C>               <C>             <C>
UACSC  2002-A Auto Trust                     $     300,000  $     288,759     0.00%           4.50%
UACSC  2001-C Auto Trust                           330,000        273,172     0.47%           4.75%
UACSC  2001-B Auto Trust                           150,002        112,697     0.87%           4.75%
UACSC  2001-A Auto Trust                           573,000        376,222     1.86%           6.05%
UACSC  2000-D Auto Trust                           510,001        312,556     2.52%           6.23%
UACSC  2000-C Auto Trust                           500,000        275,455     2.85%           6.36%
UACSC  2000-B Auto Trust                           534,294        281,869     4.12%           7.41%
UACSC  2000-A Auto Trust                           282,721        121,469     3.88%           6.51%
UACSC  1999-D Auto Trust                           302,693        121,174     5.43%           8.11%
UACSC  1999-C Auto Trust                           364,792        133,264     4.94%           7.02%
UACSC  1999-B Auto Trust                           340,233        108,531     5.35%           7.11%
UACSC  1999-A Auto Trust                           320,545         87,078     5.64%           7.01%
UACSC  1998-D Auto Trust                           275,914         61,737     4.93%           5.87%
UACSC  1998-C Auto Trust                           351,379         71,031     4.61%           5.40%
UACSC  1998-B Auto Trust                           267,980         43,586     4.14%           4.85%
UACSC  1998-A Auto Trust                           228,938         32,335     4.19%           4.79%
UACSC  1997-D Auto Trust                           204,147         21,876     4.04%           4.75%
UACSC  1997-C Auto Trust (3)                       218,390         21,528     4.75%           5.20%
                                         ------------------ --------------
  Total Tier I Securitized Trusts                6,055,029      2,744,339

PSC 1998-1 Grantor Trust                            28,659          4,060    10.40%          12.00%
                                         ------------------ --------------
       Grand Total                           $   6,083,688  $   2,748,399
                                         ================== ==============
</TABLE>

(1)  Net loss to original balance at March 31, 2002.
(2)  Forward - looking information.
(3)  Pool was paid in full May 2002.

Discussion of Forward-Looking Statements

The above discussions and notes to consolidated  condensed financial  statements
contain forward-looking  statements made by the Company regarding its results of
operations,  effects  of  changes in  accounting  policies,  cash flow needs and
liquidity,  receivable  acquisition  volume,  target spreads,  potential  credit
losses,  recovery rates, prepayment rates, servicing income and other aspects of
its business. Similar forward-looking statements may be made by the Company from
time to time. In  particular,  the  Company's  gain on sale of  receivables  and
retained interest in securitized assets are reported on the basis of significant
estimates of future portfolio performance.  Such forward-looking  statements are
subject to a number of important factors that cannot be predicted with certainty
and  which  could  cause  such  forward-looking   statements  to  be  materially
inaccurate.  Such factors include,  for example,  demand for new and used autos,
competition,  and consumer credit and delinquency trends. See the "Discussion of
Forward-Looking  Information"  under  "Management's  Discussion  and Analysis of
Financial Condition and Results of Operations" in the Company's Annual Report on
Form 10-K for the six-month  transition  period ended December 31, 2001 which is
incorporated herein by this reference.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company's  sources for  short-term  funds  generally  have variable rates of
interest,  and its  receivable  portfolio  bears  interest at fixed  rates.  The
Company  therefore  bears  interest  rate  risk on  receivables  until  they are
securitized and employs an economic  hedging strategy to mitigate this risk. The
Company uses an economic  hedging  strategy that  primarily  consists of forward
interest rate derivatives  having a maturity  approximating the average maturity
of the  acquisition  volume  during  the  relevant  period.  At  such  time as a
securitization is committed,  the interest rate derivatives are terminated.  The
Company's  economic  hedging  strategy  is an integral  part of its  practice of
periodically securitizing receivables.  The commercial paper conduit pursuant to
which the Company  securitized  $500.0  million in receivables in September 2000
and $150.0  million in  receivables  in June 2001, and which it may utilize from
time to time in the future,  provides for issuance of a note bearing interest at
a  floating  rate with the  resulting  interest  rate risk  covered by a related
interest rate swap arrangement. There is no assurance that these strategies will
completely  offset changes in interest  rates.  In particular,  such  strategies
depend on  management's  estimates  of  receivable  acquisition  volume  and the
interest rate on those receivables. The Company generally realizes a gain on its
economic hedging  transactions  during periods of increasing  interest rates and
generally  realizes a loss on such  transactions  during  periods of  decreasing
interest rates. At March 31, 2002, the Company has an unrealized hedging loss of
$404,000 based on notional amounts outstanding of $135.4 million. The fair value
of term debt  increases  or decreases  as market  interest  rates are reduced or
increased, respectively.

The following table presents the principal cash repayments and related  weighted
average  interest rates by maturity date for the current  variable rate and term
debt at March 31, 2002:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                   Nine months
                                      ended
                                   December 31,
                                      2002        2003        Total     Fair Value
                                   ------------------------------------------------
                                               (Dollars in thousands)
                                               ----------------------
<S>                                <C>         <C>         <C>          <C>
Notes Payable                      $   47,011  $        -  $    47,011  $    47,011
  Weighted average variable rate        3.05%

Term debt                          $   65,333  $   46,000  $   111,333  $   110,569
  Weighted average fixed rate           8.06%       9.99%        8.86%

--------------------------------------------------------------------------------
</TABLE>

Sensitivity Analysis on Retained Interest

The Company bears the primary risk of loss due to credit losses in its servicing
portfolio.  Credit loss rates are  impacted  by general  economic  factors  that
affect  customers'  ability  to  continue  to  make  timely  payments  on  their
indebtedness.  Prepayments on receivables in the servicing  portfolio reduce the
size of the  portfolio and reduce the Company's  servicing  income.  The gain on
sales of receivables in connection with each securitization  transaction and the
amount of Retained Interest  recognized in each transaction  reflect  deductions
for estimates of future defaults and prepayments. The carrying value of Retained
Interest may be adjusted  periodically to reflect  differences between estimated
and actual net credit losses and prepayments on past securitizations.

At March 31, 2002, key economic  assumptions  and the sensitivity of the current
fair value of Retained  Interest  to  immediate  10% and 20% adverse  changes in
assumed economics is as follows (in thousands):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                     Expected
                                    Cumulative                                                  Spread
                                    Net Credit          Discount          Prepayment           Interest
                                      Losses              Rate              Speed                Rate
                                 (pool life rate)    (annual rate)         (curve)             (curve)
                                 -----------------  -----------------  -----------------   -----------------
<S>                                <C>                 <C>               <C>                  <C>
Impact on fair value of
10% adverse change                 $      (30,664)     $      (5,274)    $       (8,096)      $      (1,866)
20% adverse change                 $      (63,201)     $     (10,376)    $      (15,490)      $      (3,724)

------------------------------------------------------------------------------------------------------------
</TABLE>


These  sensitivities  are hypothetical  and should be used with caution.  As the
amounts  indicate,  any change in fair value  based on a  particular  percentage
variation in assumptions cannot be extrapolated  because the relationship of the
change  in fair  value is not  linear.  Also,  in this  table,  the  effect of a
variation in a particular  assumption on the fair value of the Retained Interest
is calculated  independent  from any change in another  assumption;  in reality,
changes in one factor may result in changes in another,  which might  magnify or
counteract the sensitivities. See "Discussion of Forward-Looking Statements."

<PAGE>

Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K

          (a) The following exhibits are filed with this report:

              4.1 - Note Purchase Agreement,  dated as of May 1, 2002, between
                    Union Acceptance Corporation and certain purchasers relating
                    to 12.0% Series A Senior Notes due 2007.

              4.2 - Securities  Funding  Agreement,  dated as of April 5,  2002,
                    among Union  Acceptance  Corporation,  UAC Funding  Facility
                    Corporation,   Wachovia   Bank,   N.A.,   and  First   Union
                    Securities, Inc.

              4.3 - Third Amendment and Limited Waiver, dated March 29, 2002, to
                    Security  Agreement among the Registrant,  Union  Acceptance
                    Funding  Corporation,  UAFC-2 Corporation,  Variable Funding
                    Captial  Corporation,  First Union  Securities,  Inc., First
                    Union  National  Bank,  and certain  bank  investors,  dated
                    August 31, 2001.

          (b) Reports on Form 8-K

              The Company filed  no reports on Form 8-K during the quarter ended
              March 31, 2002.

<PAGE>


Signatures

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

                                    Union Acceptance Corporation


May 14, 2002               By:      /s/ Lee N. Ervin
                                    --------------------------------------------
                                    Lee N. Ervin
                                    President and Chief Operating Officer


May 14, 2002               By:      /s/ Rick A. Brown
                                    --------------------------------------------
                                    Rick A. Brown
                                    Treasurer, Chief Financial Officer and
                                    Executive Vice President