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 June 30, 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                (I.R.S. Employer Identification
         incorporation 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 August 13, 2002

      Common Stock, without par value                 31,019,150


<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
         June 30, 2002 and December 31, 2001                                   3

         Consolidated Condensed Statements of Earnings (Loss)
         for the Three and Six Months Ended June 30, 2002 and 2001             4

         Consolidated Condensed Statements of Cash Flows for the
         Six Months Ended June 30, 2002 and 2001                               5

         Consolidated Condensed Statement of Shareholders' Equity for the
         Six Months Ended June 30, 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           27

Part II. OTHER INFORMATION                                                    28

         Signatures                                                           31

         Certifications                                                       32

<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>

                                                                          June 30,       December 31,
Assets                                                                      2002             2001
                                                                         ------------    -------------

<S>                                                                         <C>              <C>
Cash and cash equivalents                                                   $ 16,626         $ 14,244
Restricted cash                                                                5,696            4,650
Receivables held for sale, net                                               286,533          176,511
Retained interest in securitized assets                                      193,113          198,251
Accrued interest receivable                                                    1,653            1,323
Property, equipment, and leasehold improvements, net                           8,045            8,516
Other assets                                                                  36,534           33,661
                                                                         ------------    -------------

  Total Assets                                                             $ 548,200        $ 437,156
                                                                         ============    =============

Liabilities and Shareholders' Equity

Liabilities

Notes payable                                                              $ 226,516        $ 100,300
Term debt                                                                    122,333          133,000
Accrued interest payable                                                       3,417            2,393
Amounts due to trusts                                                         18,989           18,610
Other payables and accrued expenses                                           12,429            8,153
                                                                         ------------    -------------

  Total Liabilities                                                          383,684          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 June 30, 2002 and December 31, 2001;
   31,019,150 and 30,926,606 shares issued and outstanding at
   June 30, 2002 and December 31, 2001, respectively                         145,900          145,374

  Accumulated other comprehensive earnings (loss), net of taxes                  (42)             450
  Retained earnings                                                           18,658           28,876
                                                                         ------------    -------------

   Total Shareholders' Equity                                                164,516          174,700
                                                                         ------------    -------------

   Total Liabilities and Shareholders' Equity                              $ 548,200        $ 437,156
                                                                         ============    =============
</TABLE>

See accompanying notes to consolidated condensed financial statements.


<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Earnings (Loss)
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
                                                                  Quarter Ended                    Six Months Ended
                                                                     June 30,                          June 30,
                                                          -------------------------------   -------------------------------
                                                              2002             2001             2002             2001
                                                          --------------  ---------------   --------------  ---------------

<S>                                                             <C>              <C>             <C>              <C>
Interest on receivables held for sale                           $ 5,162          $ 3,844         $ 10,933         $ 14,571
Retained interest and other                                       5,072            8,934           10,928           17,313
                                                          --------------  ---------------   --------------  ---------------

   Total interest income                                         10,234           12,778           21,861           31,884
Interest expense                                                  4,517            5,372            8,818           14,275
                                                          --------------  ---------------   --------------  ---------------

   Net interest margin                                            5,717            7,406           13,043           17,609
Provision for estimated credit losses                             1,152              715            2,114            1,015
                                                          --------------  ---------------   --------------  ---------------
   Net interest margin after provision
     for estimated credit losses                                  4,565            6,691           10,929           16,594

Gain (loss) on sales of receivables, net                              -          (13,932)         (11,553)          (1,052)
Gain (loss) on interest rate derivatives
 on securitized receivables                                           -           (2,353)            (976)         (12,828)
Gain (loss) on interest rate derivatives
 on held for sale receivables                                    (5,339)           1,647           (5,743)           4,769
Servicing fee income                                              6,601            8,049           13,403           15,854
Late charges and other fees                                       2,360            1,557            4,622            3,481
                                                          --------------  ---------------   --------------  ---------------

  Other revenues                                                  3,622           (5,032)            (247)          10,224
                                                          --------------  ---------------   --------------  ---------------

Salaries and benefits                                             7,746            8,646           15,153           17,460
Other expenses                                                    5,581            5,849           11,553           11,866
                                                          --------------  ---------------   --------------  ---------------

  Total operating expenses                                       13,327           14,495           26,706           29,326
                                                          --------------  ---------------   --------------  ---------------

  Earnings (loss) before provision (benefit)
   for income taxes                                              (5,140)         (12,836)         (16,024)          (2,508)
Provision (benefit) for income taxes                             (1,849)          (4,662)          (5,806)            (868)
                                                          --------------  ---------------   --------------  ---------------
Net earnings (loss) before cumulative effect
 of change in accounting principle                               (3,291)          (8,174)         (10,218)          (1,640)
Cumulative effect of change in accounting principle,
  less applicable taxes of $568 (Note 2)                              -              989                -              989
                                                          --------------  ---------------   --------------  ---------------
Net earnings (loss)                                            $ (3,291)        $ (9,163)       $ (10,218)        $ (2,629)
                                                          ==============  ===============   ==============  ===============

Net earnings (loss) per common share before
  cumulative effect of change in accounting
  principle (basic and diluted)                                 $ (0.11)         $ (0.49)         $ (0.33)         $ (0.11)
Cumulative effect of change in
  accounting principle (Note 2)                                       -            (0.06)               -            (0.07)
                                                          --------------  ---------------   --------------  ---------------
Net earnings (loss) per common share
 (basic and diluted)                                            $ (0.11)         $ (0.55)         $ (0.33)         $ (0.18)
                                                          ==============  ===============   ==============  ===============

Basic weighted average number of
  common shares outstanding                                  30,981,211       16,582,568       30,954,059       14,947,695
Dilutive effect of common stock options                               -                -                -                -
                                                          --------------  ---------------   --------------  ---------------
Diluted weighted average number of
  common shares outstanding                                  30,981,211       16,582,568       30,954,059       14,947,695
                                                          ==============  ===============   ==============  ===============

</TABLE>

See accompanying notes to consolidated condensed financial statements.

<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
                                                                                           Six Months Ended
                                                                                               June 30,
                                                                                ----------------------------------------
                                                                                      2002                  2001
                                                                                ------------------    ------------------

Cash flows from operating activities:
<S>                                                                                 <C>                    <C>
   Net earnings (loss)                                                              $ (10,218)             $ (2,629)
     Adjustments to reconcile net earnings (loss) to net cash
       from operating activities:
         Purchases of receivables held for sale                                      (402,558)             (535,449)
         Principal collections on receivables held for sale,
           net of securitized receivables repurchased                                  (7,726)                6,486
         Dealer premiums paid, net on receivables held for sale                        (8,844)              (15,876)
         Proceeds from securitization of receivables held for sale                    300,000               723,020
         Gain on sales of receivables held for sale                                    (7,537)              (28,639)
         Impairment of retained interest in securitized assets                         18,836                26,496
         Cumulative effect of change in accounting principal (Note 2)                       -                 1,557
         Accretion of discount on retained interest in securitized assets             (10,804)              (16,676)
         Provision for estimated credit losses                                          2,114                 1,015
         Amortization and depreciation                                                  2,438                 2,460
         Restricted cash                                                               (1,046)                4,993
         Other assets and accrued interest receivable                                  (1,919)                4,537
         Amounts due to trusts                                                            379                 5,328
         Other payables and accrued expenses                                            4,161                (8,026)
                                                                                ------------------    ------------------
                 Net cash provided by (used in) operating activities                 (122,724)              168,597
                                                                                ------------------    ------------------

Cash flows from investing activities:
   Collections on retained interest in securitized assets                              19,156                49,735
   Change in spread accounts                                                           (8,070)              (18,066)
   Capital expenditures                                                                  (403)                 (406)
                                                                                ------------------    ------------------
                 Net cash provided by investing activities                             10,683                31,263
                                                                                ------------------    ------------------

Cash flows from financing activities:
   Principal payment on term debt                                                     (21,667)                    -
   Stock options exercised                                                                526                     -
   Issuance of common stock, net of offering costs of $1,525                                -                86,475
   Issuance of term debt                                                               11,000
   Net change in notes payable                                                        126,216              (221,842)
   Payment of borrowing fees                                                           (1,652)                    -
                                                                                ------------------    ------------------
                 Net cash provided by (used in) financing activities                  114,423              (135,367)
                                                                                ------------------    ------------------

Change in cash and cash equivalents                                                     2,382                64,493

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

Cash and cash equivalents, end of period                                             $ 16,626              $ 70,939
                                                                                ==================    ==================

Supplemental disclosures of cash flow information:
Income taxes paid                                                                     $ 2,323                 $ 463
Interest paid                                                                         $ 7,251              $ 14,054

</TABLE>

See accompanying notes to consolidated condensed financial statements.
<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Six Months Ended June 30, 2002
(Dollars in thousands, except per share data)
(Unaudited)

<TABLE>
<CAPTION>

                                                                        Accumulated
                                           Number of                       Other                          Total
                                         Common Stock      Common      Comprehensive      Retained    Shareholders'
                                         Outstanding        Stock     Earnings (Loss)     Earnings        Equity
                                       ----------------  ------------ -----------------  ------------ ---------------

<S>                 <C> <C>               <C>              <C>             <C>            <C>            <C>
Balance at December 31, 2001              30,926,606       $145,374        $ 450          $ 28,876       $ 174,700

Comprehensive loss:
  Net loss                                         -              -            -           (10,218)        (10,218)
  Net unrealized loss on retained
     interest in securitized assets                -              -         (775)                -            (775)
  Income taxes related to unrealized
     loss in securitized assets                    -              -          283                 -             283
                                                                                                      ---------------
Total comprehensive loss                                                                                   (10,710)
Stock options exercised                       92,544            526            -                 -             526
                                       ----------------  ------------ -----------------  ------------ ---------------
Balance at June 30, 2002                  31,019,150       $145,900        $ (42)          $ 18,658      $ 164,516
                                       ================  ============ =================  ============ ===============

</TABLE>


See accompanying notes to consolidated condensed financial statements.

<PAGE>

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) and is  included  in the Gain (loss) on sales of
receivables,  net.  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.  The
Company  did not  record any  charges  related to the  revaluation  of  Retained
Interest during the quarter ended June 30, 2002.

<PAGE>

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  during  the  quarter  ended  March 31,  2002  which more fully
incorporate  the  effects of recent  economic  events and trends.  Although  the
existing  loss curves were 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,  recessionary  economic
trends,  and other events.  At June 30, 2002,  the Company  again  evaluated the
current loss curves and determined that the total expected future loss estimates
were  appropriate.  Except for the one remaining  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 June 30, 2002.

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's  prepayment  assumptions include
estimates for both voluntary prepayments and involuntary prepayments as a result
of  default.  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 June 30, 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,  the Company  utilizes a
forward interest rate curve 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 that the Company  believes are
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 June 30, 2002 was 9.67% compared to 10.87% at
December 31, 2001.

In the  quarter  ended  June 30,  2001,  the  Company  recorded  a charge  for a
cumulative effect of a change in accounting  principle of $989,000 (net of taxes
of $568,000). This charge related to the implementation of the provisions of the
Emerging Issues Task Force Issue No. 99-20,  "Recognition of Interest Income and
Impairment  of  Purchased  and  Retained  Beneficial  Interests  in  Securitized
Financial  Assets",  ("EITF 99- 20"). EITF 99-20 set forth rules for recognizing
interest  income and  determining  when  securities must be written down to fair
value  because of other than  temporary  impairments.  EITF 99-20  requires  the
prospective  method of adjusting  the  recognition  of interest  income when the
anticipated  cash flows have either  increased or  decreased.  Anticipated  cash
flows can change as a result of  factors  such as credit  losses and  prepayment
rates.  Under the provisions of EITF 99-20,  an other than temporary  impairment
must be recorded when the  anticipated  cash flows have decreased since the last
estimate and the fair value of the  Retained  Interest is less than the carrying
value.

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

<TABLE>
<CAPTION>
                                                                  June 30,     December 31,
                                                                   2002           2001
                                                                -----------   --------------
Estimated gross interest spread from receivables,
<S>                                                             <C>           <C>
  net of estimated prepayments and fees                         $   246,068   $   285,207
Estimated dealer premium rebates refundable                           6,384         9,335
Estimated credit losses on securitized receivables                 (127,879)     (152,985)
Accelerated principal (1)                                            28,823        28,823
Spread accounts                                                      99,463        91,393
                                                                -----------   --------------
  Total estimated future undiscounted cash flows                    252,859       261,773
Less:  Discount to present value                                    (59,746)      (63,522)
                                                                -----------   --------------
  Total Retained Interest in Securitized Assets                 $   193,113   $   198,251
                                                                ===========   ==============

Outstanding balance of securitized receivables serviced         $ 2,429,066   $ 2,788,006
                                                                ===========   ==============
Estimated credit losses as a percentage of
  securitized receivables serviced                                     5.26%         5.49%
Weighted average discount rate                                         9.67%        10.87%
Weighted average original contract life (in months)                    75.5          75.3


</TABLE>


(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
$226.5  million  and $100.3  million at June 30,  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 and is subject to certain  funding  conditions.  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.

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:

<TABLE>
<CAPTION>

                                                Quarter ended June 30,           Six months ended June 30,
                                            --------------------------------    ----------------------------
                                                 2002              2001            2002            2001
                                            ---------------    -------------    ------------    ------------

<S>                  <C>                        <C>                 <C>           <C>               <C>
Anti-dilutive effect (1)                        140,473             8,796         66,487            7,208
Exercise price greater than fair value          685,069           993,263        759,055          994,851
                                            ---------------    -------------    ------------    ------------
                                                825,542         1,002,059        825,542        1,002,059
                                            ===============    =============    ============    ============

</TABLE>


(1) The  calculation  for  dilutive  earnings  per share for the quarter and six
months ended June 30, 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  and six months
ended June 30, 2002 and June 30, 2001.

<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 39
states  from over 5,900  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  $193.2 million of receivables  for the quarter ended June
30, 2002, a 2.8% decrease from the $198.8  million  acquired  during the quarter
ended June 30, 2001.  The Company's  decrease in  acquisitions  from the quarter
ended June 30, 2001 was  primarily  attributed  to  management's  discipline  in
pricing its receivables.  This discipline in the Company's  pricing has resulted
in a  significantly  lower number of application  for the quarter ended June 30,
2002 when  compared to the quarter  ended June 30,  2001,  but this  decrease in
applications  has been partially  offset by higher approval and contract cashing
ratios.  The  Company  anticipates  a  softening  in the used car  market in the
quarter ended September 30, 2002 due to the return of the auto  manufacturers 0%
financing  for longer terms on new car sales  beginning  in July 2002.  Although
market  conditions  do not appear to be as favorable  for the used car market in
the September 2002 quarter as previously projected,  management still intends to
maintain its receivable acquisitions near the current level within the Company's
risk-based  pricing  parameters.  During July 2002,  the company  acquired $85.7
million of receivables. See "Discussion of Forward-Looking Statements."

During the quarter  ended June 30, 2002,  the Company  implemented  an automated
application   process   which  allows  the  dealer  to  submit  an   application
electronically instead of utilizing a facsimile machine.  Approximately 32.2% of
the total  applications  received  during  the month of June 2002 were  received
utilizing the electronic submission process.

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 three quarters of high quality  receivables priced to
support the Company's  targeted return on managed assets ("ROMA") 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. 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 sixth version in the June 2002 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  incorporate   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 support a ROMA 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 702 and
693 for the quarters ended June 30, 2002 and 2001, respectively.  As of June 30,
2002  approximately  35% of the  outstanding  portfolio  was  priced  at a level
estimated  to  support  ROMA  at  or  above   1.50%,   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  determine  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."

<PAGE>

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.  The Company
believes that the following  represents  the more critical  accounting  policies
used  in  the  preparation  of  its  consolidated   financial  statements.   See
"Discussion of Forward-Looking 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 six months ended June 30, 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 is positioning itself to move away from gain on sale accounting with
the  goal of  structuring  the  next  securitization  transaction  as a  secured
financing  and  recording it on balance  sheet.  In general,  when an on balance
sheet secured financing is effected,  the Company will not record a gain on sale
at the time of the securitization.  In addition, the receivables  transferred in
the  securitization and the associated debt will be recorded on its consolidated
balance sheet. Also, a provision for estimated credit losses will be recorded on
its consolidated financial statements.  Although this change in the structure of
the   Company's   securitizations   will  impact  the   accounting   for  future
securitizations,  the  accounting  for  existing  securitizations  will  not  be
impacted.  The Company  believes  that by accounting  for future  securitization
transactions  in  this  manner  the  Company's  reported  earnings  will be less
dependent on  subjective  estimates and cash flow  projections,  and the Company
will be able to provide more readily understandable  financial information about
its  operating   results.   Management   believes  that  accounting  for  future
securitization  transactions  as  secured  financings  is in the long  term best
interest of 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 and such amounts are  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.  The
Company  did not  record any  charges  related to the  revaluation  of  Retained
Interest during the quarter ended June 30, 2002.

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  during  the  quarter  ended  March 31,  2002  which more fully
incorporate  the  effects of recent  economic  events and trends.  Although  the
existing  loss curves were 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,  recessionary  economic
trends,  and other events.  At June 30, 2002,  the Company  again  evaluated the
current loss curves and determined that the total expected future loss estimates
were  appropriate.  Except for the one remaining  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 June 30, 2002. See the pool specific net credit loss  assumptions in
the "Asset Quality" section below.

<PAGE>

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's  prepayment  assumptions include
estimates for both voluntary prepayments and involuntary prepayments as a result
of  default.  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 June 30, 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,  the Company  utilizes a
forward interest rate curve 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 that the Company  believes are
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 June 30, 2002 was 9.67% 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 $3.3
million,  or $0.11 per  diluted  share,  for the  quarter  ended June 30,  2002,
compared  to net loss of $9.2  million,  or $0.55  per  diluted  share,  for the
quarter ended June 30, 2001.  The change from the same quarter of the prior year
is primarily due to the recording of a $23.7 million charge for the  revaluation
of retained  interest during the quarter ended June 30, 2001. This was offset by
the fact that the Company did not effect a securitization, experienced a loss on
interest rate derivatives on held for sale receivables,  and experienced a lower
net interest  margin during the quarter ended June 30, 2002 compared to June 30,
2001. The decrease in the net interest margin was primarily the result of a $3.8
million decrease in discount accretion. Discount accretion for the quarter ended
June 30, 2002 was $5.1 million  compared to $8.9  million for the quarter  ended
June 30, 2001.  The change in the gain (loss) on interest  rate  derivatives  on
securitized  receivables was primarily the result of decreases in interest rates
from the time of the initiation of the derivative  agreements.  The gain on sale
of  receivables,  net was zero for the quarter  ended June 30, 2002  because the
Company  did not effect a  securitization  in the quarter and did not record any
change in the valuation of retained  interest.  This compares to a loss on sales
of  receivables,  net of $13.9 million for the quarter ended June 30, 2001 which
was primarily  comprised of a $10.1 million gain on sale of receivables,  net of
$23.7 million of other than temporary impairment.

For the six months ended June 30, 2002, the net loss was $10.2 million, or $0.33
per share,  compared to a net loss of $2.6 million,  or $0.18 per share, for the
six months ended June 30, 2001.  The decrease is primarily  the result of a $6.4
million  decrease in discount  accretion and a $10.5 million increase in loss on
sale of receivables,  net. Discount  accretion for the six months ended June 30,
2002 was $10.9  million  compared to $17.3 million for the six months ended June
30, 2001. The loss on sale of receivables, net for the six months ended June 30,
2002 was $11.6  million,  compared to a loss of $1.1  million for the six months
ended June 30, 2001.  The loss on sale of  receivables  for the six months ended
June  30,  2002  is  primarily  comprised  of  $7.2  million  of gain on sale of
receivables,  net of $18.8 million of other than temporary impairment,  compared
to loss on sale of receivables  primarily  comprised of $25.8 million of gain on
sale of receivables, net of $26.5 million of other than temporary impairment for
the six months ended June 30, 2001.

<PAGE>
<TABLE>
<CAPTION>

                                          Quarter ended June 30,              Six months ended June 30,
                                    ----------------------------------    ----------------------------------
                                         2002               2001              2002                2001
                                    ---------------     --------------    --------------     ---------------
                                               (Dollars in thousands, except per share amounts)

<S>                                  <C>                 <C>                <C>                 <C>
Net earnings (loss)                  $ (3,291)           $ (9,163)          $ (10,218)          $ (2,629)
Net earnings (loss) per share        $  (0.11)           $  (0.55)          $   (0.33)           $ (0.18)
  (basic and diluted)

</TABLE>



Interest on receivables  held for sale  increased  34.3% to $5.2 million for the
quarter ended June 30, 2002, compared to $3.8 million for the quarter ended June
30, 2001.  The increase from the prior quarter  related to a higher average held
for sale  portfolio  during the  quarter  ended June 30,  2002  compared  to the
quarter  ended June 30, 2001 as shown in the following  table.  The average held
for sale portfolio  increased during the quarter ended June 30, 2002 compared to
the quarter ended June 30, 2001 primarily as a result of no securitization being
effected in the quarter  ended June 30, 2002.  For the six months ended June 30,
2002,  interest on receivables  held for sale  decreased  25.0% to $10.9 million
from $14.6 million for the six months ended June 30, 2001. The decrease from the
prior six month  period  ended June 30, 2001 is  primarily  attributed  to lower
weighted  average  contract  rates  during  the six months  ended June 30,  2002
compared to those  experienced in the same period ended June 30, 2001.  Interest
rates were near historical lows during the six months ended June 30, 2002.

<TABLE>
<CAPTION>

                                               Quarter ended June 30,          Six months ended June 30,
                                            ------------------------------   ------------------------------
                                                2002             2001            2002             2001
                                            -------------    -------------   -------------    -------------

<S>                                          <C>               <C>            <C>              <C>
Average held for sale (in thousands)         $ 219,803         $ 76,186       $ 213,689        $ 201,803
Weighted average contract rate                   10.95%           12.56%          10.94%           12.91%

</TABLE>


Retained  interest and other interest income decreased 43.2% to $5.1 million and
decreased  36.9% to $10.9  million for the quarter and six months ended June 30,
2002,  respectively,  compared to $8.9 million and $17.3 million for the quarter
and six  months  ended  June 30,  2001,  respectively.  The  accretion  rate has
decreased on all impaired pools as the book value and associated  expected total
future cash flows were  adjusted  in  connection  with the other than  temporary
impairments taken in previous  quarters.  The individual  components of Retained
interest and other interest income are shown in the following table:

<TABLE>
<CAPTION>

                                       Quarter ended June 30,             Six months ended June 30,
                                  ---------------------------------   ----------------------------------
                                      2002               2001             2002                2001
                                  --------------     --------------   --------------     ---------------
                                           (In thousands)                      (In thousands)

<S>                                 <C>                <C>             <C>                 <C>
Discount accretion                  $ 5,038            $ 8,676         $ 10,822            $ 16,946
Other interest income                    34                258              106                 367
                                  --------------     --------------   --------------     ---------------
                                    $ 5,072            $ 8,934         $ 10,928            $ 17,313
                                  ==============     ==============   ==============     ===============
</TABLE>


Interest  expense  decreased  15.9% to $4.5 million and decreased  38.2% to $8.8
million  for the  quarter  and six  months  ended June 30,  2002,  respectively,
compared to $5.4 million and $14.3  million for the quarter and six months ended
June 30,  2001,  respectively.  Interest  expense for the quarter and six months
ended  June 30,  2002  decreased  due to lower term debt  interest  expense as a
result of the required $22.0 million and $21.7 million  principal  payments made
on the  Company's  term debt in August  2001 and March 2002,  respectively,  and
lower  warehouse  expense as a result of lower  acquisitions  of $402.6  million
during  the six  months  ended  June 30,  2002  compared  to $534.4  million  of
acquisitions for the same period ended June 30, 2001.

<PAGE>

Provision for estimated  credit losses  increased  61.1% to $1.2 million for the
quarter  ended June 30, 2002,  compared to $715,000 for the same period of 2001.
The increase for the quarter ended June 30, 2002 over the corresponding  quarter
is primarily  due to the increase in the level of  receivables  held for sale at
June 30, 2002 compared to June 30, 2001.  The  provisions  for losses  increased
108.3% for the six months  ended June 30, 2002 to $2.1 million from $1.0 million
for the six months ended June 30, 2001. This increase is primarily the result of
not effecting a securitization in the June 2002 quarter compared to the delivery
of receivables into a  securitization  during the month of April 2001 related to
the 2001-A  securitization and the delivery of receivables into a securitization
during the month of June 2001 related to the 2001-B securitization.

Gain (loss) on sale of receivables,  net. The loss on sale of  receivables,  net
was zero and $11.6  million for the quarter and six months  ended June 30, 2002,
respectively,  compared  to a loss of $13.9  million  and $1.1  million  for the
corresponding  periods  ended  June  30,  2001,  respectively.   There  were  no
securitizations  or charges for the revaluation of retained  interest during the
quarter  ended June 30, 2002.  The loss on sale of  receivables  for the quarter
ended June 30, 2001 is primarily  comprised  of a $10.1  million gain on sale of
receivables,  net of $23.7 million of other than temporary impairment.  The loss
on sale of receivables,  net for the six months ended June 30, 2002 is primarily
comprised of a $7.2 million  gain,  net of $18.8  million  other than  temporary
impairment  compared to a $25.8  million  gain,  net of $26.5 million other than
temporary  impairment  for the six  months  ended June 30,  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."

Gain (loss) on sale of  receivables,  net for the six months ended June 30, 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  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  positioning  itself to move away from gain on
sale accounting  with the goal of structuring the next  transaction as a secured
financing  and  recording  it on balance  sheet.  The Company  believes  that by
accounting  for  future  transactions  in this  manner  the  Company's  reported
earnings  will  be  less  dependent  on  fundamental  estimates  and  cash  flow
projections, and the Company will be able to provide more readily understandable
financial information about the Company's operating results. Management believes
this change is in the long term best  interest  of the  Company.  See  "Critical
Accounting Policies" and "Discussion of Forward-Looking Statements."


<PAGE>

Selected Securitization Data (1) (2):                 Quarter ended
                                                    ------------------
                                                      June 30, 2001
                                                    ------------------

                                                        2001 - B

Original amount (in millions)                            $150.0
Weighted average receivable rate                         12.61%
Weighted average certificate rate                         5.19%
Gross spread (3)                                          7.42%
Net spread (4)                                            5.01%
Weighted average remaining maturity (in months)           74.4
Weighted average estimated life (in years)                2.05
Annual credit loss assumption (5)                         2.32%
Cumulative credit loss assumption                         4.75%
Average prepayment speed assumption (6)                  28.60%
Discount rate assumption                                 13.25%

(1)  The Company did not effect a  securitization  during the quarter ended June
     30, 2002.
(2)  Information at time of securitization.
(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.

Gain (loss) on interest rate derivatives on securitized  receivables.  There was
no gain (loss) on interest rate  derivatives on securitized  receivables for the
quarter ended June 30, 2002,  compared to a loss of $2.4 million for the quarter
ended  June  30,  2001,  due to the  fact  that  the  Company  did not  effect a
securitization during the quarter ended June 30, 2002. The loss on interest rate
derivatives  on securitized  receivables  for the six months ended June 30, 2002
was $1.0  million,  compared to $12.8  million for the six months ended June 30,
2001. This decrease was primarily the result of the interest rate environment at
the time of the securitization  during the quarter ended March 31, 2002 compared
to that in the six months  ended June 30,  2001 as well as a new  strategy  that
seeks  the most  effective  hedge  instrument  while  minimizing  cash  outflows
utilized  during  the six  months  ended  June  30,  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 $5.3 million
and  $5.7  million  for  the  quarter  and  six  months  ended  June  30,  2002,
respectively,  compared to a gain on interest rate  derivatives on held for sale
receivables  of $1.6  million  and $4.8  million  for the quarter and six months
ended June 30, 2001  respectively.  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.  These
changes  in the  fair  value  of  interest  rate  derivatives  on held  for sale
receivables  result in a cash impact at the time a  securitization  is effected.
This cash impact is mostly  offset over the life of the  securitization  because
the same change in market rates  generally  result in a higher or lower  average
interest  rate on the notes issued in the  securitization.  See  "Discussion  of
Forward-Looking   Statements"  and  "Item  3  -  Quantitative   and  Qualitative
Disclosures About Market Risk."

Servicing  fee  income  is  the  contractual  fee,   typically  one  percent  of
receivables  serviced,  earned from each trust.  Servicing fee income  decreased
18.0% to $6.6 million  income for the quarter  ended June 30, 2002,  compared to
$8.0 million for the quarter ended June 30, 2001. Servicing fees decreased 15.5%
to $13.4  million  for the six months  ended  June 30,  2002  compared  to $15.9
million for the six months ended June 30, 2001.  The decrease in servicing  fees
for the  quarter  ended June 30,  2002 is a result of the 20.3%  decrease in the
average  securitized  servicing  portfolio of $2.5 billion for the quarter ended
June 30, 2002 compared to $3.2 billion for the quarter ended June 30, 2001.  The
decrease in servicing fees for the six months ended June 30, 2002 is a result of
the 16.6%  decrease  in the  average  securitized  servicing  portfolio  of $2.6
billion for the six months ended June 30, 2002  compared to $3.1 billion for the
six months ended June 30, 2001.

Late charges and other fees increased  51.6% to $2.4 million and increased 32.8%
to  $4.6   million  for  the  quarter  and  six  months  ended  June  30,  2002,
respectively,  from $1.6 million and $3.5 million for the quarter and six months
ended June 30, 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 and six months ended June 30, 2002
over the quarter  and six months  ended June 30, 2001  resulted  primarily  from
increased phone pay fees.

Total  operating  expenses  decreased  8.1% and 8.9% to $13.3  million and $26.7
million  for the  quarter  and six  months  ended June 30,  2002,  respectively,
compared to $14.5 million and $29.3 million for the quarter and six months ended
June 30,  2001,  respectively.  During the  quarter  ended  December  31,  2001,
management  implemented several expense reduction initiatives and the Company is
experiencing  some of the  benefits  of these  initiatives  which  are  aimed at
lowering the operating  expense ratio 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.
Given the recent trends resulting from these initiatives, management anticipates
the Company may experience a potential of $7.0 million reduction in expenses for
the twelve months ended  December 31, 2002 compared to the similar  period ended
December 31, 2001.  Management continues to evaluate the Company's processes for
additional  efficiencies in its operations.  See "Discussion of  Forward-Looking
Statements."

Total operating expenses as a percentage of the average servicing  portfolio was
1.94%  and  1.90%  for  the  quarter  and  six  months   ended  June  30,  2002,
respectively,  compared to 1.78% and 1.77% for the quarter and six months  ended
June 30, 2001, respectively.  The increase in operating expenses as a percentage
of the  average  servicing  portfolio  can be  attributed  to a 15.4%  and 15.2%
decrease  in the  average  servicing  portfolio  over the quarter and six months
ended June 30, 2001, respectively.

Salaries  and  benefits  decreased  10.4%  and 13.2% to $7.7  million  and $15.2
million for the quarter and six months ended June 30, 2002,  respectively,  from
$8.6  million and $17.5  million  for the quarter and six months  ended June 30,
2001,  respectively.  The decrease for the quarter and six months ended June 30,
2002 was primarily related to the staff reductions, thereby lowering payroll and
related tax  expenses  but was  partially  offset by  approximately  $488,000 of
severance payments related to the staff reductions.

Provision for income taxes were a $1.8 million and $5.8 million  benefit for the
quarter  and six months  ended June 30,  2002,  respectively,  compared  to $4.7
million and $868,000 benefit for the corresponding  quarter and six months ended
June 30, 2001.  The change for the quarter and six months is the result of a net
loss before  income taxes of $5.1 million and $16.0  million for the quarter and
six months ended June 30, 2002, respectively, compared to net loss before income
taxes of $12.8  million and $2.5  million  for the quarter and six months  ended
June 30, 2001, respectively.

Cumulative effect of change in accounting  principle.  In the quarter ended June
30, 2001, the Company  recorded a charge for a cumulative  effect of a change in
accounting principle of $989,000 (net of taxes of $568,000). This charge related
to the  implementation of the provisions of the Emerging Issues Task Force Issue
No.  99-20,  "Recognition  of Interest  Income and  Impairment  of Purchased and
Retained Beneficial Interests in Securitized Financial Assets",  ("EITF 99-20").
EITF 99-20 set forth rules for recognizing  interest income and determining when
securities  must be written down to fair value  because of other than  temporary
impairments.  EITF  99-20  requires  the  prospective  method of  adjusting  the
recognition  of  interest  income  when the  anticipated  cash flows have either
increased or decreased. Anticipated cash flows can change as a result of factors
such as credit losses and prepayment rates.  Under the provisions of EITF 99-20,
an other than temporary  impairment must be recorded when the  anticipated  cash
flows have decreased  since the last estimate and the fair value of the Retained
Interest is less than the carrying value.

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

The principal  balance for receivables  held for sale, net is higher at June 30,
2002 than at December 31, 2001 primarily because the Company elected to forego a
securitization  during the quarter  ended June 30,  2002.  Selected  information
regarding the Receivables held for sale, net and the servicing portfolio at June
30, 2002 and December 31, 2001 is summarized in the following table:


                                       June 30,                 December 31,
                                         2002                       2001
                                   -------------------       -------------------
                                                   (In thousands)

Receivables held for sale, net        $ 286,533                 $ 176,511
Allowance for net credit losses          (1,837)                   (2,054)
Securitized assets serviced           2,429,066                 2,788,006
Total servicing portfolio             2,711,803                 2,962,075


Retained interest in securitized assets ("Retained Interest"). Retained Interest
decreased $5.2 million to $193.1  million at June 30, 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)             14,755
Collections                                                         (19,156)
Accretion of discount                                                10,804
Change in spread accounts                                             8,070
Other than temporary impairments                                    (18,836)
Net change in unrealized gain                                          (775)
                                                               -------------

Balance at June 30, 2002                                          $ 193,113
                                                               =============




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

Balance at December 31, 2001                                       $ 91,393

Net excess cash flows deposited to spread accounts                   19,686
Initial spread account deposits                                       2,850
Interest earned on spread accounts                                      831
Less:  excess cash flows released to the Company                    (15,297)
                                                               -------------

Balance at June 30, 2002                                           $ 99,463
                                                               =============



Allowance  for net credit  losses on  securitized  receivables  is included as a
component of Retained  Interest.  At June 30, 2002,  the  allowance  relating to
securitized   receivables   totaled  $127.9  million,  or  5.26%  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):

                                                  June 30,          December 31,
                                                    2002                2001
                                              -----------------   --------------
Repossessed assets                                $ 5,900             $ 9,566
Accrued servicing fees                              4,571               3,086
Current and deferred income tax receivable         18,869               9,201
Other                                               7,194              11,808
                                              -----------------   --------------
                                                 $ 36,534            $ 33,661
                                              =================   ==============

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 six months ended June 30, 2002.
The  decrease in other is  primarily  the result of the hedging  activities.  At
December 31, 2001,  the fair value of the interest  rate caps was  approximately
$4.0  million and was included on the balance  sheet as an other asset.  At June
30,  2002,  the fair value of the  interest  rate  derivatives  on held for sale
receivables  was a liability of  approximately  $4.9 million and was included in
Other payables and accrued expenses.

The Company  utilizes  interest  rate caps in projected  falling  interest  rate
environments  and uses  interest  rate swaps in projected  rising  interest rate
environments.  The fair value of interest  rate  derivatives  is recorded on the
balance  sheet.  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.  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 $226.5  million at June 30, 2002,  compared to $100.3 million
at December 31, 2001.  The increase is the result of the Company not effecting a
securitization in the June 2002 quarter.

Term debt was $122.3  million at June 30,  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 offset by the
$11.0 million of privately  issued senior notes by the Company  during May 2002.
The Company  retired the  remaining  $22.0 million of its senior notes issued in
August 1995 on August 1, 2002.


Liquidity and Capital Resources

Sources and Uses of Cash in  Operations.  Net cash used in operating  activities
was $122.7  million  compared to net cash  provided in operating  activities  of
$168.6  million for the six months  ended June 30, 2002 and 2001,  respectively.
The change was primarily  attributable  to lower  receivables  securitized  than
acquired  during the six months  ended June 30, 2002  compared to the six months
ended June 30, 2001. Net cash provided by investing activities was $10.7 million
and $31.3 million for the six months ended June 30, 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  provided by
financing  activities  for the six months ended June 30, 2002 was $103.4 million
compared to net cash used in financing  activities of $135.4 million for the six
months ended June 30, 2001. The primary factor for this change is the difference
in  the  timing  of  the  securitizations  and  receivables  acquisition  volume
subsequent  to each  securitization  for the six  months  ended  June  30,  2002
compared  to the quarter  ended June 30, 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 June 30, 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 $349.0
million was utilized at June 30, 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 and its residual credit facility 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 financial condition
and projected  receivable  acquisition  growth may be impaired 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 six months ended June 30, 2002,  derivative  financial  instrument
transactions  used cash of $1.0 million  compared to cash used of $12.8  million
during the six months ended June 30, 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  $550.0  million  to fund
receivable acquisitions. A $350.0 million credit facility is insured by a surety
bond while a $200.0  million  credit  facility is not. At June 30, 2002,  $226.5
million of the  capacity  was  utilized,  and an  additional  $46.4  million was
available  to borrow  based on the  outstanding  principal  balance of  eligible
receivables. The Company is currently in the process of renewing both facilities
which are set to expire in August 2002. 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  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.  The Company will continue to evaluate its future  warehouse  needs. See
"Discussion of Forward-Looking Statements."


 Credit Facility          Outstanding              Expiration
    Capacity            at June 30, 2002              Date
------------------   -----------------------   -------------------
               (in millions)
     $ 350.0                 $226.5               August 2002
     $ 200.0                  None                August 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.  This facility is subject to funding
conditions.

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 was payable semiannually, and principal payments of $22.0 million began on
August 1, 1998 and were due  annually  on August 1 until  maturity.  The Company
made its final  principal  payment on these  notes on August 1,  2002.  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 5.53% as of June 30, 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 June 30, 2002,  the Company had term
debt obligations  totaling  approximately $122.3 million, of which $22.0 million
was paid on August 1, 2002, and $43.3  million,  $46.0 million and $11.0 million
is due in December 2002, March 2003 and April 2007, respectively. As part of the
Company's overall refinancing plan related to its term debt, its current capital
resources include available cash and borrowing capacity of approximately  $112.0
million.  Of this amount,  $49.0 million  would be available  under the residual
facility,  which is subject to funding  conditions.  Most notably,  availability
under  this  facility  will  decline to $27.0  million if $22.0  million of this
facility is not syndicated by October 2002.  Management is in negotiations  with
potential  lenders to accept this  position.  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  accommodate  the  Company's  cash
requirements.  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,  performance  trigger  events
within the  securitizations  which may  restrict  the  release  of cash,  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. 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
                                  --------------------------------------------------------------------------------------------------

                                  June 30, 2002              March 31, 2002              December 31, 2001          June 30, 2001
                                  -------------------------- --------------------------  -------------------------- ----------------
                                                                             (Dollars in thousands)

                                     Number of               Number of              Number of                 Number of
                                   Receivables   Amount    Receivables   Amount    Receivables   Amount     Receivables    Amount
                                   -----------   ------    -----------   ------    -----------   ------     ------------   -------

<S>                                 <C>        <C>           <C>       <C>           <C>        <C>            <C>       <C>
Average servicing portfolio         224,928    $2,750,719    234,476   $2,871,966    245,563    $3,027,302     261,498   $3,251,799

Gross charge-offs                     3,584    $   44,146      4,531   $   54,075      4,169    $   47,776       2,903   $   36,888
Recoveries                                         16,104                  20,101                   14,600                   13,256
                                             ------------              ----------               ----------               -----------
  Net charge-offs                              $   28,042              $   33,974               $   33,176               $   23,632
                                             ============              ===========              ==========               ===========

Gross charge-offs as a
  percentage of average
  servicing portfolio (1)              6.37%         6.42%      7.73%        7.53%      6.79%         6.31%       4.44%        4.54%
Recoveries as a percentage of
  gross charge-offs                                 36.48%                  37.17%                   30.56%                   35.94%
Net charge-offs as a percentage
  of average servicing
   portfolio (1)                                    4.08%                    4.73%                    4.38%                    2.91%
    (1) Annualized

</TABLE>

<TABLE>
<CAPTION>

                                                                    Credit Loss Experience
                                                                   For the Six Months Ended
                                      -----------------------------------------------------------------------------------

                                      June 30, 2002               December 31, 2001           June 30, 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             229,702      $ 2,811,342    250,025     $ 3,089,247      265,258     $ 3,315,391

Gross charge-offs                         8,115         $ 98,221      7,807        $ 94,428        6,054        $ 75,092
Recoveries                                                36,205                     32,304                       29,393
                                                  ---------------             --------------               --------------
  Net charge-offs                                       $ 62,016                   $ 62,124                     $ 45,699
                                                  ===============             ==============               ==============

Gross charge-offs as a percentage
  of average servicing portfolio (1)      7.07%            6.99%      6.25%           6.11%        4.56%           4.53%
Recoveries as a percentage of
  gross charge-offs                                       36.86%                     34.21%                       39.14%
Net charge-offs as a percentage
  of average servicing portfolio (1)                       4.41%                      4.02%                        2.76%
    (1) Annualized


</TABLE>

<TABLE>
<CAPTION>

                                                                   Delinquency Experience
                             ----------------------------------------------------------------------------------------------------

                                 At June 30, 2002        At March 31, 2002        At December 31, 2001       At June 30, 2001
                             ------------------------- -----------------------   -----------------------  -----------------------
                                                                   (Dollars in thousands)

                               Number of                 Number of                 Number of                Number of
                              Receivables   Amount      Receivables    Amount     Receivables    Amount    Receivables    Amount
                             ----------  ------------- ------------- ----------   ------------ ---------  ------------- ----------

<S>                            <C>         <C>           <C>       <C>             <C>       <C>            <C>       <C>
Servicing portfolio            221,884     $2,711,525    231,676   $2,838,139      241,178   $2,961,737     258,852   $3,210,336
Delinquencies:
  30-59 days                     5,260       $ 61,235      5,665     $ 66,393        7,329     $ 84,748       5,476     $ 62,999
  60-89 days                     2,614         31,052      2,641       33,105        3,605       44,100       2,938       36,856
  90 days or more                  906         10,561      1,000       11,517        1,504       17,121       1,233       14,871
                             ----------  ------------- -----------------------   -----------------------  -----------------------
Total delinquencies              8,780      $ 102,848      9,306    $ 111,015       12,438    $ 145,969       9,647    $ 114,726
                             ==========  ============= =======================   =======================  =======================

Delinquency as a percentage
  of servicing portfolio         3.96%          3.79%      4.02%        3.91%        5.16%        4.93%       3.73%        3.57%

Delinquency as a percentage
  of servicing portfolio
  excluding bankruptcies                        3.14%                   3.14%                     4.12%                    2.73%

</TABLE>


Net credit losses as a percentage of the average servicing  portfolio were 4.08%
for the quarter  ended June 30,  2002,  a decrease  from 4.73% and 4.38% for the
quarters  ended March 31,  2002 and  December  31,  2001,  respectively,  and an
increase from 2.91% for the quarter ended June 30, 2001.  The decrease in losses
for the  quarter  ended  June 30,  2002  compared  to the prior  quarter  can be
primarily attributed to the effectiveness of the improved collection  activities
and lower  delinquency  at March 31, 2002.  Net credit losses as a percentage of
the average servicing portfolio increased to 4.41% for the six months ended June
30, 2002 compared to 4.02% and 2.76% for the six months ended  December 31, 2001
and June 30, 2001, respectively. The increase in losses for the six months ended
June 30,  2002  can  primarily  be  attributed  to the  remaining  effects  of a
recessionary  economy in the quarter  ended March 31,  2002,  offset by improved
collection  activities  in the  quarter  ended  June 30,  2002.  These  external
economic factors along with the aging of the portfolio  combined to increase the
Company's net credit losses for the six months ended June 30, 2002.

Recoveries as a percentage of gross charge-offs were 36.48%,  37.17%, 30.56% and
35.94% for the quarters ended June 30, 2002, March 31, 2002,  December 31, 2001,
and June 30, 2001, respectively.  Recovery rates dropped slightly from the March
2002 quarter to the June 2002 quarter due to a weaker used vehicle market as the
result of greater  incentives  offered by the auto manufacturers to customers to
purchase new  vehicles.  In addition,  the type of used  vehicles that have been
moving into the market tend to be the certified  pre-owned  vehicles  which meet
the  eligibility  requirements  to  be  financed  through  the  captive  finance
companies  currently offering the increased  incentives.  This movement can have
the effect of depressing the market for the remaining used vehicles.

As  indicated  in the above  table,  delinquency  rates  based upon  outstanding
receivable  balances of accounts 30 days past due and over decreased to 3.79% at
June 30, 2002 compared to 3.91% at March 31, 2002 and 4.93 at December 31, 2001,
and  increased  from  3.57%  at  June  30,  2001.  The  Company  attributes  the
improvement  this quarter  primarily  to the  Company's  technology  initiatives
instituted by 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 two
behavioral  scoring  models.  As  anticipated,  the Company began to witness the
improvement  in delinquency  trends  reflected in lower credit losses during the
June 2002 quarter. During each month for the six months ended June 30, 2002, the
collection   department  has   successfully   decreased  the  dollar  amount  of
delinquencies,  thus generating  fewer accounts to roll into loss in the future.
See "Discussion of Forward-Looking Statements."

One factor  that has  contributed  to the  higher  delinquency  and credit  loss
percentages from the same period last year is the declining servicing portfolio.
The total  servicing  portfolio  has been on a steady  decline for five quarters
dropping  from $3.2  billion at June 30, 2001 to $2.7  billion at June 30, 2002.
The total dollar delinquencies of $102.8 million at June 30, 2002 are the lowest
since  September  2000.  The total dollar net charge offs were $28.0 million for
the quarter  ended June 30, 2002,  the lowest level since the quarter ended June
30, 2001. The delinquency and quarterly  credit loss  percentages as of, and for
the quarter  ended June 30, 2002,  would be 3.20% and 3.45% using a twelve month
lag which  isolates the effect of the  portfolio  decline.  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 six months  ended June 30, 2002 was 4.50%,  compared to 4.75% for the
prior year  corresponding  period.  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
in the  "Acquisition  Volume and  Pricing"  section  above.  The  allowance  for
estimated  credit losses on all  securitized  receivables  (inherent in Retained
Interest)  was 5.26% at June 30,  2002,  compared to 5.67% at March 31, 2002 and
5.37% at June 30, 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 the quarter  ended  March 31, 2002 which more fully  reflect the
effects of the recent economic events and trends.  At June 30, 2002, the Company
again  evaluated the current loss curves and determined  that the total expected
future loss  estimates were  appropriate.  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."

Selected  information about the Company's active  securitizations  are presented
below:
<TABLE>
<CAPTION>

                                                               Remaining
                                                              Balance at        Net Loss       Expected
                                             Original          June 30,        to Original    Cumulative
            Securitizations                   Amount              2002          Balance        Net Loss
----------------------------------------------------------------------------- -------------  --------------
                                                                                  (1)             (2)
                                               Dollars in thousands)

<S>    <C>                                   <C>              <C>                 <C>             <C>
UACSC  2002-A Auto Trust                     $ 300,000        $ 260,549           0.13%           4.50%
UACSC  2001-C Auto Trust                       330,000          248,685           0.81%           4.75%
UACSC  2001-B Auto Trust                       150,002          102,556           1.32%           4.75%
UACSC  2001-A Auto Trust                       573,000          338,690           2.44%           6.05%
UACSC  2000-D Auto Trust                       510,001          281,283           3.24%           6.23%
UACSC  2000-C Auto Trust                       500,000          246,409           3.41%           6.36%
UACSC  2000-B Auto Trust                       534,294          251,814           4.76%           7.41%
UACSC  2000-A Auto Trust                       282,721          107,526           4.48%           6.51%
UACSC  1999-D Auto Trust                       302,693          107,131           6.06%           8.11%
UACSC  1999-C Auto Trust                       364,792          117,231           5.42%           7.02%
UACSC  1999-B Auto Trust                       340,233           95,215           5.81%           7.11%
UACSC  1999-A Auto Trust                       320,545           75,212           6.07%           7.01%
UACSC  1998-D Auto Trust                       275,914           52,944           5.25%           5.87%
UACSC  1998-C Auto Trust                       351,379           59,663           4.93%           5.40%
UACSC  1998-B Auto Trust                       267,980           36,265           4.38%           4.85%
UACSC  1998-A Auto Trust                       228,938           26,542           4.41%           4.79%
UACSC  1997-D Auto Trust (3)                   204,147           17,950           4.12%           4.75%
                                         ------------------------------------
  Total Tier I Securitized Trusts            5,836,639         2,425,665

PSC 1998-1 Grantor Trust                        28,659             3,401          10.57%         12.00%
                                         ------------------------------------
       Grand Total                         $ 5,865,298       $ 2,429,066
                                         ====================================
</TABLE>


(1)  Net loss to original balance at June 30, 2002.
(2)  Forward - looking information.
(3)  Pool was paid in full August 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,  availability of capital resources,  changes in interest rates, 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 June 30, 2002, the Company has an unrealized  hedging loss of
$4.9 million based on notional amounts  outstanding of $342.1 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 June 30, 2002:


                            Six months
                              ended
                            December 31,
                               2002        2003      2007     Total  Fair Value
                         -------------------------------------------------------
                                        (Dollars in thousands)

Notes Payable                $ 226,516   $    -             $ 226,51    $226,516
 Weighted average variable        4.03%

Term debt                    $  65,333   $ 46,000  $11,000  $122,333    $121,235
 Weighted average
     fixed rate                   8.05%      9.99%   12.00%    9.13%


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 June 30, 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)
                                 -----------------  -----------------  -----------------   -----------------
Impact on fair value of
<C>                                 <C>                 <C>                <C>                 <C>
10% adverse change                  $ (29,304)          $ (4,862)          $ (5,871)           $ (1,753)
20% adverse change                  $ (57,724)          $ (9,574)         $ (13,991)           $ (3,504)

</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."


Part II. Other Information

Item 1.  Legal Proceedings

The Company is a defendant in the cases of Lyndah Wise and Terrance  Wilson,  as
the  Administrator of the Estate of Jack Wilson v. Union Acceptance  Corporation
and Jesus Cortez and Alex Noboa v. Union Acceptance  Corporation,  both filed on
January 16, 2002 in the United States  District Court for the Southern  District
of Indiana.  The plaintiffs  claim,  in almost  identical  complaints,  that the
Company  violated the Equal Credit  Opportunity Act by adopting a credit pricing
system that has a discriminatory  impact on a protected class, African Americans
and Hispanics, respectively. Auto dealers and their customers who seek financing
through the dealer are free to  negotiate  the  interest  rate that applies to a
receivable,  within  applicable usury laws. If the rate negotiated by the dealer
exceeds the minimum  "buy rate" at which the Company is willing to purchase  the
receivable,  the dealer may be eligible to receive a higher  purchase price from
the Company, in excess of the amount financed, if the dealer chooses to sell the
receivable to the Company. This practice is common in the auto finance industry.
Plaintiffs allege that this practice  encourages  dealers to negotiate  interest
rates in excess of the buy rates and that this  results  in  minority  consumers
being  improperly  subjected to higher  interest  rates as compared to similarly
situated white consumers.

Plaintiffs  filed a motion  for class  certification  in both  cases on July 15,
2002.  The  Company  denies the  allegations  in both  complaints  and has filed
motions to dismiss in both cases.  The Company  believes the complaints  have no
merit and will vigorously defend these cases.


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

At the Company's  Annual Meeting of  Shareholders on May 14, 2002, the following
nominees were elected to the Board of Directors.


                                 Affirmative        Votes
                                    Votes          Withheld
                                --------------  ---------------

Lee N. Ervin                       20,080,011        46,450
Thomas C. Heagy                    20,079,711        46,750
William E. McKnight                20,079,511        46,950
Donald A. Sherman                  20,080,111        46,350




The following  proposal was approved at the Company's  Annual Meeting on May 14,
2002:

Ratification of appointment of auditors. Deloitte and Touche LLP was retained as
the Company's  auditors for the year ending December 31, 2002. The votes were as
follows:  20,112,210  Affirmative  Votes;  7,951 Negative Votes, and 6,300 Votes
Abstained.

Item 5.  Other Information

The Company has recently announced the following executive officer  appointments
and board changes:

     Lee N. Ervin has been appointed Chief Executive Officer, in addition to his
     status as President,  effective August 5, 2002. Michael G. Stout elected to
     step down as Chairman and Chief Executive Officer, but remains on the Board
     of Directors.  John M.  Eggemeyer,  an incumbent  director,  has been named
     Chairman of the Board of Directors effective August 5, 2002.


     Mark R.  Turner was named  Executive  Vice  President  and Chief  Financial
     Officer   effective  August  1,  2002.  Mr.  Turner  previously  served  as
     vice-president of corporate risk management for Ford Motor Credit Co.


     Stephen  D.  Saulnier  was named  Senior  Vice  President  of  Originations
     effective  July 8,  2002.  Mr.  Saulnier  previously  served as  executive
     manager of finance services at American Isuzu Motors, Inc.

     Phillip L. Cassata was named Senior Vice President of Sales effective March
     8, 2002. Mr. Cassata  previously served as corporate sales manager at Isuzu
     Motors Acceptance Corporation.

     Gary  Levine  was named  Senior  Vice  President  of  Business  Development
     effective  August 6, 2002. Mr. Levine  previously  served as executive vice
     president of the sub-prime  automobile  department of Amernican  Investment
     Bank.

Item 6.  Exhibits and Reports on Form 8-K

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

         4.1   Amendment  No. 2,  effective  July 1, 2002,  to the Note Purchase
               Agreement  dated as of March 24,  1997,  relating to Senior Notes
               due 2002.

         4.2   Amendment  No.  2,  effective  July 1,  2002,  to  Note  Purchase
               Agreements  dated  as  of  April  3,  1996,  relating  to  Senior
               Subordinated Notes due 2003.

        10.1   Employment   Agreement  dated  as  of  August  1,  2002,  between
               Registrant and Mark R. Turner.

        10.2   Employment   Agreement  dated  as  of  August  1,  2002,  between
               Registrant and Douglas E. Starkey.


     (b)  Reports on Form 8-K

          The Company filed no reports on Form 8-K during the quarter ended June
          30, 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


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


August 14, 2002                  By: /s/ Mark R. Turner
                                    --------------------------------------
                                    Mark R. Turner
                                    Treasurer, Chief Financial Officer and
                                    Executive Vice President

<PAGE>


                                  CERTIFICATION

Each of the undersigned officers hereby certifies, pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,
to his  knowledge,  (i) this report  fully  complies  with the  requirements  of
Section  13(a)  or  15(d) of the  Securities  Exchange  Act of 1934 and (ii) the
information  contained in this report fairly presents, in all material respects,
the  financial   condition  and  results  of  operations  of  Union   Acceptance
Corporation.


/s/ Lee N. Ervin                          /s/ Mark R. Turner
-----------------------------            ---------------------------------
Lee N. Ervin,                            Mark R. Turner,
President and Chief Executive Officer    Treasurer, Chief Financial Officer and
                                         Executive Vice President