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

                                    Form 10-Q

(Mark One)

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

                For the quarterly period ended September 30, 1998

                                       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                     (I.R.S. Employer Identification
of 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 November 13,1998

Class A Common Stock, without par value                 4,376,446 Shares
---------------------------------------                 ----------------
Class B Common Stock, without par value                 8,855,036 Shares
---------------------------------------                 ----------------



<PAGE>

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                      INDEX


                                                                            Page
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited) :

         Consolidated Condensed Balance Sheets as of
         September 30, 1998 and June 30, 1998                                  3

         Consolidated Condensed Statements of Earnings (Loss) and
         Comprehensive Earnings (Loss) for the Three Months Ended
         September 30, 1998 and 1997                                           4

         Consolidated Condensed Statements of Cash Flows for the
         Three Months Ended September 30, 1998 and 1997                        5

         Consolidated Condensed Statement of Shareholder's Equity for
         the Three Months Ended September 30, 1998                             6

         Notes to Consolidated Condensed Financial Statements                  7

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                             9
 
Item 3.  Quantitative and Qualitative Disclosures                             18

Part II. OTHER INFORMATION                                                    19

         Signatures                                                           20

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

                                                                September 30,    June 30,
Assets                                                              1998           1998
                                                                  --------       --------
                                                                 (Unaudited)

<S>                                                               <C>            <C>     
Cash                                                              $  6,090       $ 75,612
Restricted cash                                                     11,203         17,823
Receivables, net                                                   165,268        118,259
Accrued interest receivable                                          1,255          1,045
Property, equipment, and leasehold improvements, net                 8,294          7,921
Retained interest in securitized assets                            192,321        171,593
Other assets                                                        20,873         19,280
                                                                  --------       --------
  Total Assets                                                    $405,304       $411,533
                                                                  ========       ========

Liabilities

Amounts due under warehouse facilities                            $ 84,808       $ 73,123
Long-term debt                                                     199,000        221,000
Accrued interest payable                                             1,616          6,280
Amounts due to trusts                                               11,967         15,510
Dealer premiums payable                                              4,209          1,374
Deferred income tax payable                                         12,779          9,573
Other payables and accrued expenses                                  3,264          2,200
                                                                  --------       --------
  Total Liabilities                                                317,643        329,060
                                                                  --------       --------

Shareholders' Equity

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

Class A Common Stock, without par value,
  authorized 30,000,000 shares; 4,376,446 shares
  issued and outstanding at September 30, 1998 and
  June 30, 1998, respectively                                       58,360         58,360

Class B Common Stock, without par value,
  authorized 20,000,000 shares; 8,855,036 shares
  issued and outstanding at September 30, 1998 and
  June 30, 1998, respectively                                           --             --

Net unrealized gain on retained interest in securitized assets      10,740          7,609
Retained earnings                                                   18,561         16,504
                                                                  --------       --------
  Total Shareholders' Equity                                        87,661         82,473
                                                                  --------       --------

  Total Liabilities and Shareholders' Equity                      $405,304       $411,533
                                                                  ========       ========

</TABLE>
See accompanying notes to consolidated condensed financial statements.




<PAGE>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Earnings (Loss)
   and Comprehensive Earnings (Loss)
Dollars in thousands, except share data
(Unaudited)

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                  September 30,
                                                        --------------------------------
                                                            1998                1997
                                                        ------------        ------------

<S>                                                     <C>                 <C>         
Interest on receivables                                 $      8,251        $      6,627
Other interest                                                 5,479               3,113
                                                        ------------        ------------
  Total interest income                                       13,730               9,740
Interest expense                                               6,952               6,053
                                                        ------------        ------------
  Net interest margin                                          6,778               3,687
Provision for estimated credit losses                          2,325               1,505
                                                        ------------        ------------
  Net interest margin
         after provision                                       4,453               2,182

Gain (loss) on sales of receivables, net                       2,706             (10,847)
Servicing fees, net                                            4,953               4,745
Other revenues                                                 1,206               1,020
                                                        ------------        ------------

  Total revenues                                              13,318              (2,900)
                                                        ------------        ------------

Salaries and benefits                                          5,670               4,610
Other expenses                                                 4,321               4,013
                                                        ------------        ------------

  Total operating expenses                                     9,991               8,623
                                                        ------------        ------------

Earnings (loss) before provision (benefit)
  for income taxes                                             3,327             (11,523)
Provision (benefit) for income taxes                           1,270              (4,656)
                                                        ------------        ------------

  Net earnings (loss)                                          2,057              (6,867)
                                                        ------------        ------------

Other comprehensive earnings before taxes:
Net change in unrealized gain on retained
   interest in securitized assets                              5,066               4,312
  Income taxes related to items of other
    comprehensive earnings                                    (1,935)             (1,748)
                                                        ------------        ------------

Other comprehensive earnings, net of taxes                     3,131               2,564
                                                        ------------        ------------

Comprehensive earnings (loss)                           $      5,188        $     (4,303)
                                                        ============        ============

  Net earnings (loss) per share (basic & diluted)       $       0.16        $      (0.52)
                                                        ============        ============

  Weighted average number of
      common shares outstanding                           13,231,482          13,216,788
                                                        ============        ============
</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>
                                                                                           Three Months Ended
                                                                                              September 30,
                                                                                       --------------------------
                                                                                         1998             1997
                                                                                       ---------        ---------

Cash flows from operating activities:
<S>                                                                                    <C>              <C>       
      Net earnings (loss)                                                              $   2,057        $  (6,867)
         Adjustments to reconcile net earnings (loss) to net cash
         used by operating activities:
                  Receivable acquisitions in excess of liquidations                     (398,641)        (239,015)
                  Dealer premiums paid in excess of dealer premium
                    rebates received on receivables held for                             (13,342)          (9,860)
                  Securitization of receivables held for sale                            351,379          218,390
                  Gain on sales of receivables                                           (12,713)          (7,489)
                  Proceeds on sale of interest-only strip                                     --            3,782
                  Return of excess and servicing asset cash flows,
                    net of present value effect                                            5,167            3,951
                  Impairment of retained interest in securitized assets                    3,542           16,397
                  Provision for estimated credit losses                                    2,325            1,505
                  Amortization and depreciation                                            1,279            1,027
                  Spread accounts                                                          2,018            1,830
                  Restricted cash                                                          6,620             (517)
                  Other assets and accrued interest receivable                            (4,284)          (3,678)
                  Amounts due to trusts                                                   (3,543)          (1,229)
                  Other payables and accrued expenses                                       (394)          (5,213)
                                                                                       ---------        ---------
                              Net cash used by operating activities                      (58,530)         (26,986)
                                                                                       ---------        ---------

Cash flows from investing activities:
      Purchase of property, equipment, and leasehold improvements                           (677)          (2,237)
                                                                                       ---------        ---------

Cash flows from financing activities:
      Principal payment on long-term debt                                                (22,000)              --
      Net change in warehouse credit facilities                                           11,685           48,735
                                                                                       ---------        ---------
                              Net cash provided (used) from financing activities         (10,315)          48,735

Change in cash                                                                           (69,522)          19,512

Cash, beginning of period                                                                 75,612           58,801
                                                                                       ---------        ---------

Cash, end of period                                                                    $   6,090        $  78,313
                                                                                       =========        =========

Supplemental disclosures of cash flow information:

Income taxes paid                                                                      $       1        $       9
                                                                                       =========        =========

Interest paid                                                                          $  12,172        $   9,672
                                                                                       =========        =========
</TABLE>



See accompanying notes to consolidated condensed financial statements.





<PAGE>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Three Months Ended September 30, 1998
Dollars in thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>


                                                                                        
                                        Number of Common Stock                     Net Unrealized
                                          Shares Outstanding                      Gain on Retained                Total
                                      ---------------------------      Common      Interest in     Retained    Shareholders'
                                        Class A        Class B         Stock        Securitized    Earnings      Equity
                                                                                       Assets
                                      -------------------------------------------------------------------------------------

<S>                                     <C>            <C>               <C>            <C>          <C>           <C>    
Balance at June 30, 1998                4,376,446      8,855,036         $58,360        $7,609       $16,504       $82,473

Net earnings                                    -              -               -             -         2,057         2,057

Net change in unrealized 
   gain on retained interest
   in securitized assets                        -              -               -         3,131             -         3,131
                                      -------------------------------------------------------------------------------------
Balance at September 30, 1998           4,376,446      8,855,036         $58,360       $10,740       $18,561       $87,661
                                      =====================================================================================
</TABLE>




See accompanying notes to consolidated condensed financial statements.





<PAGE>


Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Three Months Ended September 30, 1998 and 1997
(Unaudited)

Note 1 - Basis of Presentation

         The forgoing 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.
The consolidated  condensed  financial  statements include the accounts of Union
Acceptance Corporation and its subsidiaries.

         During  fiscal  1995,  Union  Acceptance   Funding   Corporation,   UAC
Securitization  Corporation,  Performance  Funding  Corporation  and Performance
Securitization  Corporation  were formed as  wholly-owned  subsidiaries  of UAC.
During  fiscal  1996,  UAC Boat  Funding  Corp.  was  formed as a wholly-  owned
subsidiary  of UAC.  In fiscal  1997,  UAC Finance  Corporation  was formed as a
wholly-owned  subsidiary  of UAC.  Circle City Car Company and Union  Acceptance
Receivables  Corporation were formed as wholly-owned  subsidiaries of UAC during
the first and second quarters, respectively, of fiscal 1998.

         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 full 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 year ended June 30, 1998.

Note 2 - Reclassification

         Certain amounts for the prior period have been  reclassified to conform
to the current presentation.

Note 3 - Other Interest Income

         Other interest income includes interest on cash collection accounts and
the  accretion of  discounted  retained  interest in  securitized  assets.  Cash
collection accounts represent customer payments held in trust until disbursement
by the  trustee.  Interest  is earned by the  Company  on these  funds  prior to
distribution  of such funds to investors  and the servicer.  Beginning  with the
implementation of Statement of Financial Accounting Standards No. 125 on January
1, 1997, the Company  established a servicing asset for the expected  collection
account interest.  Other interest income includes collection account interest on
all  securitization  transactions  before  January 1,  1997,  and  includes  the
accretion of the discount  related to the servicing asset on all  securitization
transactions after December 31, 1996.

Note 4 - Earnings Per Share

         The Company has implemented Statement of Financial Accounting Standards
No. 128,  "Earnings  per Share" (EPS) which is effective  for interim and annual
periods ending after December 15, 1997, and requires the  presentation  of basic
and  dilutive  earnings  per share.  EPS have been  computed on the basis of the
weighted  average  number  of common  shares  outstanding.  The  effect of stock
options  not  exercised  during the  periods  presented  are  anti-dilutive  and
therefore  not  included in diluted  earnings per share.  The  weighted  average
number of shares used in the basic and diluted  EPS  computations  for the three
months  ended  September  30,  1998 and 1997  were  13,231,482  and  13,216,788,
respectively.

Note 5 - Current Accounting Pronouncements

                  In June, 1997, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise  and Related  Information,"  which  introduces  new guidance on
segment  reporting.  The Statement is effective for fiscal years beginning after
December 15, 1997,  with earlier  application  encouraged.  The Statement is not
expected  to have a material  impact on the  financial  condition  or results of
operations of the Company.



<PAGE>



Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Three Months Ended September 30, 1998 and 1997
(Unaudited)

Note 5 - Current Accounting Pronouncements (continued)

         In February 1998, Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  132,  "Employer's  Disclosures  about
Pensions and Other  Postretirement  Benefits."  The Statement does not alter the
measurement and recognition  provisions currently outlined in generally accepted
accounting principles but merely standardizes the disclosure  requirements.  The
Statement is effective for fiscal years  beginning after December 15, 1997, with
earlier application encouraged. The Statement is not expected to have a material
impact on the  financial  condition or results of operations of the Company when
adopted.

         In June 1998,  Financial Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities."  The Statement is effective for fiscal years beginning
after June 15, 1999, with earlier application  allowed.  Management is currently
assessing the impact of this Statement on the financial  condition of operations
of the Company upon adoption.

Note 6 - Retained Interest in Securitized Assets

<TABLE>
<CAPTION>


                                                                       September 30,         June 30,
                                                                           1998                1998
                                                                       -----------         -----------
Estimated fair value of excess servicing receivable,
<S>                                                                    <C>                 <C>        
  net of estimated prepayments                                         $   198,795         $   175,164
Allowance for estimated credit losses on securitized receivables           (95,614)            (90,203)
Estimated dealer premium rebates                                            26,036              25,718
Discount to present value                                                  (34,908)            (33,117)
                                                                       -----------         -----------
                                                                            94,309              77,562

Spread accounts                                                             66,095              68,113
Accrued interest on securitized receivables                                 14,539              13,606
Unrealized gain                                                             17,378              12,312
                                                                       -----------         -----------
Retained interest in securitized assets                                $   192,321         $   171,593
                                                                       ===========         ===========

Outstanding balance of receivables serviced
  through securitized trusts                                           $ 2,058,960         $ 1,929,981
Allowance for estimated credit losses as
  a percentage of securitized receivables serviced                            4.64%               4.67%

</TABLE>



Note 7 - Restatement of Consolidated Financial Statements

         The Company determined in August 1998 that it should measure other than
temporary  impairment of Retained  Interest in  Securitized  Assets,  previously
captioned Excess Servicing,  on a disaggregate basis (the pool-by-pool  method).
The  adjustments   resulting  from  the  measurement  of  other  than  temporary
impairment on a disaggregate  basis were of sufficient  significance  to require
restatement of the consolidated financial statements since the implementation of
Statement of Financial  Accounting  Standards No. 125. This  restatement had the
effect of reducing  earnings for the three months  ended  September  30, 1997 by
$7.5  million  (net of income  taxes of $5.1  million)  or $0.57 per share.  The
restatement  had the effect of reducing  shareholders'  equity at September  30,
1997, by $4.1 million.  In conjunction  with the  restatement,  the Company made
other adjustments,  which were not individually significant,  that increased net
earnings for the three  months ended  September  30, 1997,  by $147,000  (net of
income taxes of $100,000) or $0.01 per share.  The  necessary  amended Form 10-K
and 10-Q's  related to the  restatement,  are  currently in the process of being
filed.


<PAGE>



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

General

         The  Company  derives  substantially  all  of  its  earnings  from  the
acquisition,  securitization and servicing of retail installment sales contracts
originated  by   dealerships   affiliated   with  major   domestic  and  foreign
manufacturers.  To fund the acquisition of receivables prior to  securitization,
the Company utilizes a revolving warehouse facility, discussed in "Liquidity and
Capital Resources." Through securitizations,  the Company periodically pools and
sells receivables to a trust which issues Certificates to investors representing
pro-rata  interests in the receivables  sold. When the Company sells receivables
in a  securitization,  it  records a gain (or loss) on sale of  receivables  and
establishes Retained Interest in Securitized Assets ("Retained  Interest") as an
asset. Excess cash flows are recorded against Retained Interest as received over
the life of the related securitization.

         Acquisition  Volume. The Company currently  acquires  receivables in 32
states from over 3,700  manufacturer-franchised  auto  dealerships.  The Company
primarily  acquires  receivables on automobiles  made to borrowers who exhibit a
favorable  credit  profile ("Tier I") and, since October 1994, to borrowers with
adequate  credit  quality  who  would not  qualify  for a  receivable  under the
Company's Tier I quality criteria ("Tier II").

         Receivable acquisition volume increased for the quarter ended September
30,  1998,  compared  to the  quarter  ended  June 30,  1998.  Total  receivable
acquisitions  were $404.5 million for the three months ended September 30, 1998,
an increase from $270.7 and $252.9 million for the quarters ended June 30, 1998,
and September 30, 1997, respectively. Tier I receivable acquisitions were $397.0
million for the quarter ended September 30, 1998, compared to $242.3 million for
the same quarter of last year. Tier II receivable acquisitions were $7.5 million
for the quarter  ended  September  30,  1998,  compared to $8.8  million for the
quarter  ended  September  30,  1997.  The  Company  expects  volume to decrease
slightly for the second  quarter  ending  December 31, 1998, due to the expected
seasonal   fluctuations   during  the  winter  months.   See  -  "Discussion  of
Forward-Looking Statements".

         Gross and Net Spreads.  The gross and net spreads on the first  quarter
securitization  of fiscal 1999 were 7.26% and 5.15% compared to 7.04% and 5.38%,
respectively  over the same quarter of last year. Gross spread is defined as the
difference  between the weighted  average  receivable  rate and the  certificate
rate. Net spread is defined as gross spread less servicing fees,  upfront costs,
ongoing  credit  enhancement  and trustee  fees,  and  hedging  gains or losses.
Although the net spread on the first quarter  securitization  of fiscal 1999 was
slightly lower compared to the first quarter  securitization of fiscal 1998, net
spreads remain within management's expectations.

         Management  is  currently  targeting  net  spreads of 5.00% to 5.50% on
securitizations  (assuming a pricing spread for asset-backed  certificates  over
the two-year  treasury  note of 100 basis  points) for fiscal  1999.  Management
believes that by targeting a spread of 7.50% to 8.00% between  receivable  rates
and the two-year treasury rate that these net spreads can be achieved.  Although
management  believes these spreads can be achieved,  material factors  affecting
the  net  spreads  are  difficult  to  predict  and  could  cause   management's
projections to be materially inaccurate. These include current market conditions
with respect to market  interest  rates and demand for  asset-backed  securities
generally  and  for  Certificates   representing  interests  in  securitizations
sponsored by the Company. See - "Discussion of Forward-Looking Statements".

         Gain (loss) on Sales of  Receivables,  Net and Interest Rate Risk. Gain
(loss) 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,  and the level of estimation  for credit losses.  Historically,  the
Company has estimated the future  servicing cash flows recognized as a component
of the gain on sale by  discounting  the projected  future  servicing cash flows
from the time they are received by the  respective  trust.  However,  management
implemented the "cash out" method during the fourth quarter of fiscal 1998 which
discounts  the  expected  future  servicing  cash  flows  from the time they are
released from the spread account to the Company.


<PAGE>

         The  Company's  sources  for 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 a hedging  strategy  to  mitigate  this risk.  As a part of the  hedging
strategy,  the Company executes short sales of U.S. Treasury securities having a
maturity approximating the average maturity of receivables to be acquired during
the relevant  period.  There is no assurance that this strategy will  completely
offset  changes in interest  rates.  In  particular,  such  strategy  depends on
management's  estimates of receivable acquisition volume. The Company realizes a
gain on its hedging transactions during periods of increasing interest rates and
realizes  a loss on such  transactions  during  periods of  decreasing  interest
rates. The hedging gain or loss will in part offset changes in interest rates as
seen by a lower or higher reported gain on sales of  receivables,  respectively.
Recognition  of  unrealized  gains  or  losses  is  deferred  until  the sale of
receivables during the securitization. On the date of the sale, hedging deferred
gains and losses are recognized as a component of gain on sales of receivables.

         Portfolio  Performance.  From September 30, 1997, to June 30, 1998, the
Company  experienced  steady  improvement  in both  delinquency  and net  credit
losses,  although,  from June 30,  1998,  to September  30, 1998,  delinquencies
remained fairly stable while net credit losses increased  slightly.  The Company
attributes the improvement  throughout  fiscal 1998 to strategic  changes in its
origination  and collection  departments.  The Company  believes that higher net
credit  losses  during the quarter  ended  September  30, 1998,  are primarily a
result  of  depressed  recovery  rates.  Recoveries  as a  percentage  of  gross
charge-offs  dropped slightly to 38.67% for the three months ended September 30,
1998, compared to 41.17% for the quarter ended June 30, 1998, and 35.28% for the
same quarter of last year. In response to declining  recovery rates, the Company
opened a new car  franchised  dealership  in  Indianapolis  in July  1998 and is
retailing a portion of its repossessed  automobiles through the dealership.  The
Company  anticipates that this method of disposing of  repossessions  along with
stricter  monitoring of the  repossession and resale process should increase the
recovery  rate to  management's  expectations  over time.  Although  the overall
recovery percentage remains below management's expectations,  recovery rates for
repossessed automobiles sold by the Company's retail operation are significantly
higher than recovery rates on vehicles sold at auction.  However, only a minimal
percentage  of all  repossessed  automobiles  sold during the quarter  were sold
through its retail operation.

         Provisions  are made for estimated  credit losses in  conjunction  with
each receivable  sale.  Current  assumptions in the calculation of the estimated
credit loss  allowance for the first quarter  securitization  was 4.40% over the
life of the  pool  based  on a  combined  sale of Tier I,  Tier II and  modified
receivables.  Allowance related to credit loss on securitized  receivable losses
(inherent  in  Retained  Interest)  declined  to 4.64% at  September  30,  1998,
compared  to  4.67%  and  5.33%  at June  30,  1998,  and  September  30,  1997,
respectively.

         Tier I Portfolio. Set forth below is certain information concerning the
Company's experience  pertaining to delinquencies,  and net credit losses on the
Tier I fixed rate retail automobile, light truck and van receivables serviced by
the Company.  There can be no assurance that future  delinquency  and net credit
loss experience on receivables will be comparable to that set forth below.
See "Discussion of Forward-Looking Statements".

<PAGE>

<TABLE>
<CAPTION>


                                                             Tier I Delinquency Experience
                              --------------------------------------------------------------------------------------------
                                 At September 30, 1998             At June 30, 1998              At September 30, 1997
                              -----------------------------   ----------------------------    ----------------------------
                                                                (Dollars in thousands)
                                Number of                         Number of                         Number of
                                 Loans           Amount             Loans          Amount            Loans           Amount 
                              ----------       ----------       ----------       ----------       ----------       ----------
<S>                              <C>           <C>                 <C>           <C>                 <C>           <C>       
Servicing portfolio              194,882       $2,151,695          184,003       $1,978,920          177,377       $1,896,748
Delinquencies:
  30-59 days                       3,741       $   38,040            3,179       $   32,967            4,310       $   45,766
  60-89 days                       1,873           19,652            1,907           20,819            2,196           25,156
  90 days or more                    793            7,966              657            6,992              934           11,131
                              ----------       ----------       ----------       ----------       ----------       ----------
Total delinquencies                6,407       $   65,658            5,743       $   60,778            7,440       $   82,053
                              ==========       ==========       ==========       ==========       ==========       ==========
Delinquency as a
percentage
  of servicing portfolio            3.29%            3.05%            3.12%            3.07%            4.19%            4.33%

</TABLE>


         As  indicated  in  the  above  table,   delinquency  rates  based  upon
outstanding  receivable  balances  of  accounts  30 days past due were  3.05% at
September 30, 1998,  compared to 3.07% and 4.33% at June 30, 1998, and September
30, 1997, respectively, for UAC's Tier I servicing portfolio.

<TABLE>
<CAPTION>


                                                                     Tier I Credit Loss Experience
                                                                       For the Three Months Ended
                                      --------------------------------------------------------------------------------------------
                                         September 30, 1998                  June 30, 1998                    September 30, 1997
                                      --------------------------        --------------------------       -------------------------
                                                                        (Dollars in thousands)
                                       Number of                        Number of                         Number of
                                         Loans          Amount            Loans           Amount           Loans           Amount 
                                         -----          ------            -----           ------           -----           ------ 
<S>                                     <C>           <C>                 <C>           <C>                 <C>         <C>       
Average servicing portfolio             190,877       $2,088,163          183,402       $1,968,595          175,920     $1,881,603

Gross charge-offs                         2,196       $   23,651            1,992       $   21,129            2,054     $   23,056
Recoveries                                                 9,146                             8,698                           8,134
                                                      ----------                        ----------                      ----------
  Net charge-offs                                     $   14,505                        $   12,431                      $   14,922
                                                      ==========                        ==========                      ==========

Gross charge-offs as a percentage
  of average servicing portfolio(1)        4.60%            4.53%            4.34%            4.29%            4.67%          4.90%
Recoveries as a percentage of
  gross charge-offs                                        38.67%                            41.17%                          35.28%
Net charge-offs as a percentage
  of average servicing portfolio(1)                         2.78%                             2.53%                           3.17%


(1) Annualized
</TABLE>



         As indicated in the table above,  credit losses on the Tier I portfolio
totaled  $14.5  million for the  quarter  ended  September  30,  1998,  or 2.78%
(annualized)  as a percentage  of the average  servicing  portfolio  compared to
2.53% and 3.17% for the  quarters  ended June 30, 1998 and  September  30, 1997,
respectively.


<PAGE>

         Tier II Portfolio.  Set forth below is certain  information  concerning
the Company's  experience  pertaining to delinquencies  and net credit losses on
the Tier II portfolio. There can be no assurance that future delinquency and net
credit loss  experience  on  receivables  will be  comparable  to that set forth
below. See "Discussion of Forward-Looking Statements".

<TABLE>
<CAPTION>


                                                  Tier II Delinquency Experience
                          ------------------------------------------------------------------------------
                          At September 30, 1998           At June 30, 1998         At September 30, 1997
                          ----------------------      ----------------------      ----------------------
                                                       (Dollars in thousands)

                          Number of                   Number of                   Number of
                            Loans         Amount        Loans        Amount         Loans         Amount 
                           -------       -------       -------       -------       -------       -------
<S>                          <C>          <C>            <C>          <C>            <C>          <C>   
Servicing portfolio          6,376       $67,685         6,385       $66,855         6,288       $70,760
Delinquencies:
  30-59 days                   359       $ 3,758           365       $ 4,023           380       $ 4,420
  60-89 days                   158         1,683           140         1,457           162         1,876
  90 days or more                9            65             5            64            --            --
                           -------       -------       -------       -------       -------       -------
Total delinquencies            526       $ 5,506           510       $ 5,544           542       $ 6,296
                           =======       =======       =======       =======       =======       =======
Delinquency as a
  percentage of
  servicing portfolio         8.25%         8.14%         7.99%         8.29%         8.62%         8.90%
</TABLE>


         As  indicated in the above table,  Tier II  portfolio  delinquency  was
8.14% based on outstanding  receivable balances of accounts 30 days past due and
over at  September  30, 1998,  compared to 8.29% at June 30, 1998,  and 8.90% at
September 30, 1997.

<TABLE>
<CAPTION>
                                                               Tier II Credit Loss Experience
                                                                 For the Three Months Ended
                                          ------------------------------------------------------------------------

                                           September 30, 1998          June 30, 1998          September 30, 1997
                                          --------------------     ---------------------    ----------------------
                                                                    (Dollars in thousands)

                                          Number of                 Number of                Number of
                                            Loans       Amount        Loans      Amount        Loans        Amount 
                                            -----       ------        -----      ------        -----        ------ 
<S>                                         <C>        <C>            <C>        <C>            <C>         <C>    
Average servicing portfolio                 6,342      $67,319        6,324      $67,769        6,202       $69,825
                                        
Gross charge-offs                             215      $ 2,118          165      $ 1,857          229       $ 2,474
Recoveries                                                 741                       694                        933
                                                        ------                    ------                    -------
  Net charge-offs                                      $ 1,377                   $ 1,163                      1,541
                                                       =======                   =======                    =======
                                        
Gross charge-offs as a                  
percentage                              
  of average servicing portfolio(1)         13.56%       12.58%       10.44%       10.96%       14.77%       14.17%
                                        
Recoveries as a percentage of           
  gross charge-offs                                      34.99%                    37.37%                    37.70%
Net charge-offs as a percentage         
  of average servicing portfolio(1)                       8.18%                     6.86%                     8.83%
                                        
</TABLE>
                                      
(1) Annualized



         As  indicated in the above  table,  credit  losses for the three months
ended  September  30,  1998,   totaled   approximately  $1.4  million  or  8.18%
(annualized) as a percentage of the average Tier II servicing portfolio compared
to 6.86% and 8.83% for the quarter ended June 30, 1998,  and September 30, 1997,
respectively.



<PAGE>



Results of Operations

         Net  earnings  increased  to $2.1  million or $0.16 per  diluted  share
compared to a net loss of $6.9  million or $0.52 per diluted  share for the same
quarter of last year.  The  increase was  primarily  related to a higher gain on
sale of receivables,  net, a lower charge for other than temporary impairment of
Retained  Interest  during the current  quarter  compared to the same quarter of
last year and an increase in other interest income. The higher gain was a result
of an increase in receivable acquisitions,  which led to a larger securitization
for the three months ended September 30, 1998, compared to September 30, 1997.

         Net interest  margin after  provision  for  September 30, 1998 was $4.5
million,  a 104.1% increase over the net interest margin after provision of $2.2
million for the same period of last year.

         Interest on receivables increased 24.5% to $8.3 million for the quarter
ended  September  30,  1998,  compared to $6.6  million  for the  quarter  ended
September  30, 1997.  The increase in interest on  receivables  resulted from an
increase  in the average  outstanding  balance of  receivables  held for sale to
$221.1  million for the three  months  ended  September  30,  1998,  from $179.6
million for the three months ended September 30, 1997, offset by a lower average
contract rate for the quarter ended September 30, 1998,  compared to the quarter
ended September 30, 1997.

         Other  interest  income  increased  76.0% to $5.5 million for the three
months ended  September 30, 1998,  compared to $3.1 million for the three months
ended  September 30, 1997.  The increase was a result of an increase in discount
accretion,  offset by lower  collection and spread account  interest.  The other
interest  income related to discount  accretion was $5.1 million for the quarter
ended September 30, 1998,  compared to $1.6 million for the same quarter of last
year.  The  increase  in  discount  accretion  was  primarily  a  result  of the
implementation  of the  "cash  out"  method  of  valuing  Retained  Interest  in
Securitized  Assets  at June  30,  1998.  The  interest  income  related  to the
restricted cash accounts (collection and spread) decreased 75.9% to $369,000 for
the three months  ended  September  30,  1998,  compared to $1.5 million for the
three months ended September 30, 1997, due to the establishment of the servicing
asset.  The servicing  asset was  established as part of the  implementation  of
Statement of Financial  Accounting  Standards No. 125, and  effectively  had the
result of reducing  interest on restricted  cash accounts  beginning  with UACSC
1997-A and increasing the discount accretion.

         Interest  expense  increased 14.9% to $7.0 million for the three months
ended September 30, 1998, from $6.1 million for the three months ended September
30, 1997. The increase  primarily  related to higher average borrowing needs due
to higher receivable acquisitions for the three months ended September 30, 1998,
compared to the three months ended  September 30, 1997,  but was offset by lower
interest on long-term debt as a result of a principal payment in August 1998.

         Provision for estimated  credit losses  increased 54.5% to $2.3 million
for the three months ended September 30, 1998,  compared to $1.5 million for the
three months ended September 30, 1997. The increase in the provision was related
to a higher average  balance of receivables  held for sale for the quarter ended
September  30, 1998,  compared to September  30, 1997.  Included in the held for
sale  balance are  modified  loans which on an average were higher for the three
months ended  September 30, 1998,  compared to the three months ended  September
30, 1997,  resulting in a higher provision for the first quarter ended September
30, 1998. The provision is expected to decrease as fewer  receivables  are being
modified and the modified  receivable  portfolio continues to be included in the
quarterly securitizations.

         Gain on sales of receivables,  net totaled $2.7 million for the quarter
ended  September  30, 1998,  compared to a loss on sale of  receivables,  net of
$10.8  million  for the same  quarter  of last  year.  The gain  (loss)  for the
quarters   ended   September  30,  1998,   and  1997,   consisted  of  gains  on
securitization transactions of $6.2 million and $5.5 million (including $840,000
and $543,000 of  servicing  asset  income) and charges for other than  temporary
impairments   of  Retained   Interest  of  $3.5   million  and  $16.4   million,
respectively. ("Unrealized gains in Retained Interest are not charged to income.
See - Financial  Condition - Retained  interest in securitized  assets," below).
The increase in the  securitization  transaction gain relates to a higher volume
of receivables  securitized but was offset by a higher credit loss assumption of
4.40% for the fiscal 1999 first quarter securitization compared to 4.00% for the
fiscal 1998 first  quarter  securitization.  The  increase was also offset by an
increase  in the  discount of the  estimated  Retained  Interest  related to the
implementation  of the "cash  out"  method of  valuing  Retained  Interest.  The
receivables sold in the  securitization for the period ended September 30, 1998,
were  $351.4  million  compared to $218.4  million for the same  quarter of last
year. The increase in the credit loss assumption from 4.00% to 4.40% was related
to the combined  securitization of Tier I, Tier II, and modified  receivables in
the  current  quarter  compared  to the sale of only Tier I  receivables  in the
comparable  quarter of last year.  The annual  prepayment  estimate and discount
rate  assumptions  used  for the  fiscal  1999 and  fiscal  1998  first  quarter
securitizations were 25.00% and 9.58%, and 28.46% and 10.96%, respectively.


<PAGE>

         Servicing fees, net increased 4.4% to $5.0 million for the three months
ended  September  30, 1998,  compared to $4.7 million for the three months ended
September  30,  1997.  The increase in  servicing  fees,  net is a result of the
increase  in  average  securitized  receivables  to $1.9  billion  for the first
quarter of fiscal 1999, compared to $1.8 billion for the first quarter of fiscal
1998.  Servicing  fees consist of  contractual  servicing fees of 1.0% on Tier I
securitizations.  Beginning  with the quarter  ended  September  30,  1998,  the
scheduled  accretion of discount on excess  servicing  cash flows,  previously a
component of servicing fees, net, was reclassified to other interest income.

         Other  revenues  increased  to $1.2  million for the three months ended
September 30, 1998,  from $1.0 million for the three months ended  September 30,
1997. Other revenues consist primarily of late charge income and origination fee
income.  The  increase  is  primarily  related to an increase in late charge fee
income.

         Salaries and benefits  expense  increased to $5.7 million for the three
months ended September 30, 1998, from $4.6 million for the corresponding  period
ended  September  30,  1997.  The increase  resulted  primarily  from  increased
full-time equivalent ("FTE") employees. Average FTE's for the three months ended
September  30, 1998,  were 540 compared to 420 for the  comparable  period ended
September 30, 1997.  Since September  1998, the Company has  experienced  growth
primarily in collections,  systems and remarketing, but modestly in other areas.
The increase in  collections  is  primarily  in response to a growing  servicing
portfolio. The systems area increased because of a Company commitment to improve
internal  analysis  and  reporting  of  corporate  financial,   acquisition  and
collection  data that will be used to improve  operations.  The  increase in the
number of  reconditioning  and remarketing  operations  employees was due to the
opening of a new automotive dealership in July 1998 to facilitate remarketing of
repossessed vehicles.

         Other  operating  expense  increased 7.7% to $4.3 million for the three
months ended  September  30, 1998,  from $4.0 million for the three months ended
September 30, 1997.  Other operating  expense  includes  occupancy and equipment
costs,  outside and  professional  services,  receivable  expenses,  promotional
expenses,  travel,  office  supplies  and other.  Total  operating  expense as a
percentage of the average servicing portfolio was 1.85% and 1.76% for the period
ending September 30, 1998, and September 30, 1997, respectively.

Financial Condition

         Receivables, net and servicing portfolio. Receivables, net includes the
principal  balance of receivables  held for sale,  net of unearned  discount and
allowance for  estimated  credit  losses,  receivables  in process,  and prepaid
dealer premiums. The Company's portfolio of receivables, net increased to $165.3
million at  September  30,  1998,  from  $118.3  million at June 30,  1998.  The
increase was primarily  due to a higher  volume of Tier I  receivables  acquired
compared  to Tier I  receivables  sold in the first  quarter  securitization  of
approximately $58.2 million.  The increase was offset by the sale of Tier II and
modified  receivables  in  the  first  quarter   securitization.   The  Tier  II
receivables  held for sale  decreased  $2.6  million  as more  receivables  were
securitized than acquired during the first quarter ended September 30, 1998. The
modified receivable portfolio,  included in receivables held for sale, decreased
approximately  $2.7  million  as a  portion  of the  modified  receivables  were
included in the first  quarter  securitization.  Allowance  for credit losses on
receivables  held for sale was $2.1 million at September  30, 1998,  compared to
$1.9  million at June 30,  1998.  The  Company  serviced  $2.1  billion and $1.9
billion in securitized  receivables,  and the total servicing portfolio was $2.2
billion  and  $2.0  billion  as of  September  30,  1998,  and  June  30,  1998,
respectively.

         Retained interest in securitized assets ("Retained Interest"). Retained
Interest  increased  to $192.3  million at of September  30,  1998,  from $171.6
million at June 30, 1998. The Retained Interest balance increased by the amounts
capitalized  upon  consummation of the UACSC 1998-C Auto Trust ("1998-C") Tier I
securitization  including  estimated dealer premium rebates and unrealized gains
recognized on certain  pools.  Total amounts  capitalized  for the quarter ended

<PAGE>

September 30, 1998, were $25.1 million.  Retained  Interest also increased by an
additional  pre-tax  unrealized gain of $5.1 million and a $933,000  increase in
accrued  interest.  Additions to Retained  Interest were offset by the return of
excess cash flows over the quarter  ended  September  30,  1998,  related to all
securitizations of $4.8 million and by the effect of the $3.5 million impairment
of Retained  Interest  taken during the first quarter ended  September 30, 1998.
Impairment  of Retained  Interest is measured on a  disaggregate  basis (pool by
pool) in accordance with SFAS 115. Additionally,  Retained Interest decreased by
the net  decrease in spread  accounts  of $2.0  million.  Withdrawals  of spread
account  funds  are made when the  balance  of the  account  is in excess of the
requirements  stipulated in the servicing  agreement  (the  Company's  servicing
agreements  are   collectively   referred  to  as  the  "Pooling  and  Servicing
Agreements"). Allowance for credit losses on securitized receivables is included
as a component of Retained  Interest.  At  September  30,  1998,  the  allowance
related to both Tier I and Tier II securitized receivables totaled $95.6 million
or 4.64% of the total securitized receivable portfolio compared to $90.2 million
or 4.67% at June 30,  1998.  The  Company's  assumptions  for  valuing  Retained
Interest at September 30, 1998,  include estimates for credit losses of 3.33% to
6.54% on Tier I  receivables  and 12.00% to 15.68% on Tier II  receivables  as a
percentage  of  original  principal  balance  over the life of the  receivables,
annual  prepayment  estimates  ranging from 20.00% to 26.30% and discount  rates
ranging from 8.31% and 10.46% in the valuation of Retained Interest at September
30, 1998. See - "Discussion of Forward-Looking Statements".

         Amounts due under  revolving  warehouse  credit  facility and long-term
debt. The balance of the revolving  warehouse credit facility and the Senior and
Senior  Subordinated Notes was $283.8 million at September 30, 1998, compared to
$294.1 million at June 30, 1998. The decrease was due to a principal  payment on
the  Company's  Senior  Note in August  1998 of $22.0  million but was offset by
higher warehouse  borrowings  related to an increase in first quarter receivable
acquisitions as compared to the previous quarter ended June 30, 1998.

         Net  deferred  income  taxes.  The net deferred  income  taxes  payable
totaled $12.8  million at September  30, 1998,  compared to $9.6 million at June
30, 1998.  This increase is a result of the deferral of a portion of the gain on
the sale of receivables for the securitization effected during the first quarter
of fiscal 1999 in excess of previously deferred income recognized  currently for
tax purposes.

Liquidity and Capital Resources

         Sources and Uses of Cash in Operations. The Company's business requires
significant  amounts of cash to support  operations.  Its  primary  uses of cash
include (i)  acquisitions  and financing of receivables,  (ii) payment of dealer
premiums,  (iii) securitization costs including cash held in spread accounts and
similar cash collateral  accounts under the revolving warehouse credit facility,
(iv)  servicer  advances  of  payments on  securitized  receivables  pursuant to
securitization trusts, (v) losses on hedging transactions realized in connection
with the  closing  of  securitization  transactions  where  interest  rates have
declined during the period covered by the hedge, (vi) operating expenses,  (vii)
payment of income taxes, and (viii) interest  expense.  The Company's sources of
cash from operations  include (i) standard  servicing  fees,  generally 1.0% per
annum of the Tier I securitized  portfolio,  (ii) future  servicing  cash flows,
(iii) dealer premium  rebates,  (iv) gains on hedging  transactions  realized in
connection with the closing of securitization  transactions where interest rates
have increased  during the periods covered by the hedge, (v) interest income and
(vi) sales of receivables in securitization transactions and (vii) proceeds from
sale of interest-only  strips in conjunction with  securitization  transactions.
Net cash used by operating  activities  increased to $58.5 million for the three
months ended September 30, 1998,  from net cash used by operating  activities of
$27.0 million for the three months ended  September  30, 1997.  The increase was
primarily  attributable  to a decrease in  receivables  securitized  relative to
receivables acquired.

         Hedging.  Hedging  transactions may represent a source or a use of cash
during a given period  depending on the change in interest  rates.  In the first
quarter  of fiscal  1999,  hedging  transactions  required a use of cash of $5.2
million.


<PAGE>

         Financing  Activities.  Net cash used by financing  activities  for the
quarter  ended  September  30,  1998,  was $10.3  million  compared  to net cash
provided  by  financing  activities  of  $48.7  million  for the  quarter  ended
September 30, 1997.  The decrease was a result of a lower  increase in warehouse
borrowings  at  September  30, 1998,  over June 30,  1998,  relative to the same
period of last year but was offset by a principal payment on long-term debt. 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, securitizations and external financing including long-term debt
and the revolving warehouse credit facility.  Historically, the Company has used
the  securitization  of  receivable  pools as its  primary  source of  long-term
funding.   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 facility 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  described  above.  The  Company's  ability  to  borrow  under  the
revolving  warehouse  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  growth  may  be  inhibited,   at  least
temporarily,  if the Company is not able to obtain  additional  funding  through
these or other  facilities  or if it is  unable to  satisfy  the  conditions  to
borrowing  under  the  revolving   warehouse   credit   facility.   The  Company
consistently  assesses its long-term receivable funding arrangements with a view
to optimizing cash flows and reducing costs.

         Warehouse  Facility.  The Company has  borrowing  arrangements  with an
independent  financial  institution  for a $450.0  million  revolving  warehouse
credit  facility  that is insured by a surety bond provider to fund the purchase
of Tier I and Tier II  receivable  acquisitions.  At September  30, 1998,  $84.8
million of the  capacity  was  utilized,  and an  additional  $62.6  million was
available  to borrow  based on the  outstanding  principal  balance of  eligible
receivables.

         Long-term debt. The Company issued $110.0 million of 8.53% Senior Notes
due August 1, 2002, in connection  with the Company's  initial public  offering.
Interest on the Notes is payable  semiannually,  and  principal  payments  began
August 1, 1998, and are due on each subsequent  August 1, in the amount equal to
approximately 20% of the stated original principal  balance.  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 is due March 15,  2002,  in the
amount equal to approximately 33 1/3% of the stated original balance.

         The Company's credit agreements, among other things, require compliance
with monthly and quarterly  financial  maintenance tests as well as 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.

         Management believes that the Company's existing capital resources,  the
revolving warehouse credit facility described above,  future earnings,  expected
growth in receivable  acquisitions,  and periodic  securitization of receivables
should provide the necessary capital and liquidity for its operations through at
least the third  quarter of fiscal  1999.  The period  during which its existing
capital resources will continue to be sufficient will,  however,  be affected by
the factors described above affecting the Company's cash requirements.  A number
of these  factors are  difficult  to predict,  particularly  including  the cash
effect of hedging  transactions,  the availability of outside credit enhancement
in securitizations  or other financing  transactions and other factors affecting
the net cash provided by  securitizations.  Depending on the  Company's  ongoing
cash and liquidity  requirements,  market conditions and investor interest,  the
Company may seek to issue additional debt or equity securities in the near term.
The sale of  additional  equity,  including  Class A Common  Stock or  preferred
stock, would dilute the interests of current shareholders.

<PAGE>

Discussion of Forward-Looking Information

         The above discussions and notes to interim 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,  Year  2000
compliance,   and  other  aspects  of  its  business.   Similar  forward-looking
statements  may be made by the Company from time to time.  Such  forward-looking
statements are subject to a number of important factors that cannot be predicted
with  certainty  and which could  cause such  forward-looking  statements  to be
materially  inaccurate.  Such factors include,  for example,  demand for new and
used autos,  competition,  and consumer credit and delinquency  trends.  See the
"Discussion of Forward-Looking  Information" under "Management's  Discussion and
Analysis of Financial  Condition  and Results of  Operations"  in the  Company's
Annual Report on Form 10-K for fiscal 1998 which is incorporated  herein by this
reference.


Year 2000 Compliance

         During  the  year  ended  June  30,  1997,  the  Company  began  a risk
evaluation of potential Year 2000 issues. The outcome of this evaluation was the
formation of a Year 2000  Committee  that  consists of  directors,  officers and
employees of the Company.  The purpose of this committee is to assess all risks,
analyze  current  systems,  coordinate  upgrades  and  replacements,  and report
current and projected status of all known Year 2000 compliance issues.

         During the assessment  phase,  over thirty  service  bureaus and system
vendors  were  identified  that  performed  or  supplied   potential  Year  2000
compliance  issues.  The list included  eight service  bureaus,  seven  software
vendors,  seven hardware  vendors,  one electric  company,  six  maintenance and
supplies companies and four telecommunications  companies. Once the systems were
identified,  an  immediate  correspondence  was  established  for the purpose of
educating  the  Company  on known  Year  2000  issues  or Year  2000  compliance
certification.

         The systems  identified were put through one of two possible phases. If
the  vendor  provided  proof that the system in  question  had proper  Year 2000
compliance  certification  and a testing  cycle  was  possible,  an  appropriate
testing cycle was performed. If the testing cycle failed or the system had known
Year 2000 issues, a mission critical evaluation and replacement  recommendations
were performed.

         The Company has three known  mission  critical  systems that are not in
Year 2000  compliance.  All  three of the  systems  have  Year  2000  compliance
certified replacement products that are scheduled for implementation in November
1998, February 1999 and March 1999, respectively.

         The replacement or remediation  costs for year 2000  compliance  issues
with the  Company  is  estimated  to be less than  $100,000,  which the  Company
recognizes as incurred.  This estimated cost is mostly due to software  upgrades
that include new features which are combined with Year 2000 corrections.

         The  Company  estimates  that the worst case Year 2000  issue  scenario
would be discontinuance  of electrical power.  Although the Company has numerous
power  backup  devices,  a long-term  power  outage would bring the Company to a
standstill.  Because of this potentially  crippling effect, the Company has been
examining the potential of installing a complete  electrical backup generator at
a cost of approximately $400,000.


<PAGE>



Item 3.           Quantitative and Qualitative Disclosures About Market Risk

         The  Company  bears the  primary  risk of loss due to  defaults  in its
servicing  portfolio.  Default  and credit  loss rates are  impacted  by general
economic  factors  that  affect  borrowers'  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 credit losses and prepayments on past
securitizations.  For example, if credit losses increased or decreased by 1.00%,
the gain on sale of a $300.0 million  securitization would result in a reduction
or an  increase  of the gain  (loss)  on sales of  receivables  by $3.0  million
pre-tax.  The same 1.00%  increase or decrease would result in a reduction or an
increase of the Retained Interest of approximately $20.6 million as of September
30, 1998. The Company does not believe fluctuations in interest rates materially
affect the rate of prepayments on receivables.

         The  Company's  sources  of  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 a hedging  strategy to mitigate this risk. As a part of
the  hedging  strategy,  the  Company  executes  short  sales  of U.S.  Treasury
securities  having a maturity  approximating the average maturity of receivables
to be acquired  during the  relevant  period.  There is no  assurance  that this
strategy will completely  offset changes in interest rates. In particular,  such
strategy depends on management's estimates of receivable acquisition volume. The
Company realizes a gain on its hedging transactions during periods of increasing
interest  rates and  realizes  a loss on such  transactions  during  periods  of
decreasing  interest rates. The hedging gain or loss will  substantially  offset
changes in interest rates as seen by a lower or higher reported gain on sales of
receivables, respectively. Recognition of unrealized gains or losses is deferred
until the sale of  receivables  during  the  securitization.  On the date of the
sale,  hedging  deferred  gains and losses are recognized as a component of gain
(loss) on sales of receivables.  Increases or decreases in interest rates reduce
or increase the fair value of long-term debt, respectively.


<PAGE>





Part II. Other Information

         Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits- Exhibits Index appears on Page E-1.

         (b)  Reports on Form 8-K

                  The  Registrant  filed a current  report on Form 8-K on August
                  17,  1998,  relating  to the  restatement  of  it's  financial
                  statements  for  fiscal  June 30,  1997,  as well as the first
                  three quarters of fiscal 1998.


<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

November 13, 1998                     By: /S/   John M. Stainbrook
                                          -------------------------
                                          John M. Stainbrook
                                          President, and Chief Executive Officer

November 13, 1998                     By: /S/   Rick A. Brown
                                          -------------------
                                          Rick A. Brown
                                          Treasurer and Chief Financial Officer

<PAGE>

                                 EXHIBIT INDEX

     27        Financial Data Schedule