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, 2001

                                       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 12, 2001

    Class A Common Stock, without par value                23,518,513
    Class B Common Stock, without par value                 7,396,608

<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
         September 30, 2001 and June 30, 2001                                  3

         Consolidated Condensed Statements of Earnings
         for the Quarter Ended September 30, 2001 and 2000                     4

         Consolidated Condensed Statements of Cash Flows for the
         Quarter Ended September 30, 2001 and 2000                             5

         Consolidated Condensed Statement of Shareholders' Equity for the
         Quarter Ended September 30, 2001                                      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           23

Part II. OTHER INFORMATION                                                    25

         Signatures                                                           26

<PAGE>

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

                                                                           September 30,           June 30,
Assets                                                                         2001                  2001
                                                                         ------------------    ------------------


<S>                                                                               <C>                   <C>
Cash and cash equivalents                                                         $ 82,185              $ 70,939
Restricted cash                                                                      5,204                 4,331
Receivables held for sale, net                                                      38,267                42,770
Retained interest in securitized assets                                            199,400               245,876
Accrued interest receivable                                                            322                   375
Property, equipment, and leasehold improvements, net                                 8,711                 9,047
Other assets                                                                        32,968                23,697
                                                                         ------------------    ------------------

Total Assets                                                                     $ 367,057             $ 397,035
                                                                         ==================    ==================

Liabilities and Shareholders' Equity

Liabilities
Notes payable                                                                     $ 34,142               $ 5,215
Term debt                                                                          133,000               155,000
Accrued interest payable                                                             2,222                 4,544
Amounts due to trusts                                                               18,220                19,822
Dealer premiums payable                                                                665                   533
Current and deferred income taxes payable                                                -                 5,856
Other payables and accrued expenses                                                  5,163                 6,197
                                                                         ------------------    ------------------

Total Liabilities                                                                  193,412               197,167
                                                                         ------------------    ------------------

Commitment and Contingencies                                                             -                     -

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;
   23,518,513 and 23,498,048 shares issued
   and outstanding at September 30, 2001 and June 30, 2001                         145,319               145,208

 Class B Common Stock, without par value, authorized 20,000,000 shares;
   7,396,608 and 7,396,608 shares issued
   and outstanding at September 30, 2001 and June 30, 2001                               -                     -

  Accumulated other comprehensive earnings, net of income taxes                         95                 2,632
  Retained earnings                                                                 28,231                52,028
                                                                         ------------------    ------------------

 Total Shareholders' Equity                                                        173,645               199,868
                                                                         ------------------    ------------------

  Total Liabilities and Shareholders' Equity                                     $ 367,057             $ 397,035
                                                                         ==================    ==================
</TABLE>

See accompanying notes to consolidated condensed financial statements.


<PAGE>


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

                                                                                  Quarter Ended
                                                                                  September 30,
                                                                        -----------------------------------
                                                                             2001               2000
                                                                        ----------------   ----------------


<S>                                                                        <C>                <C>
Interest on receivables held for sale                                      $      5,457       $     14,371
Retained interest and other                                                       5,948              7,300
                                                                        ----------------   ----------------

   Total interest income                                                         11,405             21,671
Interest expense                                                                  4,685             11,041
                                                                        ----------------   ----------------

   Net interest margin                                                            6,720             10,630
Provision for estimated credit losses                                               650                975
                                                                        ----------------   ----------------
   Net interest margin after provision
     for estimated credit losses                                                  6,070              9,655
                                                                        ----------------   ----------------

Gain (loss) on sales of receivables, net                                        (36,038)             7,867
Gain (loss) on interest rate derivatives on securitized receivables              (2,584)            (5,350)
Gain (loss) on interest rate derivatives on held for sale receivables                 -             (2,440)
Servicing fee income                                                              7,610              6,719
Late charges and other fees                                                       1,722              1,755
                                                                        ----------------   ----------------

  Other revenues                                                                (29,290)             8,551
                                                                        ----------------   ----------------

Salaries and benefits                                                             8,305              7,918
Other expenses                                                                    5,913              5,512
                                                                        ----------------   ----------------

  Total operating expenses                                                       14,218             13,430
                                                                        ----------------   ----------------

Earnings (loss) before provision for income taxes                               (37,438)             4,776
Provision for income taxes                                                      (13,641)             1,767
                                                                        ----------------   ----------------

Net earnings (loss)                                                        $    (23,797)      $      3,009
                                                                        ================   ================

Net earnings (loss) per common share (basic and diluted)                   $      (0.77)      $       0.23
                                                                        ================   ================

Basic weighted average number of common
  shares outstanding                                                         30,910,074         13,277,632

  Common stock options                                                               --             38,256
                                                                        ----------------   ----------------

Diluted weighted average number of common
  shares outstanding                                                         30,910,074         13,315,888
                                                                        ================   ================
</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>
                                                                                          Quarter Ended
                                                                                          September 30,
                                                                            ----------------------------------------
                                                                                  2001                  2000
                                                                            ------------------    ------------------

Cash flows from operating activities:
<S>                                                                             <C>                <C>
   Net earnings (loss)                                                          $ (23,797)         $  3,009
     Adjustments to reconcile net earnings (loss) to net cash
       from operating activities:
         Purchases of receivables held for sale                                  (258,424)         (576,414)
         Principal collections on receivables held for sale                        (7,901)           13,261
         Dealer premiums paid, net on receivables held for sale                    (6,932)          (15,198)
         Proceeds from securitization of receivables held for sale                270,001           499,999
         Gain on sales of receivables                                              (8,760)          (11,072)
         Impairment of retained interest in securitized assets                     44,000                 -
         Accretion of discount on retained interest in securitized assets          (5,709)           (7,017)
         Provision for estimated credit losses                                        650               975
         Amortization and depreciation                                              1,087             1,663
         Restricted cash                                                             (873)            2,633
         Other assets and accrued interest receivable                              (7,592)           (1,237)
         Amounts due to trusts                                                     (1,602)            2,036
         Other payables and accrued expenses                                       (9,212)              889
                                                                            --------------    --------------
                 Net cash used in operating activities                            (15,064)          (86,473)
                                                                            --------------    --------------

Cash flows from investing activities:
   Collections on retained interest in securitized assets                          17,130            19,851
   Change in spread accounts                                                        2,454            (5,109)
   Capital expenditures                                                               (78)             (270)
                                                                            --------------    --------------
                 Net cash provided by investing activities                         19,506            14,472
                                                                            --------------    --------------

Cash flows from financing activities:
   Principal payment on term debt                                                 (22,000)          (22,000)
   Stock options exercised                                                            111                 -
   Net change in notes payable                                                     28,927            94,159
   Payment of borrowing fees                                                         (234)             (525)
                                                                            --------------    --------------
                 Net cash provided by financing activities                          6,804            71,634
                                                                            --------------    --------------

Change in cash and cash equivalents                                                11,246              (367)

Cash and cash equivalents, beginning of period                                     70,939            14,792
                                                                            --------------    --------------

Cash and cash equivalents, end of period                                        $  82,185          $ 14,425
                                                                            ==============    ==============

Supplemental disclosures of cash flow information:
Income taxes paid                                                               $     414          $    154
Interest paid                                                                   $   4,208          $ 11,570

</TABLE>

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


Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Quarter Ended September 30, 2001
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>


                                                                                 Accumulated
                                       Number of Common Stock                    Accumulated
                                         Shares Outstanding                         Other                          Total
                                    -----------------------------  Common       Comprehensive      Retained     Shareholders'
                                       Class A        Class B       Stock          Earnings        Earnings        Equity
                                    --------------- -------------------------  ----------------- ------------- ---------------

<S>                                     <C>            <C>          <C>                 <C>          <C>            <C>
Balance at June 30, 2001                23,498,048     7,396,608    $145,208            $ 2,632      $ 52,028       $ 199,868

Comprehensive earnings:
  Net earnings (loss)                            -             -           -                  -       (23,797)        (23,797)
  Net unrealized loss on retained
     interest in securitized assets              -             -           -             (4,150)            -          (4,150)
  Income taxes related to unrealized
    loss in securitized assets                   -             -           -              1,613             -           1,613
                                                                                                               ---------------
Total comprehensive loss                                                                                              (26,334)
Stock options exercised                     20,465             -         111                  -             -             111

                                    --------------- -------------------------  ----------------- ------------- ---------------
Balance at September 30, 2001           23,518,513     7,396,608    $145,319               $ 95      $ 28,231       $ 173,645
                                    =============== =========================  ================= ============= ===============

</TABLE>


See accompanying notes to consolidated condensed financial statements.



<PAGE>



Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended September 30, 2001 and 2000
(Unaudited)

Note 1 - Basis of Presentation

The  foregoing   consolidated  condensed  financial  statements  are  unaudited.
However,  in the opinion of  management,  all  adjustments  necessary for a fair
presentation of the results of the interim period  presented have been included.
All  adjustments are of a normal and recurring  nature.  Results for any interim
period are not  necessarily  indicative  of results to be  expected  for the six
month   transition   period  ending  December  31,  2001  (see  "Note  6").  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 year ended June 30,  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 began using its  proprietary
risk-based  relational  database to assist in  projecting  credit losses for the
retained  interest  valuation.  In the quarter  ended  September  30, 2001,  the
Company further  enhanced its retained  interest cash flow model by refining the
following:

     o credit loss assumptions

     o interest collections assumptions

     o prepayment assumptions

     o cash accounts interest rate assumptions

     o discount rate assumptions

Overall,  these  refinements  are more  precise  and allow the Company to better
estimate  cash flows by taking  into  consideration  the  current  economic  and
interest rate environment which, for most pools, is significantly different than
it was when the pools were  securitized.  Each  element is  discussed  in detail
below.



<PAGE>


Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended September 30, 2001 and 2000
(Unaudited)

Credit loss  assumptions - The Company  estimates gross credit losses and credit
loss severity using available  historical  loss data for comparable  receivables
and the specific  characteristics  of the receivables  purchased by the Company.
The  Company  implemented  new loss  curves in June 2001  which are based on the
Company's  relational  risk  management  database  which  goes  back to 1992 and
incorporates over 640,000  consumers  representing over $9.5 billion in acquired
receivables.  As of September 30, 2001, the Company  determined it was necessary
to  further  adjust  the  expected  loss  rates  on most  pools  to  more  fully
incorporate  the data  suggested by the curves  produced by the risk  management
database.  Although  the loss  curves  were the  basis  for the  changes  in the
expected loss rates,  the Company also  considered  exposure to credit losses in
light  of   increasing   delinquency   and  loss  rates,   increasing   consumer
bankruptcies, and recessionary economic trends, especially in view of the sudden
decline in economic activity following  September 11, 2001. The Company used net
credit  loss  assumptions  ranging  from 4.60% to 7.20% as a  percentage  of the
original  principal  balance over the life of the  receivables to value Retained
Interest  at  September  30,  2001.  See  the  pool  specific  net  credit  loss
assumptions in "Item 2 - Asset Quality."

Interest collections  assumptions - During the quarter ended September 30, 2001,
as a result of an  increase  in  delinquency  and credit  losses and the overall
deterioration in the economy, the Company decreased the 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
trends in the  economy.  The Company  utilizes a  prepayment  curve  whereby the
annual  prepayment  rate  increases as the pool ages.  Annual  prepayment  rates
within the curve range from 26.75% to 36.00% at September 30, 2001.

Cash accounts interest rate assumptions - The Company reviewed the current yield
on its cash and spread accounts to the yields originally  expected.  The current
economic and interest rate  environment is  significantly  different than it was
when most of the pools were  securitized.  Accordingly,  a forward interest rate
curve was  incorporated  into the cash flow models which should better represent
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 a discount rate which the Company  believes is
commensurate  with the risks  involved.  Given the historical lows in short-term
U.S.  Treasury yields and the current steep yield curve, the Company revised its
policy for  establishing  discount rates in the gain on sale calculation and the
retained  interest  calculation.  Prior to the quarter ended September 30, 2001,
the Company used tiered  discount rates based on a pool's  specific risk factors
up to 900 basis points over the applicable  U.S.  Treasury rate. As of September
30, 2001,  the Company used a tiered  discount  rate based on a pool's  specific
risk factors up to 1000 basis points over the applicable U.S. Treasury rate. The
weighted average discount rate used to value Retained  Interest at September 30,
2001 was  11.02%  compared  to 11.51% at June 30,  2001.  This  decrease  in the
weighted  average  discount  rate is  primarily  a result of a decrease  in U.S.
Treasury  rates since June 30, 2001 but was  partially  offset by the use of the
higher spreads over the applicable U.S.  Treasury rate as discussed  above.  The
Company  utilized  discount  rates ranging from 6.45% to 12.86% on the estimated
cash flows to be released from the spread account to value the Retained Interest
at September 30, 2001.




<PAGE>
Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended September 30, 2001 and 2000
(Unaudited)
<TABLE>
<CAPTION>
Retained Interest in Securitized Assets is as follows (in thousands) at:

                                                                    September 30,      June 30,
                                                                        2001             2001
                                                                    --------------  ---------------
Estimated gross interest spread from receivables,
<S>                                                                   <C>              <C>
  net of estimated prepayments and fees                               $   320,458      $   360,722
Estimated dealer premium rebates refundable                                11,844           15,403
Estimated credit losses on securitized receivables                       (181,362)        (170,151)
Accelerated Principal (1)                                                  28,823           28,823
Spread accounts                                                            87,681           90,135
Discount to present value                                                 (68,044)         (79,056)
                                                                    --------------  ---------------
  Total Retained Interest in Securitized Assets                       $   199,400      $   245,876
                                                                    ==============  ===============

Outstanding balance of securitized receivables                        $ 3,088,051      $ 3,166,542
                                                                    ==============  ===============
Estimated credit losses as a percentage of
  securitized receivables serviced                                          5.87%            5.37%
Weighted average discount rate                                             11.02%           11.51%
Weighted average original contract life (in months)                          75.0             74.8

</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 $34.1
million and $5.2 million at September 30, 2001 and June 30, 2001, respectively.

Note 4 - 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.  The single segment is based on management's approach
to  operating   decisions,   assessing   performance  and  reporting   financial
information.

Note 5 - 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 July 2001,  the Company  issued 6,000 stock options with an option
price of $6.5750 per share.  In addition,  in September 2001, the Company issued
64,000 stock  options with an option price of $5.5800 per share.  The  following
chart  indicates the numbers of shares which were excluded from the  calculation
of EPS assuming dilution for the periods indicated:



<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Quarter Ended September 30, 2001 and 2000
(Unaudited)

                                                        Quarter Ended
                                                        September 30,
                                        -------------------------------------
                                            2001                     2000
                                        ------------            -------------
        Anti-dilutive effect(1)             225,700                     --
        Exercise price greater
          than fair value                   823,529                 766,875
                                        ------------            -------------
                                          1,049,229                 766,875
                                        ============            =============

(1)  The  calculation  for  dilutive  earnings  per share for the quarter  ended
     September  30,  2001 was based upon the common  shares as the effect of the
     outstanding  stock  options  for which the fair value is  greater  than the
     exercise price were anti-dilutive due to the net loss for the quarter ended
     September 30, 2001.


Note 6 - Change in Year-End

On July 27,  2001,  the Board of  Directors  approved a change in the  Company's
fiscal  year-end  from June 30 to December 31. The Company will file a report on
Form 10-K for the six month transition period ending December 31, 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 40
states from over 5,600  manufacturer-franchised  auto  dealerships.  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  $258.4 million of receivables for the quarter
ended  September  30, 2001, a 55.2%  decrease from the $576.4  million  acquired
during the quarter ended  September 30, 2000.  Receivable  acquisitions  were up
30.0% over the quarter  ended June 30, 2001 of $198.8  million.  To  effectively
utilize  the  Company's  capital  resources  prior to the rights  offering,  the
Company used its  risk-based  pricing  strategy  (described  below) to slow down
receivable  acquisition  volume  while  achieving  a targeted  return on assets.
Through the rights offering,  the Company feels that it achieved the first phase
of its capital goals.  Utilizing its risk-based pricing model, the Company began
the process of increasing receivable  acquisitions during the quarter ended June
30, 2001 and has continued this process  during the quarter ended  September 30,
2001. Acquisition volume was lower than management's  expectations primarily due
to a  decline  in the  number  of  applications  received  in the days and weeks
immediately  following September 11, 2001. The Company  anticipates  acquisition
volume to be  approximately  $240.0 to $280.0  million  for the  quarter  ending
December 31, 2001. See--"Discussion of Forward-Looking Statements".

In order to more accurately price its receivables acquired, the Company moved to
a risk-based pricing model in June 2000 and implemented the fifth version of the
pricing model in September 2001. The Company's  risk-based pricing model rewards
those  customers  with good credit quality and other  favorable  characteristics
with lower rates and prices higher risk accounts at higher rates. The use of the
refined  risk-based  pricing  model has resulted in favorable  trends in factors
such as credit scores and loan to value ratios while at the same time  producing
favorable  trends in the  gross  and net  pricing  spreads  given the  declining
interest  rate   environment.   The  average  credit  score  of  newly  acquired
receivables  was 692 and 678 for the quarters ended September 30, 2001 and 2000,
respectively,  and the loan to value ratios for the quarter ended  September 30,
2001 are near historical lows for the Company.  The Company is currently seeking
to price its  receivable  acquisitions  such that they will  support a return on
assets of 1.5% after the next several years. A number of factors, including loss
and credit performance  estimates inherent in the Company's pricing  strategies,
and other factors  impacting the Company's  results of  operations,  will affect
whether it can achieve that targeted  performance  level and the number of years
it may take it to do so. See--"Discussion of Forward-Looking Statements".

Gross and Net Pricing Spreads. The gross and net pricing spreads for the quarter
ended  September  30,  2001 were  7.02% and 6.17%  compared  to 6.73% and 5.75%,
respectively, over the same quarter of last fiscal year. Gross pricing spread is
defined as the difference  between the weighted average  receivable rate and the
weighted  average  hedge rate.  The net  pricing  spread is defined as the gross
pricing spread, net of dealer premiums. The Company has been able to utilize its
risk-based  pricing during the declining  interest rate  environment to increase
its net  pricing  spreads  as well as  acquire  higher  quality  receivables  as
discussed  above.

Net pricing  spreads  are  currently  targeted  at a minimum of 6.00%.  Although
management believes these targeted net 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 interest rates,  the competitive  landscape and the stability of
the Company's dealer base. See - "Discussion of Forward-Looking Statements".




<PAGE>


Results of Operations

Net earnings  (loss) are  summarized in the table below.  The net loss was $23.8
million,  or $0.77 per diluted share,  for the quarter ended September 30, 2001,
compared to net earnings of $3.0 million,  or $0.23 per diluted  share,  for the
quarter  ended  September  30, 2000.  The decrease  from the same quarter of the
prior year is primarily due to the recording of other than temporary  impairment
of $44.0 million  pre-tax  ($27.9  million  after-tax)  during the quarter ended
September  30, 2001 and a decrease in the net  interest  margin.  Interest  rate
derivatives on held for sale  receivables did not have an impact on earnings for
the  quarter  ended  September  30,  2001  because  the Company did not have any
outstanding  interest  rate  derivatives  instruments  at September  30, 2001 as
discussed  below in the "Gain (loss) on interest  rate  derivatives  on held for
sale  receivables"  section.  Net earnings for the quarter  ended  September 30,
2000, were $4.6 million,  or $0.34 per diluted share,  before accounting for the
earnings impact of interest rate derivatives on held for sale receivables.

                                       Quarter ended September 30,
                                    ----------------------------------
                                        2001                2000
                                    --------------     ---------------
                             (Dollars in thousands, except per share amounts)

Net earnings (loss)                  $ (23,797)           $ 3,009
Net earnings (loss) per share        $   (0.77)           $  0.23
  (basic and diluted)



Interest on receivables  held for sale  decreased  62.0% to $5.5 million for the
quarter  ended  September  30, 2001,  compared to $14.4  million for the quarter
ended  September  30, 2000.  The decrease from the prior year related to a lower
average held for sale portfolio and decreased weighted average contract rates on
receivables  held for sale during the quarter ended  September 30, 2001 compared
to the quarter ended September 30, 2000 as shown in the following table:

                                            Quarter ended September 30,
                                               2001              2000
                                         ----------------- -----------------

Average held for sale (in thousands)        $ 139,840         $ 409,420
Weighted average contract rate                  11.89%            13.50%



Retained  interest and other interest income decreased 18.5% to $5.9 million for
the quarter ended  September 30, 2001,  compared to $7.3 million for the quarter
ended   September  30,  2000.  In  connection  with  the  other  than  temporary
impairments  taken in the quarter ended June 30, 2001,  the  accretion  rate has
decreased  on all  impaired  pools as the  discount  rates were  adjusted to the
current  market  rates on the impaired  pools at June 30,  2001.  The other than
temporary  impairment  taken in the quarter ended September 30, 2001 may further
reduce the accretion  rate on the impaired pools and may result in a decrease in
Retained interest and other interest income in the future.  See - "Discussion of
Forward-Looking  Statements". The individual components of Retained interest and
other interest income are shown in the following table.


                                     Quarter ended September 30,
                                 -----------------------------------
                                      2001                2000
                                 ---------------     ---------------
                                            (In thousands)

Discount accretion                  $ 5,724             $ 7,068
Other interest income                   224                 232
                                 ---------------     ---------------
                                    $ 5,948             $ 7,300
                                 ===============     ===============


Interest expense decreased 57.6% to $4.7 million for the quarter ended September
30, 2001 compared to $11.0 million for the corresponding quarter ended September
30, 2000.  The decrease was the result of the previously  mentioned  decrease in
the  average  held for  sale  balance  (resulting  in  lower  borrowings  on the
Company's credit  facilities),  a decrease in the credit  facilities'  effective
interest rate, and lower term debt interest  expense as a result of the required
$22.0 million principal payment made on the senior debt on August 1, 2001.

Provision  for  estimated  credit  losses  decreased  33.3% to $650,000  for the
quarter  ended  September  30, 2001,  compared to $975,000 for the quarter ended
September 30, 2000.  The decrease  from the quarter ended  September 30, 2000 is
due  to  lower  receivable   acquisitions  in  the  corresponding  quarter.  The
receivables acquired during the quarter ended September 30, 2001 decreased 55.2%
over the same period ended September 30, 2000.

Gain  (loss)  on sale of  receivables,  net and Gain  (loss)  on  interest  rate
derivatives on securitized receivables. The loss on sale of receivables, net was
$36.0  million for the quarter ended  September 30, 2001,  compared to a gain of
$7.9 million for the corresponding quarter ended September 30, 2000. The loss on
sale of  receivables,  net for the quarter ended September 30, 2001 is primarily
comprised of $7.9 million of gain on sale of receivables net of $44.0 million of
other than  temporary  impairment  compared  to $7.9  million of gain on sale of
receivables  with no other  than  temporary  impairment  for the  quarter  ended
September  30,  2000.  Management  reviews  the  fair  value  of  the  estimated
recoverable  cash flows  associated  with the  retained  interest for other than
temporary impairments on a regular basis. Some of the factors considered in this
evaluation  are  discussed  further  in  the  Notes  to  Consolidated  Financial
Statements. See - "Note 2 of the Consolidated Condensed Financial Statements".

In connection  with the  securitization  during the quarter ended  September 30,
2001,  the Company sold $330 million of notes and delivered  $270 million of the
total  receivables.   The  Company  delivered  the  additional  $60  million  in
receivables  in October  2001.  The net economic  gain (the gain on the sales of
receivables   net  of  losses  on  interest  rate   derivatives  on  securitized
receivables  but excluding  other than  temporary  impairments)  on the sales of
receivables (as shown in the following  table) increased to $5.3 million for the
quarter  ended  September  30,  2001 from $2.5  million  for the  quarter  ended
September 30, 2000. The net economic gain for the receivables  delivered  during
the  quarter  ended  September  30,  2001  included  a  loss  on  interest  rate
derivatives  on  securitized  receivables  of $2.6  million  compared  to a $5.4
million loss on interest rate  derivatives  on securitized  receivables  for the
quarter ended  September 30, 2000.  The increase in the net economic gain during
the quarter ended September 30, 2001 compared to the same period of last year is
due  primarily  to the increase in the gross spread and the decrease in the loss
on interest rate  derivatives  on securitized  receivables.  The increase in the
gross spread was the result of the Company experiencing only a 11.8% decrease in
the  weighted  average  receivable  rate  compared  to a 38.2%  decrease  in the
weighted  average  certificate  rate.  The decrease in the loss on interest rate
derivatives on securitized  receivables for the quarter ended September 30, 2001
when  compared to the quarter  ended  September  30, 2000 is the result of a new
hedging strategy that seeks the most effective hedge instrument while minimizing
cash  outflows.  These  increases  were  partially  offset by a decrease  in the
receivables  delivered pursuant to the  securitization  during the quarter ended
September 30, 2001 of $270 million  compared to the quarter ended  September 30,
2000 of $500 million.


                                          Quarter ended September 30,
                                        --------------------------------
                                             2001             2000
                                        ---------------  ---------------
                                                (In thousands)
Gain on sales of receivables               $ 7,930          $ 7,859
Loss on interest rate derivatives on
     securitized receivables                (2,584)          (5,350)
                                        ---------------  ---------------

     Net economic gain                     $ 5,346          $ 2,509
                                        ===============  ===============


As mentioned above, the Gain (loss) on sale of receivables,  net for the quarter
ended  September 30, 2001 included a charge for other than temporary  impairment
of $44.0  million.  Approximately  60% of the charge  for other  than  temporary
impairment related to cash flow modeling enhancements for components of retained
interest other than expected credit losses.  The remaining  portion of the other
than  temporary  impairment  related to increased  loss rate  estimates  and the
effects of the economic environment.  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  over 640,000  consumers  representing
over $9.5 billion in acquired  receivables.  Management  has continues to refine
the loss curves to take account of additional  factors that affect  performance.
As of September  30, 2001,  the Company  determined  it was necessary to further
adjust the expected loss rates on most pools to more fully  incorporate the data
suggested by the curves produced by the risk management  database.  Although the
loss  curves  were the basis for the changes in the  expected  loss  rates,  the
Company  also  considered  exposure  to  credit  losses  in light of  increasing
delinquency and loss rates,  increasing consumer bankruptcies,  and recessionary
economic trends,  especially in view of the sudden decline in economic  activity
following September 11, 2001. The Company is aware, however, that the historical
database may not fully take account of general recessionary  economic trends and
will  continue  to assess that risk.  These  modeling  enhancements  are further
discussed in "Note 2 - Notes to Consolidated  Condensed  Financial  Statements."
Also, see "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 for net credit  losses,  discount rate, and
prepayment rate.


<PAGE>


                                                          Quarter ended
Selected Securitization Data (1):                         September 30,
                                                  ----------------------------
                                                      2001            2000
                                                      ----            ----

                                                    2001 - C        2000 - C

Original amount (in millions) (2)                    $330.0          $500.0
Weighted average receivable rate                     11.90%          13.57%
Weighted average certificate rate                     4.15%           6.90%
Gross spread (3)                                      7.75%           6.67%
Net spread (4)                                        5.97%           4.67%
Weighted average remaining maturity (in months)       70.7            69.5
Weighted average life (in years)                      2.06            2.08
Annual credit loss assumption (5)                     2.31%           2.21%
Cumulative credit loss assumption                     4.75%           4.60%
Average prepayment speed assumption (6)              32.39%          25.00%
Discount rate assumption                             13.50%          15.10%



(1)  Information at time of securitization.

(2)  For the  2001-C  securitization,  of the  $330  million  securitized,  $270
     million of  receivables  were delivered in September 2001 and the remaining
     $60 million were delivered in October 2001.

(3)  Difference  between weighted  average  receivable rate and weighted average
     certificate rate.

(4)  Gross  spread,  net  of  upfront  costs,  servicing  fees,  ongoing  credit
     enhancement fees, trustee fees and the economic hedging gains or losses.

(5)  Computed as the cumulative  credit loss assumption  divided by the weighted
     average 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 held for sale receivables. There was
no Gain (loss) on interest rate derivatives on held for sale receivables for the
quarter ended September 30, 2001 compared to a loss on interest rate derivatives
on held for sale receivables of $2.4 million for the quarter ended September 30,
2000. At September 30, 2001, the Company did not have any  outstanding  interest
rate derivative  instruments  because the Company utilized the prefund mechanism
of the 2001-C  securitization to hedge interest rate movement.  The Company sold
$330 million of notes in the 2001-C  securitization.  Receivables  totaling $270
million were  delivered  during the quarter ended  September 30, 2001, and a $60
million prefund account was established.  The prefund  mechanism  eliminates the
need for an interest rate swap on the prefunded  receivables given that interest
rate risk is substantially eliminated since the funding rate has been fixed. The
Company  delivered the prefunded  receivables at the expected  weighted  average
coupon in October 2001.  The Company may choose to use this hedging  strategy in
the future. See--"Discussion of Forward-Looking Statements".

Servicing fees increased  13.3% to $7.6 million for the quarter ended  September
30, 2001 compared to $6.7 million for the quarter ended  September 30, 2000. The
increase  in  servicing  fees is a result of the 13.6%  increase  in the average
securitized  servicing portfolio of $3.0 billion for the quarter ended September
30, 2001  compared to $2.7  billion for the quarter  ended  September  30, 2000.
Servicing  fees  consist  primarily  of  contractual  servicing  fees of 1.0% on
securitizations.

Salaries and  benefits  expense  increased  4.9% to $8.3 million for the quarter
ended  September 30, 2001, from $7.9 million for the quarter ended September 30,
2000.  The  increase  was  primarily  related to an increase in  employees.  The
average  full-time  equivalents for the quarter ended September 30, 2001 was 700
compared to 660 for the corresponding period in fiscal 2000.

Other general and administrative  expense increased 7.3% to $5.9 million for the
quarter ended September 30, 2001, compared to $5.5 million for the quarter ended
September 30, 2000. Other general and administrative  expense includes occupancy
and equipment costs,  outside and professional  services,  receivable  expenses,
promotional  expenses,  travel, office supplies and other. The increase in other
general and administrative  expense is primarily  attributed to outside services
expense, comprised of service bureau expense, lock box expense, bank charges and
telephone expense.

Total operating  expenses  (including  salaries and benefits) as a percentage of
the average  servicing  portfolio was 1.80% for the quarter ended  September 30,
2001,  compared to 1.75% for the same  period of fiscal  2000.  Total  operating
expenses increased 5.9% for the quarter ended September 30, 2001 compared to the
quarter ended September 30, 2000. This increase in expenses  correlates with the
2.9% increase in the average servicing portfolio.

Provision for income taxes  changed to a $13.6  million  benefit for the quarter
ended  September  30,  2001,  compared  to  $1.8  million  of  expense  for  the
corresponding  quarter ended  September 30, 2000.  The change for the quarter is
the result of a net loss before income taxes for the quarter ended September 30,
2001  compared  to net  earnings  before  income  taxes  for the  quarter  ended
September 30, 2000.

Financial Condition

Receivables  held for sale, net and servicing  portfolio.  Receivables  held for
sale, net includes the principal  balance of  receivables  held for sale, net of
unearned discount and allowance for estimated net credit losses,  receivables in
process,  and  prepaid  dealer  premiums.  Selected  information  regarding  the
Receivables held for sale, net and the servicing portfolio at September 30, 2001
and June 30, 2001 is summarized in the following table:


                                           September 30,        June 30,
                                               2001                2001
                                         ------------------- ----------------
                                                    (In thousands)

Receivables held for sale, net               $    38,267      $    42,770
Allowance for net credit losses              $    (2,010)     $    (2,216)
Securitized assets serviced                  $ 3,088,051      $ 3,166,542
Total servicing portfolio                    $ 3,127,545      $ 3,210,755



Retained interest in securitized assets ("Retained Interest"). Retained Interest
decreased  $46.5 million to $199.4  million at September  30, 2001,  from $245.9
million at June 30, 2001. The Retained  Interest balance  increased or decreased
by the amounts  capitalized upon consummation of the  securitization  during the
quarter ended  September 30, 2001 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 are the receipt of the net interest spread.

The  following  table  illustrates  the  activity of Retained  Interest  for the
quarter ended September 30, 2001 (in thousands):

Balance at June 30, 2001                                              $ 245,876

Amounts capitalized (including estimated dealer rebates)                 15,549
Collections                                                             (17,130)
Accretion of discount                                                     5,709
Change in spread accounts                                                (2,454)
Other than temporary impairments                                        (44,000)
Net change in net unrealized gain                                        (4,150)
                                                                   -------------

Balance at September 30, 2001                                         $ 199,400
                                                                   =============


The  following  table  illustrates  the  activity of the spread  account for the
quarter ended September 30, 2001 (in thousands):

Balance at June 30, 2001                                             $ 90,135

Net excess cash flows deposited to spread accounts                     10,245
Initial spread account deposits                                            91
Interest earned on spread accounts                                        790
Less:  excess cash flows released to the Company                      (13,580)
                                                                  ------------

Balance at September 30, 2001                                        $ 87,681
                                                                  ============


Allowance  for net credit  losses on  securitized  receivables  is included as a
component  of Retained  Interest  and at  September  30,  2001,  totaled  $181.4
million,  or 5.87% of the total securitized  receivable  portfolio,  compared to
$170.2 million,  or 5.37%, at June 30, 2001. See "Note 2 - Notes to Consolidated
Condensed   Financial   Statements"   for  additional   discussions  and  recent
developments   regarding   Retained   Interest.   Also,  see  -  "Discussion  of
Forward-Looking Statements".

Other Assets are as follows (in thousands):

                                                  September 30,      June 30,
                                                      2001             2001
                                                  --------------    ------------
Repossessed assets                                 $ 12,180         $  8,036
Accrued servicing fees                                3,104            8,014
Current and deferred income tax receivable           11,077            1,265
Other                                                 6,607            6,382
                                                   --------------   ------------
                                                   $ 32,968         $ 23,697
                                                   ==============   ============



The increase in the repossessed  assets is the result of increases in the credit
losses  experienced by the Company during the quarter ended  September 30, 2001.
The decrease in the accrued  servicing  fees is the result of reduced net excess
cash flows to be received from the  securitization  trust for the September 2001
collection  period given higher losses  during the quarter  ended  September 30,
2001. The increase in current and deferred income taxes receivable is the result
of the net loss for the quarter ended September 30, 2001.

Notes payable were $34.1 million at September 30, 2001, compared to $5.2 million
at June 30, 2001. The increase is a result of the timing of the  securitizations
effected in each of the respective quarters.

Term debt was $133.0  million at September  30, 2001 and $155.0  million at June
30,  2001.  The  decrease in the term debt was a result of a required  principal
payment on the Company's Senior Notes in August 2001 of $22.0 million.

Current and  deferred  income taxes  payable.  There were no current or deferred
income taxes payable at September 30, 2001, compared to $5.9 million at June 30,
2001.  The  difference  is the  result  of the net  loss for the  quarter  ended
September 30, 2001, as discussed above in "Other Assets."


Liquidity and Capital Resources

Sources and Uses of Cash in  Operations.  Net cash used in operating  activities
was $15.1  million for the quarter ended  September  30, 2001,  compared to cash
used in operating  activities of $86.5  million for the quarter ended  September
30,  2000.  The  change  was  primarily   attributable  to  higher   receivables
securitized than receivable  acquisitions during the quarter ended September 30,
2001 compared to higher receivables acquired than securitized during the quarter
ended  September 30, 2000.  Net cash provided by investing  activities was $19.5
million and $14.5  million for the quarter  ended  September  30, 2001 and 2000,
respectively.  The  increase  over the prior  period  primarily  relates  to the
increase in the change in spread accounts but was partially offset by a decrease
in the collections on retained interest in securitized assets. Net cash provided
by  financing  activities  for the  quarter  ended  September  30, 2001 was $6.8
million  compared to net cash provided by financing  activities of $71.6 million
for the quarter ended  September 30, 2000. The primary factor for this change is
the decreased  warehouse  borrowings  resulting  from the lower  acquisition  of
receivables  in the quarter  ended  September  30, 2001  compared to the quarter
ended September 30, 2000.

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 and  revolving  warehouse  credit  facilities in
addition to the existing cash balances at September 30, 2001. 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 $477 million was utilized at
September 30, 2001.  Securitization  transactions  enable the Company to improve
its  liquidity,  to  recognize  gains  from the sales of the  receivables  while
maintaining the servicing  rights to the  receivables,  and to control  interest
rate  risk  by  matching  the  repayment  of  amounts  due to  investors  in the
securitizations with the actual cash flows from the securitized assets.  Between
securitization  transactions,  the Company  relies  primarily  on the  revolving
warehouse  credit  facilities  to  fund  ongoing  receivable   acquisitions  not
including dealer premiums.  In addition to receivable  acquisition  funding, the
Company  also  requires  substantial  capital  on an  ongoing  basis to fund the
advances of dealer premiums,  securitization  costs,  servicing  obligations and
other cash requirements  previously  described.  The Company's ability to borrow
under  revolving  warehouse  credit  facilities is dependent upon its compliance
with the terms and conditions thereof. The Company's ability to obtain successor
facilities  or  similar  financing  will  depend on,  among  other  things,  the
willingness  of financial  institutions  to  participate  in funding  automobile
financing  business  and  the  Company's  financial  condition  and  results  of
operations.   Moreover,  the  Company's  growth  may  be  inhibited,   at  least
temporarily,  if the Company is not able to obtain  additional  funding  through
these or other  facilities,  or if it is unable to  satisfy  the  conditions  to
borrowing under revolving warehouse credit facilities.  The Company consistently
assesses its long-term receivable funding arrangements with a view of optimizing
cash flows and  reducing  costs.  The Company  has  several  options for funding
including, but not limited to, a public asset-backed securitization, a sale into
a  commercial  paper  facility,  a private  sale,  or  temporarily  holding  the
receivables.  The Company  continues to evaluate market conditions and available
liquidity  and could  decide to alter the timing of its  securitizations  in the
future  depending  on the  Company's  cash  position  and  available  short-term
funding.

Derivative financial instruments.  Derivative financial instrument  transactions
(generally,  a gain or loss on interest rate derivatives) may represent a source
or a use of cash  during a given  period  depending  on the  change in  interest
rates. In the quarter ended September 30, 2001,  derivative financial instrument
transactions  used cash of $2.5  million  compared to cash used of $5.9  million
during the quarter ended September 30, 2000.

Warehouse  facilities.  The  Company  has  credit  facilities  with  independent
financial   institutions  for  a  total  of  $750  million  to  fund  receivable
acquisitions.  A $350  million  credit  facility  is  insured  by a surety  bond
provider while the two $200 million credit  facilities are not. At September 30,
2001, $34.1 million of the capacity was utilized, and an additional $300,000 was
available  to borrow  based on the  outstanding  principal  balance of  eligible
receivables. At June 30, 2001, $5.2 million of the capacity was utilized, and an
additional  $32.5  million  was  available  to borrow  based on the  outstanding
principal  balance of  eligible  receivables.  The Company  anticipates  that at
current  acquisition  volumes, it could fund the purchase of receivables through
its  existing  credit  facilities  for the  next  eight to nine  months  without
securitizing.  The credit facilities generally have a term of one year. Selected
summary information about the credit facilities is shown below:

 Credit Facility                Outstanding                       Expiration
    Capacity               at September 30, 2001                     Date
------------------        ------------------------            ------------------
  (in millions)
      $ 350                        $34.1                         August 2002
      $ 200                        None                         February 2002
      $ 200                        None                          August 2002


Working  capital line.  This line of credit was unsecured and was established to
fund  short-term cash flow needs of the Company.  Effective  September 30, 2001,
the Company voluntarily terminated this facility.

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 of $22 million began on
August  1,  1998 and are due  annually  on  August 1 until  maturity.  The Notes
currently  have a  private  rating by Fitch of B+. 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.  The Notes  currently  have a private  rating by Fitch of B-. 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 Notes currently have a private rating by Fitch of
B+.

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.

Capitalization  and Affect on Results of  Operations.  The Company is pursuing a
capital  strategy,  of which the rights offering  completed in the quarter ended
June 30,  2001 is a part,  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 5.03% as of September 30,
2001 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. Management is currently
evaluating  its  long-term  capital  needs  considering   projected   receivable
acquisition growth,  operating expenses and fee income  initiatives.  Management
believes that the proceeds of the rights offering,  together with funds provided
by  operations  should be sufficient  to support  measured  growth in receivable
acquisitions,  achieve an  acceptable  level of  profitability  and to allow the
Company to meet term debt  repayment  obligations  coming due in the next twelve
months.  It should be noted,  however,  that the cash requirements of operations
depend on a number of factors that are difficult to predict, including the costs
of interest rate hedging transactions, the level of credit enhancements required
to  securitize  receivables,  dealer  reserve  levels and similar  matters.  See
"Forward-Looking Statements."

The Company's Board of Directors has approved charter amendments to, among other
things, convert the outstanding Class B Common Stock and Class A Common Stock to
a single class of Common Stock (thereby eliminating the voting preference of the
Class B Common  Stock in the  election of  directors).  Upon  conversion  of the
shares of class B Common  Stock,  no shares of Class B Common  Stock will remain
authorized.  These amendments will be presented to the shareholders for approval
at the 2001 annual meeting. See - "Discussion of Forward-Looking Statements".

Asset Quality

The Company  experienced  an increase in  delinquency  on the Tier I  automobile
portfolio at September  30, 2001  compared to June 30, 2001.  Tier I delinquency
was 3.67% at September  30,  2001,  compared to 3.52% and 3.13% at June 30, 2001
and September  30, 2000,  respectively.  During the quarter ended  September 30,
2001, the Company experienced an increase in recoveries as a percentage of gross
charge-offs  on the Tier I portfolio when compared to the quarter ended June 30,
2001,  but a decrease in Tier I recoveries as a percentage of gross  charge-offs
compared to the quarter ended  September 30, 2000.  The Tier I recovery rate was
38.14% for the quarter ended  September 30, 2001,  compared to 36.23% and 41.01%
for the quarters ended June 30, 2001 and September 30, 2000,  respectively.  Net
credit losses increased during the quarter ended September 30, 2001, compared to
the quarter  ended June 30, 2001 and the quarter  ended  September  30, 2000. As
shown in the following  tables,  Tier I net credit losses  totaled 3.64% for the
quarter ended  September 31, 2001,  compared to 2.85% and 2.11% for the quarters
ended June 30,  2001 and  September  30,  2000,  respectively.  Several  factors
contributed to the increased delinquency and credit losses for the quarter ended
September  30, 2001.  The slow down in  corporate  profits  contributed  to wide
spread layoffs which resulted in many people  struggling to repay consumer debt.
In addition,  in October  consumer  confidence  fell to its lowest level in more
than seven years. These external economic factors along with seasonality,  aging
of the  portfolio,  and increased  bankruptcy  filings  combined to increase our
delinquency and loss rates during the quarter ended September 30, 2001.

Provisions  are made for estimated net credit  losses in  conjunction  with each
securitization.  The  current  assumption  utilized  in  the  gain  on  sale  of
receivables  calculation  for estimated net credit losses on the  securitization
closed  during the quarter  ended  September 30, 2001 was 4.75% over the life of
the pool compared to 4.60% over the life of the pool on the  securitization  for
the quarter ended September 30, 2000. The allowance for estimated  credit losses
on  securitized  receivables  (inherent  in  Retained  Interest)  was  5.87%  at
September  30, 2001,  compared to 5.37% and 4.36% at June 30, 2001 and September
30, 2000, respectively.

Certain information concerning the Company's experience pertaining to net credit
losses and  delinquencies  on the Tier I fixed rate retail  vehicle  receivables
serviced  by the  Company  is shown in the  following  tables.  There  can be no
assurance that future net credit loss and delinquency  experience on receivables
will be comparable to that set forth below.  See "Discussion of  Forward-Looking
Statements".

<TABLE>
<CAPTION>
                                                                     Tier I Credit Loss Experience
                                                                         For the Qurater Ended
                                      --------------------------------------------------------------------------------------------

                                        September 30, 2001               June 30, 2001                    September 30, 2000
                                      -------------------------- -------------------------------  --------------------------------
                                                                        (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             252,095     $ 3,135,301         258,804     $ 3,232,911           246,406     $ 3,031,640

Gross charge-offs                         3,555        $ 46,119           2,801        $ 36,147             2,306        $ 27,099
Recoveries                                               17,590                          13,096                            11,112
                                                  --------------                  --------------                    --------------
  Net charge-offs                                      $ 28,529                        $ 23,051                          $ 15,987
                                                  ==============                  ==============                    ==============

Gross charge-offs as a percentage
  of average servicing portfolio (1)      5.64%           5.88%           4.33%           4.47%             3.74%           3.58%
Recoveries as a percentage of
  gross charge-offs                                      38.14%                          36.23%                            41.01%
Net charge-offs as a percentage
  of average servicing portfolio (1)                      3.64%                           2.85%                             2.11%
    (1) Annualized
</TABLE>


<TABLE>
<CAPTION>


                                                          Tier I Delinquency Experience
                          ----------------------------------------------------------------------------------------------
                                At September, 2001               At June 30, 2001              At September, 2000
                          ------------------------------- ------------------------------- ------------------------------
                                                             (Dollars in thousands)

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

<S>                          <C>           <C>               <C>           <C>               <C>          <C>
Servicing portfolio          250,354       $ 3,112,205       256,252       $ 3,192,472       252,293      $ 3,133,025
Delinquencies:
  30-59 days                   5,647       $    64,150         5,247       $    61,316         5,120      $    56,184
  60-89 days                   2,901            36,122         2,841            36,194         2,482           29,062
  90 days or more              1,199            13,917         1,219            14,805         1,158           12,918
                          ---------------  -------------- --------------- --------------- --------------- --------------
Total delinquencies            9,747       $   114,189         9,307       $   112,315         8,760      $    98,164
                          ===============  ============== =============== =============== =============== ==============

Delinquency as a percentage
  of servicing portfolio        3.89%           3.67%           3.63%            3.52%          3.47%           3.13%

</TABLE>


<PAGE>


Selected  information about the Company's active  securitizations  are presented
below:


<TABLE>
<CAPTION>

                                                               Remaining
                                                              Balance at        Net Loss       Expected
                                             Original        September 30,     to Original    Cumulative
            Securitizations                   Amount              2001          Balance          Loss
----------------------------------------------------------------------------- -------------  --------------
                                                                                 (1)             (2)
                                                (Dollars in thousands)
<S>                                         <C>             <C>                 <C>            <C>
UACSC  2001-C Auto Trust (3)                 $ 330,000       $   268,249         0.00%          4.75%
UACSC  2001-B Auto Trust                       150,002           135,825         0.02%          4.75%
UACSC  2001-A Auto Trust                       573,000           464,291         0.56%          5.70%
UACSC  2000-D Auto Trust                       510,001           382,425         1.11%          5.70%
UACSC  2000-C Auto Trust                       500,000           341,166         1.48%          5.90%
UACSC  2000-B Auto Trust                       534,294           346,087         2.51%          6.70%
UACSC  2000-A Auto Trust                       282,721           153,048         2.58%          6.00%
UACSC  1999-D Auto Trust                       302,693           152,309         3.84%          7.20%
UACSC  1999-C Auto Trust                       364,792           170,059         3.62%          6.30%
UACSC  1999-B Auto Trust                       340,233           139,549         4.15%          6.40%
UACSC  1999-A Auto Trust                       320,545           114,743         4.62%          6.60%
UACSC  1998-D Auto Trust                       275,914            83,711         4.02%           .70%
UACSC  1998-C Auto Trust                       351,379            96,624         3.91%           .40%
UACSC  1998-B Auto Trust                       267,980            60,680         3.59%           .70%
UACSC  1998-A Auto Trust                       228,938            46,061         3.68%           .60%
UACSC  1997-D Auto Trust                       204,147            31,900         3.70%           .75%
UACSC  1997-C Auto Trust                       218,390            32,021         4.42%           .20%
UACSC 1997-B  Auto Trust                       295,758            35,163         4.25%           .75%
UACSC 1997-A Auto Trust (4)                    293,348            28,126         5.97%           .01%
                                         ------------------------------------
  Total Tier I Securitized Trusts            6,344,135         3,082,037

PSC 1998-1 Grantor Trust                        28,659             6,014         9.36%         12.00%
                                         ------------------------------------
       Grand Total                         $ 6,372,794       $ 3,088,051
                                         ====================================
</TABLE>


(1)  Net loss to original balance at September 30, 2001.

(2)  Forward-looking    information.    See   "Discussion   of   Forward-Looking
     Statements."

(3)  Of the total  securitized,  $270 million of  receivables  were delivered in
     September  2001 and the  remaining  $60 million  were  delivered in October
     2001.

(4)  Pool was paid in full in November 2001.

Discussion of Forward-Looking Statements

The above discussions and notes to consolidated  condensed financial  statements
contain forward-looking  statements made by the Company regarding its results of
operations,  effects  of  changes in  accounting  policies,  cash flow needs and
liquidity,  receivable  acquisition  volume,  target spreads,  potential  credit
losses, recovery rates, prepayment rates, servicing income, and other aspects of
its business. Similar forward-looking statements may be made by the Company from
time to time. In  particular,  the  Company's  gain on sale of  receivables  and
retained interest in securitized assets are reported on the basis of significant
estimates of future portfolio performance.  Such forward-looking  statements are
subject to a number of important factors that cannot be predicted with certainty
and  which  could  cause  such  forward-looking   statements  to  be  materially
inaccurate.  Such factors include,  for example,  demand for new and used autos,
competition,  and consumer credit and delinquency trends. See the "Discussion of
Forward-Looking  Information"  under  "Management's  Discussion  and Analysis of
Financial Condition and Results of Operations" in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 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. As a result of the prefunding  mechanism in use at September 30,
2001,  the Company had no economic  hedges  outstanding.  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 September 30, 2001:


<TABLE>
<CAPTION>
                                          Quarter
                                           ended           Year Ended
                                        December 31,       December 31,
                                        --------------------------------------------------------------
                                          2001          2002         2003        Total      Fair Value
                                        --------------------------------------------------------------
                                            (Dollars in thousands)

<S>                                     <C>           <C>          <C>         <C>          <C>
Notes Payable                           $ 34,142      $    -       $      -    $ 34,142     $  34,142
   Weighted average variable rate           4.33%

Term debt                               $      -      $ 87,000     $ 46,000    $ 133,000    $ 132,746
   Weighted average fixed rate              0.00%         7.99%        9.99%        8.68%

</TABLE>


<PAGE>


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 September  30, 2001,  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:


<TABLE>
<CAPTION>



Amounts as of September 30, 2001                      Tier I              Tier II              Total
                                                      ------              -------              -----

<S>                                                 <C>                    <C>               <C>
Fair value of retained interest (1)                 $ 211,147              $ 992             $ 212,139

Prepayment speed assumption (curve)              26.75% - 36.00%      26.75% - 36.00%

Impact on fair value of 10% adverse change          $ 203,340              $ 984             $ 204,324
Impact on fair value of 20% adverse change          $ 195,904              $ 977             $ 196,881


Net loss rate assumption (pool life rate)        4.60% - 7.20%             12.00%

Impact on fair value of 10% adverse change          $ 180,107              $ 684             $ 180,791
Impact on fair value of 20% adverse change          $ 146,152              $ 385             $ 146,537


Discount rate assumption (annual rate)           6.45% - 12.86%             9.97%

Impact on fair value of 10% adverse change          $ 206,329              $ 974             $ 207,303
Impact on fair value of 20% adverse change          $ 201,375              $ 957             $ 202,332

Spread interest rate assumption (curve)          2.55% - 4.85%          2.55% - 4.85%

Impact on fair value of 10% adverse change          $ 209,841              $ 987             $ 210,828
Impact on fair value of 20% adverse change          $ 208,437              $ 982             $ 209,419

</TABLE>



(1)  Retained  Interest on the balance  sheet is lower than the total fair value
included in this  analysis.  The difference  primarily  relates to the inventory
value of repossessed  autos that have not been sold.  This amount is included in
Retained  Interest  as part of the  allowance  for  estimated  credit  losses on
securitized receivables but not included in the total fair value.

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

<PAGE>

Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K

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

          3.2  Registrant's Code of By-Laws, as amended and restated,  September
               17, 2001.

          4.1  Amendment Number 5 to Security  Agreement,  dated as of September
               30,  2001,  by and among Union  Acceptance  Funding  Corporation,
               UAFC-l  Corporation,  Registrant,  Enterprise Funding Corporation
               and  Bank  of  America,  N.A.  amending  that  certain  Security
               Agreement dated as of May 25, 2000.

          4.2  Amendment Number 1 to Security  Agreement,  dated as of September
               30,  2001,  by and among Union  Acceptance  Funding  Corporation,
               UAFC-2   Corporation,   Registrant,   Variable   Funding  Capital
               Corporation,   First  Union  Securities,  Inc.  and  First  Union
               National Bank amending that certain  Security  Agreement dated as
               of August 31, 2001.

          10.1 Employment  Agreement,  dated  as of  September  1,  2001, by and
               between Registrant and Lee N. Ervin.


     (b)  Reports on Form 8-K

     The  following  report  on Form 8-K was  filed  during  the  quarter  ended
     Septembe 30, 2001:

        Date of Report          Items Filed
        --------------          -----------

        August 1, 2001          Item 7.  Financial Statements and Exhibits
                                Item 8.  Change in Fiscal Year End
                                Item 9.  Regulation FD Disclosure







<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, 2001                   By: /s/ Michael G. Stout
                                        ------------------------------------
                                        Michael G. Stout
                                        Chairman of the Board,
                                        President and Chief Executive Officer



November 13, 2001                   By: /s/ Rick A. Brown
                                        ------------------------------------
                                        Rick A. Brown
                                        Treasurer and Chief Financial Officer