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

                                    Form 10-Q

(Mark One)

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

                  For the quarterly period ended March 31, 1998

                                       or

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

                  For the Transition Period from _____ to _____

                         Commission File Number: 0-26412

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


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


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


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

         Indicate  by check mark  whether  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was  required  to file such  reports),  and (2) has been  subject to
filing requirements for the past 90 days.

Yes (X) No ( )

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

                   Class                       Outstanding at May 13, 1998

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

<PAGE>

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                      INDEX


                                                                          Page
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements :

         Consolidated Condensed Balance Sheets as of
         March 31, 1998 and June 30, 1997                                   3

         Consolidated Condensed Statements of Earnings for the Three
         and Nine Months  Ended  March 31, 1998 and 1997                    4

         Consolidated Condensed Statements of Cash Flows for the
         Nine Months Ended March 31, 1998 and 1997                          5

         Consolidated Condensed Statement of Shareholders' Equity for
         the Nine Months Ended March 31, 1998                               6

         Notes to Consolidated Condensed Financial Statements               7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                               10

Part II. OTHER INFORMATION                                                 20


         Signatures                                                        21

<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
Dollars in thousands, except share data
                                                      March 31,     June 30,
Assets                                                  1998          1997
                                                     ------------------------
                                                            (Unaudited)

Cash                                                 $  28,025      $  58,801
Restricted cash                                         18,331         16,657
Loans, net                                             153,759        121,381
Accrued interest receivable                              1,439          1,232
Property and equipment, net                              6,564          2,150
Excess servicing                                       106,428         98,841
Spread accounts                                         70,542         71,744
Other assets                                            20,715         21,360
                                                     ------------------------
  Total Assets                                       $ 405,803      $ 392,166
                                                     ========================

Liabilities

Amounts due under warehouse facilities                  57,070         44,455
Long-term debt                                         221,000        221,000
Accrued interest payable                                 2,283          5,793
Amounts due to trusts                                   17,932         16,067
Dealer premiums payable                                  1,601          1,372
Other payables and accrued expenses                      2,835          2,318
Deferred income tax payable                             17,124         15,046
                                                     ------------------------
  Total Liabilities                                    319,845        306,051
                                                     ------------------------

Shareholders' Equity

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

Class A Common Stock, without par value,
  authorized 30,000,000 shares; 4,376,446 and
  4,016,788 shares issued and outstanding at 
  March 31, 1998 and June 30, 1997, respectively        58,360         58,270

Class B Common Stock, without par value,
  authorized 20,000,000 shares; 8,855,036 and
  9,200,000 shares issued and outstanding at 
  March 31, 1998 and June 30, 1997, respectively            --             --

Net unrealized loss on excess servicing                 (4,489)            --
Retained earnings                                       32,087         27,845
                                                     ------------------------
  Total Shareholders' Equity                            85,958         86,115
                                                     ------------------------

  Total Liabilities and Shareholders' Equity         $ 405,803      $ 392,166
                                                     ========================

See accompanying notes to consolidated condensed
financial statements.




<PAGE>

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


<TABLE>
<CAPTION>
                                                      Three Months Ended                Nine Months Ended
                                                          March 31,                         March 31,
                                               ------------------------------     -----------------------------
                                                   1998              1997             1998             1997
                                               ------------------------------     -----------------------------
<S>                                            <C>               <C>              <C>              <C>         
Interest on loans                              $      7,119      $      7,685     $     20,243     $     26,014
Interest on spread accounts and
   restricted cash                                    1,686             1,654            5,083            4,709
                                               ------------------------------     -----------------------------
  Total interest income                               8,805             9,339           25,326           30,723
 Interest expense                                     6,990             6,118           19,210           18,793
                                               ------------------------------     -----------------------------
  Net interest margin                                 1,815             3,221            6,116           11,930
Provision for credit losses                           1,900             1,180            5,175            3,028
                                               ------------------------------     -----------------------------
  Net interest margin
     after provision                                    (85)            2,041              941            8,902


Gain on sales of loans
                                                      4,383             8,283            8,938           22,948
Servicing fees, net                                   6,445             6,860           19,066           18,944
Other                                                 1,065             1,011            3,070            2,856
                                               ------------------------------     -----------------------------

  Total revenues                                     11,808            18,195           32,015           53,650
                                               ------------------------------     -----------------------------

Salaries and benefits                                 4,815             4,065           14,296           11,597
Other                                                 4,007             3,480           12,185           10,927
                                               ------------------------------     -----------------------------

  Total operating expenses                            8,822             7,545           26,481           22,524
                                               ------------------------------     -----------------------------

Earnings before provision for
  income taxes                                        2,986            10,650            5,534           31,126
Provision for income taxes                            1,194             4,341            1,292           12,706
                                               ------------------------------     -----------------------------

  Net earnings                                 $      1,792      $      6,309     $      4,242     $     18,420
                                               ==============================     =============================

  Net earnings per share (diluted & basic)     $       0.14      $       0.48     $       0.32     $       1.39
                                               ==============================     =============================

  Weighted average number of
      common shares outstanding                  13,231,482        13,216,788       13,225,047       13,214,554
                                               ==============================     =============================
</TABLE>

See accompanying notes to consolidated condensed financial statements.


<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Cash Flows
(Dollars in thousands)
(Unaudited)

<TABLE>
<CAPTION>
                                                                       Nine Months Ended
                                                                           March 31,
                                                                    ------------------------
                                                                      1998           1997
                                                                    ---------      ---------

Cash flows from operating activities:
<S>                                                                 <C>            <C>      
   Net earnings                                                     $   4,242      $  18,420
      Adjustments to reconcile net earnings to net
      cash provided (used) by operating activities:
         Loan acquisitions in excess of liquidations                 (688,342)      (854,758)
         Dealer premiums paid in excess of dealer premium
           rebates received on loans held for sale                    (30,197)       (43,014)
         Securitization of loans held for sale                        651,475        918,540
         Gain on sales of loans                                       (17,438)       (32,693)
         Proceeds on sale of interest-only strip                       11,050         25,979
         Return of excess servicing cash flows                         15,986         19,779
         Impairment of Excess Servicing                                 3,756             --
         Provision for estimated credit losses                          5,175          3,028
         Amortization and depreciation                                  3,314          2,719
         Spread accounts                                                1,202         (7,908)
         Restricted cash                                               (1,674)        (1,423)
         Other assets and accrued interest receivable                   2,142         (3,352)
         Amounts due to trusts                                          1,865          6,695
         Other payables and accrued expenses                             (838)         4,747
                                                                    ---------      ---------
               Net cash provided (used) by operating activities       (38,282)        56,759
                                                                    ---------      ---------

Cash flows from investing activities:
   Purchase of fixed assets                                            (5,109)          (664)
                                                                    ---------      ---------

Cash flows from financing activites:
   Net change in warehouse credit  facilities                          12,615        (60,538)
   Proceeds from issuance of senior notes                                  --         65,000
   Payment of borrowing fees                                               --           (574)
                                                                    ---------      ---------
               Net cash provided by financing activities               12,615          3,888


Change in cash                                                        (30,776)        59,983

Cash, beginning of period                                              58,801         13,459
                                                                    ---------      ---------

Cash, end of period                                                 $  28,025      $  73,442
                                                                    =========      =========

Supplemental disclosures of cash flow information:

               Income taxes paid                                    $      20      $   4,277
                                                                    =========      =========

               Interest paid                                        $  23,255      $  21,983
                                                                    =========      =========
</TABLE>


See accompanying notes to consolidated condensed financial statements.




<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Nine Months Ended March 31, 1998
(Dollars in thousands, except per share data)
(Unaudited)

<TABLE>
<CAPTION>
                                Number of Common Stock                      Net
                                  Shares Outstanding                     Unrealized
                                                                          Loss on                        Total
                                                              Common       Excess       Retained     Shareholders'
                                  Class A      Class B        Stock      Servicing      Earnings        Equity
                              ---------------------------    ---------   -----------    ---------    -------------

<S>                              <C>           <C>             <C>        <C>           <C>             <C>    
Balance at June 30, 1997         4,016,788     9,200,000       $58,270    $       -     $27,845         $86,115
Grants of Common Stock              14,694             -            90            -           -              90
Conversion of Class B
   Common Stock into Class A
   Common Stock                    344,964      (344,964)                                             
                                                                     -            -           -               -
Net Earnings                                                                                         
                                         -             -             -            -       4,242           4,242
                              --------------------------------------------------------------------------------------
                                 4,376,446     8,855,036        58,360            -      32,087          90,447
                                                                                                             

Net unrealized loss on excess
   servicing                             -             -             -       (4,489)          -          (4,489)
                              --------------------------------------------------------------------------------------
Balance at March 31, 1998        4,376,446     8,855,036       $58,360      $(4,489)    $32,087         $85,958
                              ======================================================================================
</TABLE>

<PAGE>

Note 1- Basis of Presentation

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

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

         The consolidated  condensed financial  statements have been prepared in
accordance with Form 10-Q  specifications,  and,  therefore,  do not include all
information and footnotes normally shown in full annual financial statements.  A
summary of the  Corporation's  significant  accounting  policies is set forth in
"Note  1"  of  the  "Notes  to   Consolidated   Financial   Statements"  in  the
Corporation's Annual Report on Form 10-K for the year ended June 30, 1997.


Note 2- Earnings Per Share

         The  Corporation  has  implemented  Statement of  Financial  Accounting
Standards  128,  "Earnings  per Share" (EPS) which is effective  for interim and
annual periods ending after December 15, 1997, and requires the  presentation of
basic and dilutive  earnings per share.  EPS have been  computed on the basis of
the weighted  average number of common shares  outstanding.  The effect of stock
options  not  exercised  during the  periods  presented  are  anti-dilutive  and
therefore  not  included in diluted  earnings per share.  The  weighted  average
number of shares used in the basic and diluted  EPS  computations  for the three
months  ended  March  31,  1998  and  1997  were   13,231,482  and   13,216,788,
respectively.  The  weighted  average  number  of  shares  used in the basic and
dilutive EPS computations for the nine months ended March 31, 1998 and 1997 were
13,225,047 and 13,214,554, respectively.


Note 3- Conversion of Common Stock

         The  Company's  charter  provides  that shares of Class B Common  Stock
convert  automatically  to shares of Class A Common  Stock on a  share-for-share
basis upon transfer  outside a prescribed  group of initial  holders and certain
affiliates.  Pursuant to such provision,  344,964 shares of Class B Common Stock
were  converted  to shares of Class A Common Stock in the fiscal  quarter  ended
December 31, 1997.

Note 4-Year 2000 Compliant

A Year  2000  Committee  has  been  established  by the  Company  consisting  of
directors,  officers,  and  employees of the Company to address  problems  which
could arise from the  forthcoming  Year 2000 rollover.  The Committee is charged
with providing regular reports to the Board of Directors  detailing  progress in
this area.  Based on progress by the  Committee to date,  it is not  anticipated
that the Year 2000  rollover  will present  material  financial  or  operational
burdens for the Company.

<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to the Consolidated Condensed Financial Statements
For the Nine Months Ended March 31, 1998 and March 31, 1997
(Unaudited)


Note 5- Excess Servicing

Excess servicing is as follows 
(in thousands) at:
                                              March 31,         June 30,
                                                1998              1997
                                             -----------------------------
Estimated value of excess servicing
   cash flows, net of estimated prepayments  $   157,050       $   148,788
Allowance for estimated credit losses            (68,932)          (79,013)
Estimated dealer premium rebates                  26,473            28,175
Discount to present value                        (13,796)          (11,916)
                                             -----------------------------
                                                 100,795            86,034

Accrued interest on securitized loans             12,896            12,807
Unrealized loss on excess servicing               (7,263)               --
                                             -----------------------------
Excess Servicing                             $   106,428       $    98,841
                                             =============================

Outstanding balance of loans
   serviced through securitized trusts       $ 1,856,746       $ 1,818,163

Allowance for estimated credit
   losses as a percentage of
   securitized loans serviced                       3.71%             4.35%


         Historically, the Company has estimated the Excess Servicing recognized
as a component of the gain on sale and its subsequent  fair value by discounting
the projected future servicing cash flows from the time they are received by the
respective trust. However,  management is currently considering implementing the
"cash out" method which  discounts the expected  excess cash flows from the time
they are released from the Spread Account to the Company.

         The "cash out" method  estimates  Excess  Servicing by discounting  the
expected  excess  cash  flows  from the time they are  released  from the Spread
Account using a discount rate which the Company  believes is  commensurate  with
the risks involved.  In determining the expected excess cash flows,  the Company
must  still  estimate  the  future  rates  of  prepayments  and  credit  losses.
Accordingly, use of the "cash out" method may result in a larger discount of the
estimated Excess Servicing asset due to the timing of expected excess cash flows
released from the Spread Account. Additionally, interest income earned on Spread
Accounts and  Restricted  Cash would  become a component of the expected  excess
cash flows and no longer  recognized  as  interest  income  during  the  period.
Offsetting  the  potentially  lower gain on sales and the  reduction of interest
income would be an increase in the  accretion  of  discounted  excess  servicing
during future periods.

         The  impact  of  utilizing  the  "cash  out"  method  has not yet  been
determined  but is not expected to have a material  effect on the fourth quarter
gain on sales.  Utilizing the "cash out" method could have a material  effect on
the fair value of the Excess  Servicing asset as of June 30, 1998, and result in
an other than temporary  impairment of Excess  Servicing  which would be charged
against current earnings.


<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to the Consolidated Condensed Financial Statements
For the Nine Months Ended March 31, 1998 and March 31, 1997
(Unaudited)


Note 6-Current Accounting Pronouncements

         In June, 1997, The FASB issued SFAS No. 130,  "Reporting  Comprehensive
Income" ("SFAS 130"),  which establishes  standards for reporting and displaying
comprehensive   income  and  its   components  in  the   financial   statements.
Comprehensive  income is the total of net  income and all  non-owner  changes in
shareholders'  equity.  The  Statement is effective  for fiscal years  beginning
after December 15, 1997, with earlier application permitted.  The Statement will
require new disclosures by the Company, but is not expected to have an impact on
the financial statements or results of operations.

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

         Other recent  pronouncements  issued by the FASB are not  applicable to
the Company's consolidated financial statements.




<PAGE>

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

General

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

         Acquisition  Volume.  The Company currently acquires loans in 31 states
from over 3,400  manufacturer-franchised auto dealerships. The Company primarily
acquires loans on automobiles  made to borrowers who exhibit a favorable  credit
profile  ("prime  lending")  and, since October 1994, to borrowers with adequate
credit  quality  who would not  qualify  for a loan  under the  Company's  prime
lending  quality  criteria  ("non-prime  lending").  The Company began acquiring
loans  under the marine  lending  program  ("marine  lending")  in June 1996 and
terminated the program in March 1998. See - "Other Matters".

         Over  1,200  of the  3,400  dealerships  with  which  the  Company  has
agreements  provide  non-prime  quality loans.  During the current quarter,  the
prime and non-prime origination departments were merged effectively reducing the
administrative  complexity  involved with separate  operating  structures.  As a
result of the merged  origination  departments,  the Company's  lending  program
acquires two levels of loan quality.  The Company will, from time to time, refer
to its prime lending level as "Tier I" and its non-prime  lending level as "Tier
II". The Company  will  continue to track  performance  and  acquisition  volume
separately, as well as maintain the current underwriting criteria.

         Total loan  acquisitions were $220.3 million for the three months ended
March 31, 1998, a decrease from $227.4 and $279.8 million for the quarters ended
December 31, 1997, and March 31, 1997, respectively. Prime loan acquisitions for
the quarter  ended March 31, 1998,  decreased by 3.0% from the previous  quarter
and 20.4% from the quarter ended March 31, 1997. Non-prime loan acquisitions for
the quarter ended March 31, 1998,  decreased 3.4% from the previous  quarter and
35.2% from the quarter ended March 31, 1997.  Loan  acquisitions  for the marine
business  decreased by 43.7% from the previous quarter and 83.9% for the quarter
ended  March 31,  1997,  as a result of the  termination  of the marine  lending
program.

         The Company  tightened its credit standards during the third quarter of
fiscal 1997. The  tightening of the credit  standards had the effect of lowering
loan  acquisition  volume for the three and nine months  ended  March 31,  1998,
compared  to the same  period of last year.  Strategic  changes  made within the
dealer relations area during the latter half of the third quarter as well as the
seasonal cycle of the automotive  industry are expected to increase  acquisition
volume in the fourth  quarter of fiscal  1998.  The Company  continues to expand
through focusing on penetrating the existing dealer base and on new high-quality
dealers within the existing markets. Management continues to focus on controlled
growth,  recognizing that the underlying  credit quality of the portfolio is one
of the most important  factors  associated with long-term  profitability.  See -
"Discussion of Forward-Looking Statements".

         Gross and Net Spreads.  The gross and net spreads on the third  quarter
securitization  of fiscal 1998 were 6.81% and 5.27% compared to 6.96% and 5.43%,
respectively, over the same quarter of last year. Gross spread is defined as the
difference  between the weighted average loan rate and the Certificate rate. Net
spread is defined as gross spread less servicing  fees,  upfront costs,  ongoing
credit  enhancement  and trustee fees, and hedging gains or losses.  Net spreads
peaked in the year ago quarter at 5.43% and have  fluctuated over the succeeding
four  quarters  to 5.15%,  5.38%,  5.07% and 5.27%.  The net spread on the third
quarter  securitization  of fiscal 1998 was slightly lower compared to the third
quarter  securitization  of fiscal  1997,  however net spreads  have been within
management's expectations.

         Management  is  currently  targeting  net  spreads of 5.00% to 5.50% on
prime securitizations  (assuming a pricing spread for asset-backed  certificates
over the two-year treasury note of 50 basis points). Management believes that by
targeting  a spread  of  7.00% to 7.50%  between  loan  rates  and the  two-year

<PAGE>

treasury rate, these net spreads can be achieved.  Although  management believes
these spreads can be achieved,  material  factors  affecting the net spreads are
difficult to predict and could cause  management's  projections to be materially
inaccurate.  These  include  current  market  conditions  with respect to market
interest  rates  and  demand  for  asset-backed  securities  generally,  and for
Certificates representing interests in securitizations sponsored by the Company.
See - "Discussion of Forward-Looking Statements".

         Gain on Sales of Loans and Interest  Rate Risk.  Gain on sales of loans
continues to be a significant element of the Company's net earnings. The gain on
sales of loans is affected by several factors,  but is primarily affected by the
amount of loans  securitized,  the net spread and the level of estimated  credit
losses. Historically,  the Company has estimated the Excess Servicing recognized
as a component of the gain on sale by discounting the projected future servicing
cash flows from the time they are  received by the  respective  trust,  however,
management  is currently  considering  implementing  the "cash out" method.  The
impact of utilizing the "cash out" method has not yet been determined but is not
expected to have a material  effect on the fourth  quarter  gain on sale.  See -
"Note 5 of the Interim Financial Statements - Excess Servicing".

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

          Portfolio Performance.  UAC has seen steady improvement in delinquency
and credit losses over the last two quarters.  UAC attributes the improvement to
strategic  efforts made by the Company  including  implementing  tighter  credit
standards in March 1997, forming specialized  collection teams to concentrate on
specific  groups of accounts and  increasing  collection  efforts on charged-off
accounts.

          A decline in delinquency  and credit losses on those loans  originated
and  securitized in 1995 has also  contributed to the improved  delinquency  and
credit losses for the portfolio. In the past, these pools have had higher credit
losses and delinquency  than  anticipated  and have had continued  higher credit
losses in the latter  months of the pool life rather than  reflecting  a typical
loss life cycle which should peak between the 12th and 18th month. Over the last
six months, those loans originated and securitized in 1995 have become a smaller
proportion of the total portfolio's  credit losses and delinquency as the dollar
amount of credit losses and delinquency in those pools has been decreasing.

         Recovery rates have been a contributing factor to higher credit losses.
Recoveries have, however,  shown gradual improvements over the last two quarters
which   contributed  to  the  improvement  in  delinquency  and  credit  losses.
Recoveries  as a  percentage  of gross  charge-offs  increased to 39.42% for the
quarter  ended March 31,  1998,  from 38.11% and 39.30% for the  quarters  ended
December 31, 1997,  and March 31, 1997,  respectively.  Although  recovery rates
showed signs of improvement during the past two quarters,  management  continues
to look for ways to improve recovery rates, including more diligently monitoring
and  expanding  the  repossession  and  remarketing  operations.  See  -  "Other
Matters".

         Provisions  are made for estimated  credit losses in  conjunction  with
each loan sale. Current assumptions in the calculation of the gain allowance for
the third quarter securitization were 4.00% over the life of the pool. Allowance
for  estimated  credit  losses on  securitized  loans  (inherent  in the  excess
servicing  asset)  declined  to 3.71% at March 31,  1998,  compared  to 3.88% at
December 31, 1997, and increased from 3.00% at March 31, 1997.

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

<TABLE>
<CAPTION>

                                                               Prime Delinquency Experience At
                                      ------------------------------------------------------------------------------------
                                            March 31, 1998              December 31, 1997              March 31, 1997
                                      -----------------------       ----------------------        ------------------------

                                                                  (Dollars in thousands)
                                       Number of                    Number of                     Number of
                                         Loans       Amount           Loans      Amount            Loans        Amount 
                                         -----       ------           -----      ------            -----        ------ 
<S>                                     <C>        <C>               <C>        <C>                <C>         <C>       
Servicing portfolio                     181,026    $1,929,151        179,962    $1,920,930         171,234     $1,836,305
Delinquencies
  30-59 days                              3,426        35,449          3,954        41,778           2,484         27,527
  60-89 days                              1,923        21,818          2,274        25,933           1,561         18,894
  90 days or more                           623         7,088            688         8,048             705          8,414
                                       ---------  -----------      ---------    ----------      ----------     ----------
Total delinquencies                       5,972        64,355          6,916        75,759           4,750         54,835

Delinquency as a
  percentage of servicing portfolio        3.30%         3.34%          3.84%         3.94%           2.77%          2.99%
</TABLE>


         As  indicated  by  the  above  table,   delinquency  rates  based  upon
outstanding  loan  balances of accounts 30 days past due and over  decreased  to
3.34% at March 31, 1998,  compared to 3.94% at December 31, 1997,  and increased
from 2.99% at March 31,1997, for UAC's prime servicing portfolio.  The decreased
delinquency  is primarily  attributed to collection  strategies  implemented  to
target problem accounts as well as the utilization of new scoring tools to focus
collection efforts most effectively.

<TABLE>
<CAPTION>

                                                              Prime Credit Loss Experience
                                                               For the Three Months Ended
                               ----------------------------------------------------------------------------------------------

                                       March 31, 1998                 December 31, 1997                 March 31, 1997
                               ----------------------------      --------------------------        --------------------------
                                                                   (Dollars in thousands)
                                 Number of                        Number of                        Number of
                                  Loans           Amount           Loans           Amount           Loans           Amount 
                                  -----           ------           -----           ------           -----           ------ 
<S>                               <C>         <C>                 <C>           <C>                 <C>          <C>        
Average servicing portfolio       180,631     $   1,924,930       179,334       $ 1,916,778         170,741      $ 1,835,023
                                                                                           

Gross charge-offs                                                                                               
Recoveries                          1,886            20,767         1,977            22,373           2,139           24,027
                                                                                                      
  Net charge-offs                                     8,186                           8,527                            9,443
                                              -------------                     -----------                      -----------
                                                     12,581                          13,846                           14,584

Gross charge-offs as a
  percentage of average servicing
  portfolio (1)                      4.18%             4.32%         4.41%             4.67%           5.01%            5.24%

Recoveries as a percentage of
  gross charge-offs                                   39.42%                          38.11%                           39.30%
Net charge-offs as 
  a percentage of average 
  servicing portfolio (1)                              2.61%                           2.89%                            3.18%
</TABLE>

(1) Annualized

<PAGE>

<TABLE>
<CAPTION>

                                                Prime Credit Loss Experience
                                                 For the Nine Months Ended
                               ---------------------------------------------------------------
                                       March 31, 1998                   March 31, 1997
                               -------------------------------   -----------------------------
                                                   (Dollars in thousands)
                                 Number of                        Number of
                                  Loans           Amount           Loans           Amount 
                                  -----           ------           -----           ------ 
<S>                              <C>         <C>                 <C>           <C>        
Average servicing portfolio      178,628     $   1,907,770       162,120       $ 1,727,725
                                                 
Gross charge-offs                  5,917            66,197         4,393            48,923
Recoveries                                          24,848                          19,089
                                             -------------                     -----------
  Net charge-offs                                   41,349                          29,834

Gross charge-offs as a
  percentage of average
  servicing portfolio (1)           4.42%             4.63%         3.61%             3.78%
Recoveries as a percentage
  of gross charge-offs                               37.54%                          39.02%
Net charge-offs as a percentage
  of average servicing                                2.89%                           2.30%
  portfolio (1)
</TABLE>

(1) Annualized

         As  indicated  in the table  above,  credit  losses  on the prime  auto
portfolio  totaled  $12.6 million for the quarter ended March 31, 1998, or 2.61%
(annualized) of the average servicing  portfolio compared to 2.89% and 3.81% for
the  quarters  ended  December  31,  1997,  and  March 31,  1997,  respectively.
Decreased credit losses are primarily a result of strategic  efforts made by the
Company  to  improve  the  overall  credit-quality  of loans as well as a slight
improvement in recovery rates.

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

<TABLE>
<CAPTION>
                                                            Non-prime Delinquency Experience At
                                  ------------------------------------------------------------------------------------
                                        March 31, 1998             December 31, 1997               March 31, 1997
                                  --------------------------    -----------------------       ------------------------
                                                                 (Dollars in thousands)
                                   Number of                    Number of                     Number of
                                     Loans          Amount       Loans         Amount          Loans          Amount 
                                  ----------    ------------  -----------   -----------   -------------  --------------
<S>                                   <C>           <C>            <C>       <C>                 <C>          <C>     
Servicing portfolio                   6,414         $69,850        6,367     $  70,439           5,973        $ 68,340
                                                                                            
Delinquencies
  30-59 days                            371           4,186          400         4,647             162           1,973
  60-89 days                            114           1,369          150         1,728              73             884
  90 days or more                         -               -            -             -               -               -
                                  ----------    ------------  -----------   -----------   -------------  --------------
Total delinquencies                     485           5,555          550         6,375             235           2,857

Delinquency as a
  percentage of servicing portfolio    7.56%           7.95%        8.64%         9.05%           3.93%           4.18%

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                  Non-prime Credit Loss Experience
                                                                     For the Three Months Ended
                                      ------------------------------------------------------------------------------------------
                                            March 31, 1998               December 31, 1997                 March 31, 1997
                                      ---------------------------    ---------------------------     ---------------------------
                                                                       (Dollars in thousands)
                                       Number of                      Number of                      Number of
                                         Loans        Amount           Loans        Amount             Loans         Amount 
                                         -----        ------           -----        ------             -----         ------ 
<S>                                     <C>         <C>                <C>          <C>                <C>          <C>    
Average servicing portfolio             6,414       $ 70,345           6,340        $70,547            5,896        $67,958

Gross charge-offs                         159          1,781             195          2,163              111          1,252
Recoveries                                               602                            708                             455
                                                   ---------                       --------                         -------
  Net charge-offs                                      1,179                          1,455                             797

Gross charge-offs as a percentage
  of average servicing portfolio (1)     9.92%         10.13%          12.30%         12.26%            7.53%          7.37%
Recoveries as a percentage
  of gross charge-offs                                 33.81%                         32.75%                          36.32%
Net charge-offs as a percentage
  of average servicing portfolio (1)                    6.70%                          8.25%                           4.69%
</TABLE>

<TABLE>
<CAPTION>
                                                      For the Nine Months Ended
                                      ----------------------------------------------------------
                                            March 31, 1998                 March 31, 1997
                                      ---------------------------    ---------------------------
                                                       (Dollars in thousands)
                                       Number of                      Number of
                                        Loans          Amount           Loans          Amount 
                                        -----          ------           -----          ------ 
<S>                                     <C>           <C>               <C>           <C>    
Average servicing portfolio             6,319         $ 70,239          5,308         $61,576

Gross charge-offs                         583            6,418            247           2,736
Recoveries                                               2,243                            913
                                                     ------------                    -----------
  Net charge-offs                                        4,175                          1,823

Gross charge-offs as a percentage
  of average servicing portfolio (1)    12.30%           12.18%          6.20%           5.92%
Recoveries as a percentage
  of gross charge-offs                                   34.95%                         33.37%
Net charge-offs as a percentage
  of average servicing portfolio (1)                      7.92%                          3.95%
</TABLE>

(1) Annualized



         As indicated in the above table,  non-prime delinquency was 7.95% based
on outstanding  loan balances of accounts 30 days past due and over at March 31,
1998,  compared  to 9.05% at December  31,  1997,  and 4.18% at March 31,  1997.
Credit  losses for the quarter  ended March 31,  1998,  totaled  $1.2 million or
6.70% (annualized) as a percentage of the average non-prime  servicing portfolio
compared to 8.25% and 4.69% for the quarters  ended December 31, 1997, and March
31, 1997,  respectively.  The decrease in delinquency and net credit losses is a
result of a more  seasoned  portfolio as well as strategic  changes made with in
the collections  department.  The non-prime portfolio represents less than 4.00%
of the Company's total servicing portfolio.

         Marine Portfolio.  Delinquency related to the marine portfolio based on
outstanding  loan  balances  of  accounts  30 day past due and over at March 31,
1998,  was 1.43%,  a decrease  from 1.60% at December 31, 1997,  and an increase
from  0.74% at March  31,  1997.  Net  credit  losses  on the  marine  servicing
portfolio for the third quarter of fiscal 1998 were 1.83%  compared to 1.64% for
the quarter ended December 31, 1997.  The marine lending  program was terminated
in March  1998,  however,  net credit  losses are  expected  to  continue as the
portfolio becomes more seasoned. See - "Other Matters".


Results of Operations

         Net earnings for the three months and nine months ended March 31, 1998,
were down 71.6% and 77.0%  respectively,  compared to the three  months and nine
months  ended March 31,  1997.  Net earnings for the nine months ended March 31,
1998,  included a one-time  income tax  benefit of $860,000  resulting  from the
change in commercial domicile of five of the Company's subsidiaries.  The change
in commercial domicile should reduce the effective income tax rate from 40.5% to
approximately  38.2% on a  continuing  basis.  The  decrease in net  earnings is
primarily  attributable to lower net interest margins and lower gain on sales of
loans.  The Company's total loan  acquisitions  for the quarter  decreased 21.3%
compared to the same  quarter  last year.  Year to date loan  acquisitions  also
decreased  by 20.7% over the  comparable  period of fiscal 1997.  The  servicing
portfolio was over $2.0 billion, a 5.1% increase over a year ago.

         Net interest margin after provision  decreased  104.2% to ($85,000) and
89.4%  to  941,000  for  the  three  and  nine  months  ended  March  31,  1998,
respectively,  compared to $2.0 million and $8.9  million for the  corresponding
periods  ended  March 31,  1997.  The  decrease  in net  interest  margin is due
primarily  to three  factors.  First,  the held for sale  portfolio  had a lower
interest rate yield and a lower average  principal balance on the prime held for
sale  portfolio for the three and nine months ended March 31, 1998,  compared to
the corresponding  periods of last fiscal year. Second, the provision for credit
losses  on loans  held  for  sale was  increased  in  response  to the  trend of
increasing  credit  losses  and  delinquencies  experienced  prior to the second
quarter of this fiscal  year.  Third,  interest  expense on  long-term  debt was
higher  during the three and nine months ended March 31,  1998,  compared to the
same periods of fiscal 1997 due to the  issuance of the $65.0  million in Senior
Notes  during  March  1997,  but was  partially  offset  by  lower  interest  on
borrowings  due to lower  average  borrowing  needs  resulting  from  lower loan
acquisitions.

         Gain on sales of loans  decreased  to $4.4 million and $8.9 million for
the three and nine months ended March 31, 1998, respectively,  from $8.3 million
and $22.9  million  for the  corresponding  periods  ended March 31,  1997.  The
decrease was due to higher  provisions  for  estimated  credit losses as well as
lower loan  acquisitions  resulting  in lower  securitizations  during the first
three quarters of fiscal 1998. The Company securitized $218.4, $204.1 and $228.9
million in loans  during the first,  second and third  quarters  of fiscal  1998
compared   to  $311.0,   $314.2   (including   $31.1   million  in  a  non-prime
securitization),  and $293.3 million for the first, second and third quarters of
fiscal 1997. Furthermore, an additional $1.0 million of reserves was recorded in
the third quarter of fiscal 1998 and 1997 as a reduction to the gain.

          Servicing  fees,  net totaled $6.4  million and $19.1  million for the
three and nine months ended March 31,  1998,  compared to $6.9 million and $18.9
million,  respectively,  for the  corresponding  periods  ended March 31,  1997.
Servicing   fees   consist   of   contractual   servicing   fees  (1%  on  prime
securitizations),  the accretion of discount on excess servicing cashflows,  and
excess  rebates.  Servicing  fees, net decreased 6.1% for the three months ended
March 31,  1998,  compared  to the same  period of last year.  The  decrease  is
primarily  a result of rebates  received in excess of  original  estimates  that
reduced the excess  servicing asset rather than being recorded as a component of
servicing  fees.  The change in  recording  excess  rebates  was made during the
fourth  quarter of fiscal 1997. The decrease in servicing fees related to excess
rebates  is offset by an  increase  in  servicing  fees due to a higher  average
securitized  servicing  portfolio at March 31, 1998, compared to March 31, 1997.
The average securitized  portfolio increased by approximately 4.8% and 14.2% for
the three and nine months ended March 31, 1998,  compared to the same periods of
fiscal 1997.

         Other revenues increased to $1.1 million and $3.1 million for the three
and nine months ended March 31, 1998,  respectively,  from $1.0 million and $2.9
million  for the three and nine  months  ended  March 31,  1997.  Other  revenue
consists  primarily  of late  charge  income and  origination  fee  income.  The
increase  resulted  primarily from increases in late charge fee income,  but was
offset by a decrease in origination  fees. The increase in late charge income is
primarily  due to the  increase  in the  servicing  portfolio  as well as higher
delinquencies  experienced during the nine months ended March 31, 1998, compared
to the same period of last fiscal  year.  The  decrease in  origination  fees is
primarily  due to a lower  volume of loans  acquired  during  the three and nine
months  ended  March 31,  1998,  compared  to the same  periods of fiscal  1997.
Additionally,  origination  fees  have  decreased  due to the  use of a  greater
percentage of generic  contracts that do not allow for an origination  fee to be
charged.

          Salaries  and  benefits  increased  18.5% to $4.8 million and 23.3% to
$14.3 million for the three and nine months ended March 31, 1998,  respectively,
from $4.1  million and $11.6  million for the three and nine months  ended March
31, 1997. These increases resulted primarily from increased full-time equivalent
("FTE")  employees.  Average FTE's for the three and nine months ended March 31,
1998, were 492 and 451, respectively, compared to 371 and 364 for the comparable
periods ended March 31, 1997. The Company has  experienced  growth  primarily in
collections,  but modestly in other  areas.  Additional  support  staff has been
added  to help  ensure  efficiency  in  operations  as the  Company's  servicing
portfolio continues to increase.

          Other operating  expense  increased 15.1% to $4.0 million and 11.5% to
$12.2 million for the three and nine months ended March 31, 1998,  respectively,
from $3.5  million and $10.9  million for the three and nine months  ended March
31, 1997. Other operating  expenses  primarily  include  occupancy and equipment
costs, outside and professional services,  loan expenses,  promotional expenses,
travel and office supplies. The year to date increase resulted primarily from an
increase in consulting and  professional  fees for the Activity Based Management
("ABM")  project that began in July 1997 and the  non-recurring  fees related to
the change in commercial domicile for five of the Company's subsidiaries. ABM is
used as a tool to better  manage  the  Company's  business  and to  improve  the
pricing of products and overall operating  efficiency.  The change in commercial
domicile  provided a  one-time  income tax  benefit  of  $860,000  in the second
quarter of fiscal 1998.

Financial Condition

         Loans,  net includes the principal  balance of loans held for sale, net
of unearned discount,  allowance for estimated credit losses,  loans in process,
and prepaid dealer premiums.  The Company's portfolio of loans, net increased to
$153.8  million at March 31, 1998,  from $121.4  million at June 30,  1997.  The
increase in loans,  net is due primarily to a higher balance of non-prime  loans
held for  sale at March  31,  1998,  compared  to June  30,  1997.  A  non-prime
securitization  is  scheduled  for the fourth  quarter of fiscal 1998 which will
reduce the loans,  net balance by  approximately  $30.0  million.  Additionally,
prime loan acquisition volume was higher in the third month of the quarter ended
March 31,  1998,  compared to the quarter  ended June 30,  1997,  resulting in a
higher  loans,  net balance at quarter end.  Modified  loans,  which do not meet
certain securitization eligibility requirements,  are included in the loans, net
balance and have  increased to  approximately  $25.5  million at March 31, 1998,
from $14.3 million at June 30, 1997, of the loans, net balance.  The increase in
modified loans has contributed to a higher loans, net balance at March 31, 1998,
compared to June 30, 1997.

         Excess Servicing increased to $106.4 million as of March 31, 1998, from
$98.8  million as of June 30,  1997.  Excess  Servicing  increased by the amount
capitalized  upon  consummation  of the UACSC  1997-C,  1997-D,  and 1998-A Auto
("1997-C",   "1997-D"  and  "1998-A",   respectivley)   prime   securitizations.
Structuring of the securitization  includes the sale of an "interest only strip"
which  generates  higher cash proceeds  from the sale,  but serves to reduce the
initial excess  servicing asset recorded.  The amount  capitalized was offset by
the increased  return of excess  cashflows  over the nine months ended March 31,
1998, related to all outstanding securitizations. The excess servicing asset was
decreased by a mark to market  unrealized  loss  adjustment to excess  servicing
totaling $7.3 million,  or $4.5 million after tax. The net  unrealized  loss was
recorded as a component  of  shareholder's  equity in  accordance  with SFAS 125
during the current quarter.  Historically,  the Company has estimated the Excess
Servicing fair value by discounting  the projected  future  servicing cash flows
from the time they are received by the respective trust, however,  management is
currently  considering  implementing  the  "cash  out"  method.  The  impact  of
utilizing  the "cash out"  method has not yet been  determined  but could have a
material  effect on the fair value of the Excess  Servicing asset as of June 30,
1998, and result in an other than temporary impairment of Excess Servicing which
would  be  charged  against  current  earnings.  See -  "Note  5 of the  Interim
Financial  Statements- Excess  Servicing".  The increase in excess servicing was
also offset by the effect of the $3.7 million impairment of the excess servicing
asset recorded  during the quarter ended  September 30, 1997,  which reduced the
amount of gain  recorded in the quarter ended  September  30, 1997.  The Company
made an additional $1.0 million  provision to the allowance for estimated credit
losses on  securitized  loans  during  the third  quarter  of fiscal  1998 which
lowered the gain on sale.  Allowance for estimated  credit losses on securitized
loans is included as a component  of the excess  servicing  asset.  At March 31,
1998,  the  undiscounted  allowances,   related  to  both  prime  and  non-prime
securitized loans,  totaled $68.9 million or 3.71% of the total securitized loan
portfolio  compared to $79.0 million or 4.35% at June 30, 1997. Accrued interest
due to the Company at the cutoff date on securitized loan pools is also included
as a component of Excess Servicing.

         Spread  Accounts  decreased to $70.5  million at March 31,  1998,  from
$71.7 million at June 30, 1997.  These  balances were increased by deposits made
monthly from excess  servicing  cashflows and are reduced by any  withdrawals of
Spread  Account  funds.  Withdrawals  of Spread  Account funds are made when the
balance of the Spread Accounts are in excess of the  requirements  stipulated in
the servicing agreement or when a draw on the Spread Account is required to meet
cash flow requirements of the securitization. An initial deposit of $2.3 million
and  $2.0   million  was  made  in   connection   with  the  1998-A  and  1997-D
securitization, respectively.

         The balance of the Revolving Warehouse Credit Facilities and the Senior
and Senior  Subordinated Notes was $278.1 million at March 31, 1998, compared to
$265.5  million at June 30,  1997.  The  increase in  borrowings  was  primarily
related to higher non-prime  borrowings at March 31, 1998,  compared to June 30,
1997. Additionally,  prime loan acquisition volume was higher in the third month
of the quarter  ended  March 31,  1998,  compared to the quarter  ended June 30,
1997, effectively increasing the borrowing needs.

         The net deferred  income taxes  payable  totaled $17.1 million at March
31, 1998,  compared to $15.0 million at June 30, 1997.  The increase is a result
of  the  deferral  of  a  portion  of  the  gain  on  sales  of  loans  for  the
securitizations  effected  during the first  three  quarters  of fiscal  1998 in
excess of previously deferred income recognized currently for tax purposes.  The
increase is offset by the  $860,000  reduction  in deferred  state  income taxes
effected in the second quarter of fiscal 1997.

Liquidity and Capital Resources

         Sources and Uses of Cash in Operations. The Company's business requires
significant  amounts of cash to support  operations.  Its  primary  uses of cash
include  (i)  acquisition  of loans,  (ii)  payment  of Dealer  Premiums,  (iii)
securitization  costs  including  cash held in Spread  Accounts and similar cash
collateral accounts under revolving  Warehouse Credit Facilities,  (iv) servicer
advances of payments on securitized loans pursuant to securitization trusts, (v)
losses on  hedging  transactions  realized  in  connection  with the  closing of
securitization transactions where interest rates have declined during the period
covered by the hedge,  (vi) operating  expenses,  (vii) payment of income taxes,
and (viii)  interest  expense.  The  Company's  sources of cash from  operations
include  (i)  standard  servicing  fees,  generally  1.0% per annum of the prime
securitized  portfolio,  (ii) Excess Servicing Cash Flows,  (iii) Dealer Premium
rebates,  (iv) gains on hedging  transactions  realized in  connection  with the
closing of  securitization  transactions  where  interest  rates have  increased
during the periods  covered by the hedge,  (v)  interest  income,  (vi) sales of
loans  in   securitization   transactions   and  (vii)  proceeds  from  sale  of
interest-only strips in conjunction with securitization  transactions.  Net cash
used by  operating  activities  decreased  to $38.3  million for the nine months
ended March 31, 1998,  from net cash  provided by operating  activities of $56.8
million  for  the  nine  months  ended  March  31,  1997.   This  was  primarily
attributable to a decrease in loans securitized relative to loans acquired.  The
increase in cash used for investing activities was primarily due to the purchase
of property for the expansion of the reconditioning  and remarketing  operations
in Indianapolis. See - "Other Matters"

         Hedging  transactions  may represent a source or a use of cash during a
given period  depending on the change in interest  rates.  Hedging  transactions
have  required a use of cash of $2.2 million for the nine months ended March 31,
1998, compared to $5.8 million for the nine months ended March 31, 1997.

         Financing Activities.  The Company has substantial capital requirements
to support its ongoing operations and anticipated  growth. The Company's sources
of liquidity are currently funds from operations,  securitizations  and external
financing  including  long-term debt and revolving  warehouse credit facilities.
Historically,  the  Company  has used the  securitization  of loan  pools as its
primary  source of long-term  funding.  Securitization  transactions  enable the
Company to improve its liquidity,  to recognize gains from the sales of the loan
pools  while  maintaining  the  servicing  rights to the  loans,  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 loan  acquisitions  (not including
Dealer  Premiums).  In addition to loan  acquisition  funding,  the Company also
requires  substantial capital on an ongoing basis to fund the advances of Dealer
Premiums,   securitization   costs,   servicing   obligations   and  other  cash
requirements  described above. The Company's  ability to borrow under the 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  businesses and the
Company's financial condition and results of operations. Moreover, the Company's
growth may be  inhibited,  at least  temporarily,  if the Company is not able to
obtain  additional  funding through these or other facilities or if it is unable
to satisfy the conditions to borrowing under the Credit Facilities.  The Company
consistently  assesses its long-term  loan funding  arrangements  with a view to
optimizing cash flows and reducing costs.

         Warehouse  Facilities.  The Company has borrowing  arrangements with an
independent  financial  institution  for the Prime  Warehouse  Facility of up to
$350.0  million  and a  similar  Non-prime  Warehouse  Facility  of up to  $50.0
million. Additionally, the Company established a Marine Warehouse Facility of up
to $50.0 million in April 1997 and  terminated the Facility in April 1998. See -
"Other  Matters".  The aggregate  capacity of the Prime and Non-prime  Warehouse
Facilities  is $400.0  million,  of which  $57.1  million  was  utilized  and an
additional  $45.6  million  was  available  to borrow  based on the  outstanding
principal  balance of eligible  loans at March 31, 1998. The Prime and Non-prime
Warehouse  Facilities  were recently  renewed and extended to June 1999 and July
1999,  respectively.  The Prime  Warehouse  Facility  provides  funding for loan
acquisitions  at a purchase price of up to 100.0% of the  outstanding  principal
balance of eligible  loans at the time of purchase  to the extent  allocable  to
loans  which,  upon  acquisition,  provided  for 72  monthly  payments  or less.
Additional  funding is provided for eligible  loans with greater than 72 monthly
payments  at a  purchase  price  of up to  92.0%  of the  outstanding  principal
balance.  The advance rate is adjusted monthly based upon actual loss statistics
in order to maintain the  necessary  credit  enhancement  level.  The  Non-prime
Warehouse Facility provides funding for loan acquisitions at a purchase price of
up to 87.0% of the outstanding  principal  balance of eligible loans at the time
of purchase.

         Long-term Debt. The Company issued $110.0 million of 8.53% Senior Notes
due August 1, 2002, in connection  with the Company's  initial public  offering.
Interest  on the Notes is  payable  semiannually,  and  principal  payments  are
scheduled  to begin  August 1,  1998,  and on each  subsequent  August 1, in the
amount equal to approximately 20% of the stated original principal  balance.  In
April 1996 the Company  completed a private  placement of $46.0 million of 9.99%
Senior  Subordinated  Notes due March 30, 2003, with interest payable  quarterly
and principal due at maturity.  In March 1997,  the Company issued $65.0 million
of Senior Notes due  December  27, 2002.  The Notes were issued as "Series A" in
the principal  amount of $50.0  million at 7.75%  interest and "Series B" in the
principal  amount of $15.0 million at 7.97%  interest.  Interest on the Notes is
payable  semiannually  and a  principal  payment is due March 15,  2002,  in the
amount equal to approximately 33 1/3% of the stated original balance.

         The Company's credit agreements, among other things, require compliance
with monthly and quarterly  financial  maintenance tests as well as restrict the
Company's ability to create liens, incur additional indebtedness,  sell or merge
assets and make investments. The Company is in compliance with all covenants and
restrictions imposed by the terms of indebtedness.

         During the fiscal  quarter  ended  December 31,  1997,  the Company was
notified by FITCH IBCA  ("Fitch")  that its ratings of the Company's  Senior and
Senior  Subordinated  Notes were  being  reduced  one grade.  At the time of the
initial  downgrade,  Fitch informed the Company that it would consider a further
downgrade of such securities if the Company failed to show material  improvement
in asset quality unless the Company obtained additional equity capital. Although
improvement in asset quality during the second and third quarters of fiscal 1998
occurred,  the Company was notified on February 27, 1998, of a further downgrade
to "BB+" and "BB" on the  Senior and Senior  Subordinated  notes,  respectively.
Given  the  improvement  in  asset  quality  and  current  adequacy  of  capital
resources,  the Company does not intend to seek additional  equity investment in
the  current  fiscal  year.  The  Company  plans  to do a  prime  and  non-prime
securitization  during the fourth  quarter of fiscal 1998 and is  considering  a
sale of its marine  portfolio and its portfolio of prime loans which do not meet
certain  securitization  eligibility criteria to increase liquidity in the short
term.

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

Other Matters

         Remarketing  of Repossessed  Autos.  During the first quarter of fiscal
1998 the Company acquired a 6.5 acre property near its Indianapolis headquarters
for the purpose of expanding its reconditioning and remarketing operations which
have outgrown its current facilities in Indianapolis. Renovation of the facility
is progressing and operations are expected to commence in the latter part of the
fourth quarter of fiscal 1998.

         Marine Lending. The marine lending program was terminated March 1, 1998
due to strict rate  competition  in the market,  resulting  in the  inability to
acquire large volumes of loans with profitable spreads. Marine loan acquisitions
totaled  $288,000  and $2.5  million for the quarter and nine months ended March
31,  1998,  respectively.  The  termination  of  the  marine  program  will  not
significantly  impact operations and will allow the Company to focus on the more
profitable used car market. As a result of the termination of the marine lending
program,  the Marine Warehouse  Facility was no longer  necessary.  On April 15,
1998,  the  Company  repaid all of its  obligations  under the Marine  Warehouse
Facility and terminated all related contractual agreements.

         In May 1998 Cynthia F. Whitaker, Vice President of Special Projects and
Secretary, resigned to pursue other interests.

Discussion of Forward-Looking Information

         The above discussions and notes to interim financial statements contain
forward-looking  statements  made  by  the  Company  regarding  its  results  of
operations,  effects  of  changes in  accounting  policies,  cash flow needs and
liquidity,  loan acquisition  volume,  target spreads,  potential credit losses,
servicing  income,  and other aspects of its business.  Similar  forward-looking
statements  may be made by the Company from time to time.  Such  forward-looking
statements are subject to a number of important factors that cannot be predicted
with  certainty  and which could  cause such  forward-looking  statements  to be
materially inaccurate. See the "Discussion of Forward-Looking Information" under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" in the Company's Annual Report on Form 10-K for fiscal 1997 which is
incorporated herein by this reference.


<PAGE>



Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K

               Exhibit 4.1    Amendment  No. 8, dated as of September  29, 1998,
                              to Transfer and  Administration  Agreement,  dated
                              June  27,1995,   among  Union  Acceptance  Funding
                              Corporation,   Union  Acceptance  Corporation  and
                              Enterprise Funding Corporation,  as amended ("UAFC
                              Transfer and Administration Agreement.")

               Exhibit 4.2    Letter  Agreement   regarding  UAFC  Transfer  and
                              Administration Agreement, dated as of November 24,
                              1997.

               Exhibit 4.3    Amendment    No.   10   to   UAFC   Transfer   and
                              Administration Agreement,  dated as of January 26,
                              1998.

               Exhibit 4.4    Letter  Agreement   regarding  UAFC  Transfer  and
                              Administration  Agreement,  dated as of April  28,
                              1998.

               Exhibit 4.5    Amendment  No. 7, dated as of September  29, 1998,
                              to Transfer and  Administration  Agreement,  dated
                              July  24, 1995,    among    Performance    Funding
                              Corporation,   Union  Acceptance  Corporation  and
                              Enterprise Funding Corporation, as amended  ("Non-
                              Prime Transfer and Administration Agreement.")

               Exhibit 4.6    Letter Agreement  regarding Non-Prime Transfer and
                              Administration Agreement, dated as of November 24,
                              1997.

               Exhibit 4.7    Amendment   No.  9  to   Non-Prime   Transfer  and
                              Administration Agreement,  dated as of January 26,
                              1998.

               Exhibit 4.8    Letter Agreement  regarding Non-Prime Transfer and
                              Administration  Agreement,  dated as of April  28,
                              1998. 

               Exhibit 27     Financial Data Schedule

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed during the quarter ended
              March 31, 1998

<PAGE>



Signatures

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

                          Union Acceptance Corporation

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

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