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

                                  Form 10-Q/A-1

(Mark One)

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

                For the quarterly period ended December 31, 1997

                                       or

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

                  For the Transition Period from _____ to _____

                         Commission File Number: 0-26412

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


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



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



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

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

Yes (X)           No ( )

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

                    Class                       Outstanding at February 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/A
                                      INDEX


                                                                            Page
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited):

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

         Consolidated Condensed Statements of Earnings (Loss) for the Three
         Months and Six Months Ended  December 31, 1997 and 1996             4

         Consolidated Condensed Statements of Cash Flows for the
         Six Months Ended December 31, 1997 and 1996                         5

         Consolidated Condensed Statement of  Shareholders' Equity for
         Six Months Ended December 31, 1997                                  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                                                  18


         Signatures                                                         19








Registrant  is  amending  this  report to give  effect to  previously  announced
restatement of its results of operations for the period covered by this report.

<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
Dollars in thousands, except share data

<TABLE>
<CAPTION>

                                                                                                
Assets                                                                   December 31, 1997             June 30, 1997
------                                                                   -----------------             -------------
                                                                           (Unaudited)

<S>                                                                        <C>                            <C>     
Cash                                                                       $ 55,500                       $ 58,801
Restricted cash                                                              18,394                         16,657
Loans, net                                                                  173,891                        121,156
Accrued interest receivable                                                   1,779                          1,232
Property and equipment, net                                                   4,979                          2,150
Excess servicing                                                            101,949                         99,047
Spread accounts                                                              67,424                         71,744
Other assets                                                                 19,199                         20,481
                                                                           --------                       --------
 Total Assets                                                              $443,115                       $391,268
                                                                           ========                       ========
                                                                    
Liabilities                                                                                            
-----------                                                                                            
                                                                                                       
Amounts due under warehouse facilities                                     $102,612                       $ 44,455
Long term debt                                                              221,000                        221,000
Accrued interest payable                                                      5,796                          5,793
Amounts due to trusts                                                        12,779                         16,067
Dealer premiums payable                                                       1,514                          1,372
Other payables and accrued expenses                                           2,688                          1,874
Deferred income tax payable                                                  11,199                         13,859
                                                                           --------                       --------
 Total Liabilities                                                          357,588                        304,420
                                                                           --------                       --------
                                                                                                       
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 December 31, 1997 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 December 31, 1997 and                                                       
 June 30, 1997, respectively                                                     --                             --
                                                                                                       
Net unrealized gain on excess servicing                                       6,498                          2,252
Retained earnings                                                            20,669                         26,326
                                                                           --------                       --------
 Total Shareholders' Equity                                                  85,527                         86,848
                                                                           --------                       --------
                                                                                                       
 Total Liabilities and Shareholders' Equity                                $443,115                       $391,268
                                                                           ========                       ========
</TABLE> 


See accompanying notes to consolidated condensed financial statements.


<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Earnings (Loss)
Dollars in thousands, except share data
(Unaudited)
 
<TABLE>
<CAPTION>
                                                            Three Months Ended                  Six Months Ended
                                                               December 31,                        December 31,
                                                     ------------------------------     ------------------------------
                                                         1997              1996             1997              1996
                                                     ------------      ------------     ------------      ------------


<S>                                                  <C>               <C>              <C>               <C>         
Interest on loans                                    $      6,473      $      9,096     $     13,100      $     18,329
Interest on spread accounts
   and restricted cash                                      1,461             1,545            3,033             3,055
                                                     ------------      ------------     ------------      ------------
   Total interest income                                    7,934            10,641           16,133            21,384
Interest expense                                            6,167             6,265           12,220            12,675
                                                     ------------      ------------     ------------      ------------
   Net interest margin                                      1,767             4,376            3,913             8,709
Provisions for  losses                                      1,770               993            3,275             1,848
                                                     ------------      ------------     ------------      ------------
   Net interest margin (deficit) after provision               (3)            3,383              638             6,861

Gain (loss) on sales of loans                               2,020             7,790           (8,827)           14,665
Servicing fees, net                                         6,533             6,258           12,819            12,084
Other revenue                                                 985               910            2,005             1,844
                                                     ------------      ------------     ------------      ------------

Total revenues                                              9,535            18,341            6,635            35,454
                                                     ------------      ------------     ------------      ------------

Salaries and benefits                                       4,871             3,900            9,481             7,532
Other expenses                                              4,165             3,932            8,178             7,446
                                                     ------------      ------------     ------------      ------------

Total operating expenses                                    9,036             7,832           17,659            14,978
                                                     ------------      ------------     ------------      ------------

Earnings (loss) before provision
   for income taxes                                           499            10,509          (11,024)           20,476
Provision (benefit) for income taxes                         (711)            4,316           (5,367)            8,365
                                                     ------------      ------------     ------------      ------------

Net earnings (loss)                                  $      1,210      $      6,193     $     (5,657)     $     12,111
                                                     ============      ============     ============      ============

 Net earnings (loss) per share (diluted & basic)     $       0.09      $       0.47     $      (0.43)     $       0.92
                                                     ============      ============     ============      ============

 Weighted average number of
   common shares outstanding                           13,227,010        13,215,515       13,221,899        13,213,437
                                                     ============      ============     ============      ============
</TABLE>

See accompanying notes to consolidated condensed financial statements.





<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>

                                                                               Six Months Ended
                                                                                 December 31,
                                                                          ------------------------
                                                                             1997           1996
                                                                          ---------      ---------

Cash flows from operating activities:
<S>                                                                       <C>            <C>      
    Net earnings (loss)                                                   $  (5,657)     $  12,111
       Adjustments to reconcile net earnings (loss) to net cash
       provided (used) by operating activities:
                 Loan acquisitions in excess of liquidations               (476,782)      (588,707)
                 Dealer premiums paid in excess of dealer premium
                   rebates received on loans held for sale                  (21,175)       (28,355)
                 Securitization of loans held for sale                      422,537        625,192
                 Gain on sales of loans                                     (12,512)       (22,526)
                 Proceeds on sale of interest-only strip                      7,137         18,293
                 Return of excess and servicing asset cash flows,
                    net of present value effect                              10,270         18,074
                 Impairment of Excess Servicing                              17,549             --
                 Provision for estimated credit losses                        3,275          1,848
                 Amortization and depreciation                                2,093          1,860
                 Spread accounts                                              4,320         (9,054)
                 Restricted cash                                             (1,737)        (1,430)
                 Other assets and accrued interest receivable                (2,478)        (3,473)
                 Amounts due to trusts                                       (3,288)         3,802
                 Other payables and accrued expenses                         (1,754)         3,218
                                                                          ---------      ---------
                     Net cash provided (used) by operating activities       (58,202)        30,853
                                                                          ---------      ---------

Cash flows from investing activities:
    Purchase of fixed assets                                                 (3,256)          (561)
                                                                          ---------      ---------

Cash flows from financing activites:
    Net change in warehouse credit facilities                                58,157        (31,340)
    Payment of borrowing fees                                                    --             (4)
                                                                          ---------      ---------
                     Net cash provided (used) by financing activities        58,157        (31,344)

Change in cash                                                               (3,301)        (1,052)

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

Cash, end of period                                                       $  55,500      $  12,407
                                                                          =========      =========

Supplemental disclosures of cash flow information:

                     Income taxes paid                                    $      20      $   4,200
                                                                          =========      =========

                     Interest paid                                        $  12,768      $  13,399
                                                                          =========      =========
</TABLE>



See accompanying notes to consolidated condensed financial statements.






<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Six Months Ended December 31, 1997
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>


                                     Number of Common Stock                           Net
                                       Shares Outstanding                          Unrealized
                                                                                    Gain 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     $     2,252    $   26,326   $    86,848
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 (Loss)                      -              -                 -               -        (5,657)       (5,657)
                                ----------------------------------------------------------------------------------------
                                 4,376,446       8,855,036           58,360           2,252        20,669        81,281

Net change in unrealized gain
   on excess servicing                   -               -                -           4,246             -         4,246
                                ----------------------------------------------------------------------------------------
Balance at December 31, 1997     4,376,446       8,855,036       $   58,360     $     6,498    $   20,669   $    85,527
                                ========================================================================================
</TABLE>



See accompanying notes to consolidated condensed financial statements.

<PAGE>


Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Six Months Ended December 31, 1997 and December 31, 1996
(Unaudited)

Note 1-  Basis of Presentation

         The forgoing consolidated condensed financial statements are unaudited.
However,  in the opinion of  management,  all  adjustments  necessary for a fair
presentation of the results of the interim period  presented have been included.
All  adjustments are of a normal and recurring  nature.  Results for any interim
period are not  necessarily  indicative  of results to be expected for the year.
The consolidated  condensed  financial  statements include the accounts of Union
Acceptance Corporation ("UAC") and its subsidiaries.
         During  fiscal  1995,  Union  Acceptance   Funding   Corporation,   UAC
Securitization  Corporation,  Performance  Funding  Corporation  and Performance
Securitization  Corporation  were formed as wholly  owned  subsidiaries  of UAC.
During  fiscal  1996,  UAC Boat  Funding  Corp.  was  formed as a wholly-  owned
subsidiary  of UAC.  In fiscal  1997,  UAC Finance  Corporation  was formed as a
wholly-owned  subsidiary  of UAC.  Circle City Car Company and Union  Acceptance
Receivables  Corporation were formed as wholly-owned  subsidiaries of UAC during
the first and second quarters, respectively, of fiscal 1998.
         The  consolidated  condensed  interim  financial  statements  have been
prepared in accordance with Form 10-Q  specifications,  and,  therefore,  do not
include all  information and footnotes  normally shown in full annual  financial
statements.  A summary of the Company's  significant  accounting policies is set
forth in "Note 1" of the "Notes to  Consolidated  Financial  Statements"  in the
Company's Annual Report on Form 10-K for the year ended June 30, 1997.


Note 2- Earnings Per Share

         The Company has implemented Statement of Financial Accounting Standards
No. 128,  "Earnings per Share" ("EPS") which is effective for interim and annual
periods ending after December 15, 1997, and requires the  presentation  of basic
and  dilutive  earnings  per share.  Accordingly,  these  amounts  appear on the
consolidated  financial  statements in this Form 10-Q. 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  December  31,  1997 and 1996 were  13,227,010  and
13,215,515,  respectively.  The  weighted  average  number of shares used in the
basic and dilutive EPS  computations  for the six months ended December 31, 1997
and 1996 were 13,221,899 and 13,213,437, 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.




<PAGE>





Union Acceptance Corporation and Subsidiaries
Notes to the Consolidated Condensed Financial Statements
For the Six Months Ended December 31, 1997 and December 31, 1996
(Unaudited)


Note 4- Excess Servicing

Excess servicing is as follows (in thousands) at:

                                                 December 31,        June 30,
                                                     1997              1997
                                                 -----------       -----------
Estimated value of excess servicing cash
  flows, net of estimated prepayments            $   154,093       $   145,872
Allowance for estimated credit losses                (92,512)          (79,923)
Estimated dealer premium rebates                      24,680            26,447
Discount to present value                             (8,446)           (9,941)
                                                 -----------       -----------
                                                      77,815            82,455

Accrued interest on securitized loans                 13,721            12,807
Unrealized gain on excess servicing                   10,413             3,785
                                                 -----------       -----------
Excess Servicing                                 $   101,949       $    99,047
                                                 ===========       ===========

Outstanding balance of loans serviced
  through securitized trusts                     $ 1,829,869       $ 1,818,163
Allowance for estimated credit losses as
  a percentage of securitized loans serviced            5.06%             4.40%


Note 5-Current Accounting Pronouncements

         In June 1997, the Financial  Accounting Standards Board ("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.



<PAGE>

Note 6-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.



Note 7 - Restatement of Consolidated Condensed Financial Statements

The  Company  determined  in  August  1998  that it should  measure  other  than
temporary  impairment of Excess  Servicing on a disaggregate  basis (the pool by
pool method).  The  adjustments  resulting  from the  measurement  of other than
temporary impairment on a disaggregate basis were of sufficient  significance to
require restatement of the consolidated condensed financial statements since the
implementation  of SFAS 125.  This  restatement  had the effect of reducing  net
earnings by $719,000 (net of income taxes of $434,000),  or $0.05 per share, for
the quarter ended  December 31, 1997.  This  restatement  reduced  shareholders'
equity  at  December  31,  1997  by  $1.9  million.   In  conjunction  with  the
restatement,  the Company made other  adjustments,  which were not  individually
significant, that decreased net earnings for the quarter ended December 31, 1997
by $17,000 (net of income taxes of  $11,000),  or $0.01 per share and  increased
shareholders' equity at December 31, 1997 by $506,000.


<PAGE>



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

General

         As  more  fully  described  in  Note  7 to the  Consolidated  Condensed
Financial Statements,  this report contains financial information which has been
restated.
         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 sale of loans and  establishes  excess  servicing  as an asset.  Excess
servicing cash flows are recorded against the excess servicing asset as received
over the life of the related securitization.
         Acquisition  Volume.  The Company currently  acquires loans in 51 major
metropolitan  areas in 30 states  from over 3,300  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 program ("Non-prime  lending").  In
June 1996, the Company began  acquiring  loans under the Marine lending  program
("Marine  lending").  The  Company  continues  to  expand  through  focusing  on
penetrating the existing dealer base and on new high-quality  dealers within the
existing markets.  Over the last year, the Company made some strategic decisions
with regard to pricing and underwriting to improve the overall credit quality of
the portfolio over the long-term. These changes coupled with intense competition
in the  consumer  finance  markets  and the  cyclical  nature of the  automotive
industry  continue to negatively impact the volume of loan  acquisitions.  Total
loan acquisitions were $227.4 million for the quarter ended December 31, 1997, a
decrease  from $252.9  million for the quarter  ended  September  30, 1997,  and
$307.4 million for the quarter ended December 31, 1996. Prime loan  acquisitions
for the quarter  ended  December 31,  1997,  decreased by 8.8% from the previous
quarter,  and 25.2% from the quarter  ended  December 31, 1996.  Non-prime  loan
acquisitions  for the quarter ended  December 31, 1997,  decreased by 34.2% from
the quarter ended  September 30, 1997, and 46.7% from the quarter ended December
31, 1996. Loan  acquisitions  for the marine  business  decreased 70.1% from the
quarter ended  September 30, 1997, and 44.2% from the quarter ended December 31,
1996.
         Gross and Net Spreads.  Market interest rates (i.e.  treasury rates) on
the second quarter securitization decreased significantly from the first quarter
securitization.  The gross and net spreads on the second quarter  securitization
of fiscal 1998 were 6.71% and 5.07%  compared to 7.39% and 5.37%,  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 spread on the
most recent prime securitization  (November 1997) was 5.07% compared to 5.38% in
the first quarter  securitization  and 5.37% in the quarter  ended  December 31,
1996.  Because  of the  higher  spread  to  treasury  rates in the  asset-backed
securities market, the net spread on the second quarter securitization of fiscal
1998 was lower compared to the second quarter securitization of fiscal 1997.
         Management  is  currently  targeting  net  spreads of 4.85% to 5.35% on
prime securitizations  (assuming a pricing spread for asset-backed  certificates
over the two-year treasury note of 65 basis points) for fiscal 1998.  Management
believes that by targeting a spread of 7.00% to 7.50% between loan rates and the
two-year 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.  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.  The
Company  adjusts its pricing  frequently and employs a hedging  strategy to help
ensure an adequate net spread in the ensuing  securitization,  while  mitigating
the risks of increasing interest rates and the volatility in net spreads.
         Portfolio  Performance.  Increasing delinquency and credit losses prior
to this quarter have been  attributed to the  deterioration  of consumer  credit
despite low unemployment and relatively good economic conditions. There has been
a slight  improvement in  delinquency  and credit losses since  September  1997,
which is  primarily  attributable  to  strategic  efforts  made by the  Company.
Beginning  in March 1997,  UAC  implemented  tighter  credit  standards  in loan
acquisitions  to  help  ensure  adequate  credit  quality.   Several  collection
strategies have been implemented to target problem  accounts,  including forming
specialized  collection teams to concentrate on specific classes of accounts and
utilization of new scoring tools to focus collection efforts most effectively.
         Recovery rates are a contributing  factor to higher credit losses.  The
market for the sale of  used-cars  at auction  has  continued  to decline due to
saturation by used leased vehicles and  repossessed  vehicles due to bankruptcy.
Recoveries  as a  percentage  of gross  charge-offs  increased to 38.11% for the
quarter ended December 31, 1997, up from 35.28% for the quarter ended  September
30, 1997, and 37.52% for the quarter ended December 31, 1996.  Although recovery
rates showed signs of  improvement  during the most recent  quarter,  management
continues to look for ways to improve recovery rates, including expansion of the
Company's reconditioning 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  second  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) decreased to 5.06% at December 31, 1997, from 5.33% at
September 30, 1997,  and increased  from 3.40% at December 31, 1996.  During the
quarter ended December 31, 1997,  the Company  recorded a pre-tax charge of $1.2
million primarily to increase the allowance for estimated credit losses on those
pools which were deemed to have other than temporary impairment.
         Prime Portfolio.  Set forth below is certain information concerning the
Company's  experience  pertaining to delinquencies  and net credit losses on the
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".

<TABLE>
<CAPTION>


                                                                Prime Delinquency Experience At
                                  ------------------------------------------------------------------------------------------
                                       December 31, 1997              September 30,1997               December 31, 1996     
                                  -----------------------------    --------------------------     --------------------------
                                                                    (Dollars in thousands)
                                      Number of                     Number of                     Number of
                                        Loans        Amount          Loans            Amount        Loans           Amount 
                                        -----        ------          -----            ------        -----           ------ 
<S>                                    <C>           <C>           <C>             <C>             <C>           <C>      
Servicing portfolio                    179,962       1,920,930     177,377         1,896,748       165,270       1,766,525
Delinquencies
  30-59 days                             3,954          41,778       4,310            45,766         1,743          18,973
  60-89 days                             2,274          25,933       2,196            25,156         1,235          14,388
  90 days or more                          688           8,048         934            11,131           892          10,744
                                  -----------------------------------------------------------------------------------------
Total delinquencies                      6,916          75,759       7,440            82,053         3,870          44,105

Delinquency as a
  percentage of servicing portfolio       3.84%           3.94%       4.19%            4.33%         2.34%           2.50%

</TABLE>


         As  indicated  by  the  above  table,   delinquency  rates  based  upon
outstanding  loan  balances of accounts 30 days past due and over  decreased  to
3.94% at  December  31,  1997,  compared to 4.33% at  September  30,  1997,  and
increased from 2.50% at December 31, 1996, 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.

<PAGE>
<TABLE>
<CAPTION>


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

                                           December 31, 1997          September 30, 1997              December 31, 1996
                                      -------------------------   ----------------------------    ------------------------------

                                                                        (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             179,334      $1,916,778    175,920      $    1,881,603         162,427       $1,731,548
                                                                                                  
Gross charge-offs                         1,977          22,373      2,054              23,056           1,268           14,144
Recoveries                                                8,527                          8,134                            5,307
                                                   -------------              -----------------                ----------------
  Net charge-offs                                        13,846                         14,922                            8,837
                                                                                                                      

Gross charge-offs as a percentage
  of average servicing portfolio (1)       4.41%          4.67%       4.67%              4.90%           3.12%            3.27%
Recoveries as a percentage of
  gross charge-offs                                      38.11%                         35.28%                           37.52%
Net charge-offs as a percentage
  of average servicing portfolio (1)                      2.89%                          3.17%                            2.04%

</TABLE>

<TABLE>
<CAPTION>

                                                                  For the Six Months Ended
                                         --------------------------------------------------------------------------

                                                      December 31, 1997                December 31, 1996
                                         -----------------------------------    -----------------------------------

                                                                   (Dollars in thousands)
                                                 Number of                       Number of
                                                   Loans             Amount       Loans            Amount 
<S>                                               <C>             <C>            <C>         <C>           
Average servicing portfolio                       177,627         $,899,190      157,815     $    1,674,077

Gross charge-offs                                   4,031            45,429        2,254             24,895
Recoveries                                                           16,661                           9,646
                                                             ---------------                 --------------
  Net charge-offs                                                    28,768                          15,249

Gross charge-offs as a percentage
  of average servicing portfolio (1)                4.54%             4.78%        2.86%              2.97%
Recoveries as a percentage
  of gross charge-offs                                               36.68%                          38.75%
Net charge-offs as a percentage
  of average servicing portfolio (1)                                  3.03%                           1.82%

    (1) Annualized


</TABLE>






<PAGE>

     As indicated in the table above,  credit losses on the prime auto portfolio
totaled  $13.8  million  for the  quarter  ended  December  31,  1997,  or 2.89%
(annualized) of the average servicing  portfolio compared to 3.17% and 2.04% for
the quarters  ended  September  30, 1997,  and December 31, 1996,  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.


     Non-Prime Portfolio.  Set forth below is certain information concerning the
Company's  experience  pertaining to delinquencies  and net credit losses on the
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
                                      ----------------------------------------------------------------------------
                                           December 31, 1997          September 30, 1997        December 31, 1996
                                      -----------------------      ------------------------   --------------------

                                                                   (Dollars in thousands)
                                       Number of                    Number of                 Number of
                                        Loans         Amount         Loans        Amount       Loans         Amount 
                                        -----         ------         -----        ------       -----         ------ 
<S>                                     <C>          <C>              <C>       <C>           <C>        <C>       
Servicing portfolio                     6,367        $70,439          6,288     $70,760       5,574      $   64,746
Delinquencies
  30-59 days                              400          4,647            380       4,420         119           1,445
  60-89 days                              150          1,728            162       1,876          80           1,009
  90 days or more                           -              -              -           -           -               -
                                      --------        -------       --------     -------   ---------       ---------
Total delinquencies                       550          6,375            542       6,296         199           2,454

Delinquency as a
  percentage of servicing portfolio     8.64%          9.05%          8.62%       8.90%       3.57%           3.79%

</TABLE>


<PAGE>


     As indicated in the above table,  Non-prime portfolio delinquency was 9.05%
based on  outstanding  loan  balances  of  accounts 30 days past due and over at
December  31,  1997,  compared  to 8.90% at  September  30,  1997,  and 3.79% at
December 31, 1996. The increase in delinquency at December 31, 1997, compared to
December 31, 1996, is due primarily to the seasoning of the portfolio.

<TABLE>
<CAPTION>


                                                                      Non-prime Credit Loss Experience
                                                                        For the Three Months Ended
                                          ---------------------------------------------------------------------------

                                             December 31, 1997            September 30, 1997        December 31, 1996
                                             -----------------            ------------------        -----------------
                                                                     (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                  6,340       $  70,547     6,202     $    69,825       5,402     $  62,863
                                      
Gross charge-offs                              195           2,163       229           2,474          67           733
Recoveries                                                     708                       933                       184
  Net charge-offs                                        ---------             -------------               -----------      
                                                             1,455                     1,541                       549
                                                             
Gross charge-offs as a percentage     
  of average servicing portfolio (1)         12.30%          12.26%    14.77%          14.17%       4.96%         4.66%
Recoveries as a                             
  percentage of gross charge-offs                            32.75%                    37.71%                    25.10%
Net charge-offs as a percentage       
  of average servicing portfolio (1)                          8.25%                     8.83%                     3.49%
</TABLE>

<TABLE>
<CAPTION>

                                                             For the Six Months Ended
                                             -------------------------------------------------------
                                                  December 31, 1997            December 31, 1996
                                              -------------------------    -------------------------

                                                             (Dollars in thousands)
                                               Number of                   Number of
                                                 Loans        Amount        Loans             Amount 
                                                 -----        ------        -----             ------ 
<S>                                                 <C>     <C>            <C>           <C>        
Average servicing portfolio                         6,271   $  70,186      5,014         $    58,386

Gross charge-offs                                     424       4,637        136               1,484
Recoveries                                                      1,641                            458
                                                            ----------              -----------------
  Net charge-offs                                               2,996                          1,026

Gross charge-offs as a percentage
  of average servicing portfolio (1)               13.52%      13.21%      5.42%               5.08%
Recoveries as a percentage
  of gross charge-offs                                         35.39%                         30.86%
Net charge-offs as a percentage
  of average servicing portfolio (1)                            8.54%                          3.51%
</TABLE>




         As indicated in the table above,  credit  losses for the quarter  ended
December 31, 1997, totaled $1.5 million or 8.25% (annualized) as a percentage of
the average Non-prime  servicing  portfolio  compared to 8.83% and 3.49% for the
quarters  ended  September  30,  1997,  and  December  31,  1996,  respectively.
Increased  Non-prime  credit losses are a result of seasoning in the  portfolio.
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 days past due and over at December 31,
1997, was 1.60%, an increase from 1.46% at September 30, 1997. Net credit losses
on the marine  servicing  portfolio  for the second  quarter of fiscal 1998 were
1.64%,  compared to no credit losses for the quarter  ended  September 30, 1997.
The  increase in net credit  losses is expected as the  portfolio  becomes  more
seasoned.  The Marine  portfolio  accounts  for less than 40 basis points of the
Company's total servicing portfolio.

Results of Operations

         Net earnings for the three  months ended  December 31, 1997,  were $1.2
million,  compared to $6.2 million for the three months ended December 31, 1996.
Net loss for the six months ended December 31, 1997, was $5.7 million,  compared
to net earnings of $12.1 million for the six months ended December 31, 1996. Net
earnings  for the three months  ended  December  31,  1997,  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  for the quarter is primarily
attributable  to lower net interest  margins,  lower gain on sale of loans and a
$1.2 million  ($719,000 after tax) charge for pool by pool impairments of excess
servicing.  The Company's total loan  acquisitions for the quarter  decreased by
26.0% compared to the same quarter of last year. Year to date loan  acquisitions
also decreased by 20.5% over the comparable period of fiscal 1997. The servicing
portfolio reached over $2.0 billion, a 9.0% increase over a year ago.
         Net  interest  margin  (deficit)  after  provision  decreased  100%  to
$(3,000) and 90.7% to $638,000 million for the three months and six months ended
December 31, 1997,  respectively,  compared to $3.4 million and $6.9 million for
the three  months and six months  ended  December  31,  1996.  The  decrease  in
interest income resulted from a decrease in the average monthly balance of prime
loans held for sale to $142.6  million for the quarter ended  December 31, 1997,
from $213.5  million for the  corresponding  quarter  ended  December  31, 1996.
Interest expense for the three and six months ended December 31, 1997, was lower
than in the corresponding  periods of the prior fiscal year as a result of lower
average  borrowing  needs  resulting  from  lower loan  acquisitions.  The lower
interest  expense was partially  offset by increased  interest on long-term debt
due to the issuance of $65.0  million of Senior  Notes in March 1997.  Provision
for credit losses  increased  78.3% and 77.2% for the three and six months ended
December 31, 1997, over the same periods in the prior fiscal year. The provision
for credit  losses was  increased  in  response to the prior  periods'  trend of
increasing credit losses and delinquencies.
         Gain  (loss) on sales of loans  decreased  to $2.0  million  and $(8.8)
million for the three and six months ended December 31, 1997, respectively, from
$7.8 million and $14.7 million for the corresponding  periods ended December 31,
1996. The gain for the three months ended December 31, 1997 consisted  primarily
of a $3.4 million  gain on sale from the current  quarter  securitization  and a
$1.2 million  charge for other than temporary  impairments of excess  servicing.
The loss for the six months ended December 31, 1997 consisted  primarily of $9.0
million  of gains on sales of  quarterly  securitizations  and $17.6  million of
charges for other than temporary impairments of excess servicing.  Gain on sales
of  loans  before  impairment  decreased  due to both  lower  loan  acquisitions
resulting  in lower  securitizations  in both the first and second  quarters  of
fiscal 1998 and a higher  provision for  estimated  credit  losses.  The Company
securitized  $218.4 million in loans during the first quarter and $204.1 million
in the second  quarter of fiscal  1998,  compared  to $311.0  million and $314.2
million  (including $31.1 million in a non-prime  securitization)  for the first
and second quarters of fiscal 1997. The non-prime  securitization  in the second
quarter of fiscal 1997 yielded a gain on sale of nearly $1.9 million, accounting
for  part  of  the  decrease  in  gain  on  sale  during  the  current   quarter
securitization.
          Servicing  fees,  net  increased to $6.5 million and $12.8 million for
the three and six months ended December 31, 1997, respectively, compared to $6.3
million and $12.1 million for the corresponding periods ended December 31, 1996.
Servicing   fees   consist   of   contractual   servicing   fees  (1%  on  prime
securitizations),  the scheduled accretion of discount established on the excess
servicing asset at the time of  securitization,  and dealer rebates  received in
excess  of  original  estimates  recorded  in the  gain  calculation.  Increased
servicing  fees  were  primarily  a  result  of  the  increase  in  the  average
securitized loans of approximately  16.8% and 19.5% for the three and six months
ended December 31, 1997, respectively, as compared to the same periods of fiscal
1997.
         Other revenue  increased to $985,000 and $2.0 million for the three and
six months ended December 31, 1997, respectively, from $910,000 and $1.8 million
for the three and six months ended  December 31, 1996.  Other  revenue  consists
primarily  of late  charge  income and  origination  fee  income.  The  increase
resulted primarily from an increase in late charge fee income, but was offset by
a decrease of 45.9% and 39.2% in  origination  fees for the three months and six
months ended December 31, 1997, respectively, as compared to the same periods of
the previous  year.  The increase in late charge  income is primarily due to the
increase  in the  servicing  portfolio.  The  decrease  in  origination  fees is
primarily  due to a lower  volume  of loans  acquired  during  the three and six
months  ended  December  31,  1997  compared  to same  periods  of fiscal  1997.
Additionally,  origination  fees  have  decreased  due to the  use of a  greater
percentage of generic  contracts which do not allow for an origination fee to be
charged.
         Salaries and benefits increased 24.9% to $4.9 million and 25.9% to $9.5
million for the three and six months ended December 31, 1997, respectively, from
$3.9 million and $7.5 million for the  corresponding  periods ended December 31,
1996. These increases  resulted  primarily from increased  full-time  equivalent
("FTE") employees. Average FTE's for the three and six months ended December 31,
1997, were 441 and 431, respectively, compared to 373 and 360 for the comparable
periods ended December 31, 1996. 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  expenses  increased  6.0% to $4.2 million and 9.8% to
$8.2 million for the three and six months ended December 31, 1997, respectively,
from $3.9 million and $7.4  million for the three and six months ended  December
31, 1996. Other operating  expenses  primarily  include  occupancy and equipment
costs, outside and professional services,  loan expenses,  promotional expenses,
travel, and office supplies. The 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.  The ABM project
focuses on improving  the overall  operating  efficiency  by  identifying  costs
associated  with Company  processes,  and the change in commercial  domicile has
currently provided an income tax benefit of $860,000.

Financial Condition

         Loans,  net includes the principal  balance of loans held for sale, net
of unearned  discount  and  allowance  for  estimated  credit  losses,  loans in
process,  and prepaid dealer  premiums.  The Company's  portfolio of loans,  net
increased to $173.9  million at December 31, 1997,  from $121.2  million at June
30, 1997. This increase was due primarily to the timing of the securitization in
the  current  quarter  which was  completed  in the middle  month of the quarter
compared to the  securitization  in the quarter  ended June 30, 1997,  which was
completed in the last month of the quarter.
         Excess  Servicing  increased to $102.0 million as of December 31, 1997,
from $99.0 million as of June 30, 1997. Excess Servicing increased by the amount
capitalized  upon  consummation  of the UACSC  1997-C  and  1997-D  Auto  Trusts
("1997-C" and "1997-D") prime securitizations. Structuring of the securitization
includes the sale of an "interest only strip" which generates more cash from the
sale but serves to reduce the initial excess  servicing  asset  recorded.  Total
amounts  capitalized  for the six  months  ended  December  31,  1997 were $22.7
million.  The Excess Servicing  balance also increased by an additional  pre-tax
unrealized  gain on excess  servicing  of $6.6  million in  accordance  with the
provisions of SFAS 125. Excess Servicing also increased by the change in accrued
interest of $1.0  million.  The  increases to Excess  Servicing  were  primarily
offset by the return of excess cash flows as received  over the six months ended
December 31, 1997,  related to all outstanding  securitizations  of $9.9 million
and by the effect of the $17.6 million other than temporary impairment of Excess
Servicing  and other  reductions of $237,000.  Allowance  for  estimated  credit
losses on securitized  loans is included as a component of the excess  servicing
asset. At December 31, 1997, the undiscounted allowances,  related to both prime
and  non-prime  securitized  loans,  totaled $92.5 million or 5.06% of the total
securitized loan portfolio.
         Spread  Accounts  decreased to $67.4 million at December 31, 1997, from
$71.7  million at June 30, 1997.  These  balances are increased by deposits made
monthly from excess  servicing cash flows and are reduced by any  withdrawals of
funds from the Spread  Accounts.  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 $2.0 million was made in connection with the 1997-D securitization.

         The balance of the Revolving Warehouse Credit Facilities and the Senior
and Senior  Subordinated Notes was $323.6 million at December 31, 1997, compared
to $265.5  million  at June 30,  1997.  The  increase  in total  borrowings  was
primarily  related  to the  timing  of the  securitization  during  the  current
quarter. The second quarter  securitization was effected during the second month
of the quarter while the fourth quarter  securitization  was effected during the
third month of the quarter.  The difference in timing  resulted in borrowing for
more days during the quarter  ended  December 31, 1997,  compared to the quarter
ended June 30, 1997.
         The net deferred income taxes payable totaled $11.2 million at December
31, 1997,  compared to $13.9 million at June 30, 1997.  The decrease is a result
of the net operating loss  carryforward  net of the deferral of a portion of the
gain on sale of loans for the  securitization  effected during the quarter ended
December 31, 1997 in excess of previously  deferred income recognized  currently
for tax  purposes  which is offset by the $860,000  reduction in deferred  state
income taxes.

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) purchases and financing 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 $58.2 million for the six months ended
December  31, 1997,  from net cash  provided by  operating  activities  of $30.9
million  for  the six  months  ended  December  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. In the first and second
quarters of fiscal 1998,  hedging  transactions  have  required a use of cash of
$1.7 million.

         Financing Activities and Credit Facilities. 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  financings  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.  The Company  consistently  assesses its long-term
loan  funding  arrangements  with a view to  optimizing  cash flows and reducing
costs.
         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  has a  Marine  Warehouse  Facility  of up to  $50.0  million  that  was
established in April 1997. 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  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.  The Marine Warehouse  Facility provides funding for loan acquisitions
at a purchase  price of up to 88.0% for any boat loan,  up to 65.0% for personal
watercraft  loans  with  49  -  60  scheduled  monthly  payments,  and  personal
watercraft loans with less than 49 monthly payments at a purchase price of up to
83.0%. The Company also issued $110.0 million in Senior Notes in connection with
the Company's initial public offering and completed a private placement of $46.0
million in Senior  Subordinated  Notes in April 1996 and $65.0 million in Senior
Notes in March 1997.  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.
         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
subordinated notes were being reduced one grade. Fitch also informed the Company
that it would  consider  a further  downgrade  of such  securities  in the third
quarter of fiscal 1998 if the Company  failed to show  material  improvement  in
asset quality unless the Company obtained  additional equity capital. In view of
the improvement in the asset quality of the Company's servicing portfolio in the
second  quarter and the  adequacy  for the time being of the  Company's  capital
resources as discussed  herein,  the Company does not intend to seek  additional
equity investment in the current year. There is no assurance as to what, if any,
further action Fitch will take with respect to its ratings of the Company's debt
securities.
         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 during the remainder of fiscal 1998.
         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 fourth quarter of
fiscal 1998.

         Ongoing  Development.  As a part  of  its  ongoing  development  of its
business plan, the Company is researching the possibilities of engaging in other
finance-related  businesses such as leasing and other non-auto consumer lending.
Based on this research, the Company may expand its current operations to include
some  or  all  of  the  above  finance-related  businesses.  It is  management's
philosophy to continually search for new products and markets to grow and expand
the Company in order to maximize profits and shareholder value.


Discussion of Forward-Looking Information

         The above discussions  contain  forward-looking  statements made by the
Company regarding its results of operations, 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 4.  Submission of Matters to a Vote of Security Holders

         At the Company's Annual Meeting of  Shareholders,  on October 29, 1997,
the following nominees were elected to the Board of Directors.

                                 Affirmative           Votes
                                      Votes           Withheld
 
Howard L. Chapman                49,425,040           27,659
John M. Davis                    49,425,040           27,659
Fred M. Fehsenfeld               49,425,040           27,659
Donald A. Sherman                49,425,040           27,659
John M. Stainbrook               49,425,040           27,659
Jerry D. Von Deylen              49,425,040           27,659
Richard D. Waterfield            49,423,040           27,659
Thomas M. West                   49,425,040           27,659

The following  proposal was approved at the Company's  Annual Meeting on October
29, 1997:

Ratification  of appointment of auditors.  KPMG Peat Marwick LLP was retained as
the  Company's  auditors  for the fiscal  year 1998.  The votes were as follows:
12,656,904 Affirmative Votes; 15,350 Negative Votes; and 7,645 Votes Abstained.

Item 6.  Exhibits and Reports on Form 8-K

                  Exhibit 27 -  Restated Financial Data Schedule

         (b)  Reports on Form 8-K

                  No  reports on Form 8-K were filed  during the  quarter  ended
         December 31, 1997.

<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



 December 30, 1998                By:     /S/   Rick A. Brown
                                          -------------------
                                          Rick A. Brown
                                          Treasurer and Chief Financial Officer