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

                                    Form 10-Q

(Mark One)

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

                For the quarterly period ended September 30, 2002

                                       or

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

                  For the Transition Period from _____ to _____

                         Commission File Number: 0-26412

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


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



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



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

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

Yes (X)           No ( )

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

                  Class                         Outstanding at November 15, 2002

         Common Stock, without par value                    31,019,150

<PAGE>
                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                      INDEX


                                                                           Page
Part I.  FINANCIAL INFORMATION

Item 1.  Consolidated Condensed Financial Statements (unaudited):

         Consolidated Condensed Balance Sheets as of
         September 30, 2002 and December 31, 2001                            3

         Consolidated Condensed Statements of Loss
         for the Three and Nine Months Ended September 30, 2002 and 2001     4

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

         Consolidated Condensed Statement of Shareholders' Equity for the
         Nine Months Ended September 30, 2002                                6

         Notes to Consolidated Condensed Financial Statements                7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                13

Item 3.  Quantitative and Qualitative Disclosures about Market Risk         31

Item 4.  Controls and Procedures                                            32

Part II. OTHER INFORMATION                                                  32

Item 1.  Legal Proceedings                                                  32

Item 6.  Exhibits and Reports on Form 8-K                                   34

         Signatures                                                         35

         Certifications                                                     36


<PAGE>

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

                                                                           September 30,         December 31,
Assets                                                                         2002                  2001
                                                                         ------------------    ------------------
<S>                                                                           <C>                   <C>
Cash and cash equivalents                                                     $ 14,485              $ 14,244
Restricted cash                                                                  9,382                 4,650
Receivables held for sale, net                                                 487,906               176,511
Retained interest in securitized assets                                        141,527               198,251
Accrued interest receivable                                                      2,736                 1,323
Property, equipment, and leasehold improvements, net                             3,525                 8,516
Held for sale assets                                                             4,001                     -
Refundable and deferred income taxes                                            22,085                10,467
Other assets                                                                    17,676                23,194
                                                                         ----------------    ------------------

  Total Assets                                                                $703,323             $ 437,156
                                                                         ================    ==================

Liabilities and Shareholders' Equity

Liabilities

Notes payable                                                                 $445,483             $ 100,300
Term debt                                                                      100,333               133,000
Accrued interest payable                                                         1,197                 2,393
Amounts due to trusts                                                           19,452                18,610
Other payables and accrued expenses                                             24,828                 8,153
                                                                         ----------------    ------------------

  Total Liabilities                                                            591,293               262,456
                                                                         ----------------    ------------------

Commitments and Contingencies                                                          -                     -

Shareholders' Equity

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

 Common Stock, without par value, authorized
   130,000,000 shares at September 30, 2002 and December 31, 2001;
   31,019,150 and 30,926,606 shares issued and outstanding at
   September 30, 2002 and December 31, 2001, respectively                      145,900               145,374

  Accumulated other comprehensive earnings (loss), net of taxes                     23                   450
  Retained earnings (deficit)                                                  (33,893)               28,876
                                                                         ----------------    ------------------

   Total Shareholders' Equity                                                  112,030               174,700
                                                                         ----------------    ------------------

   Total Liabilities and Shareholders' Equity                                 $703,323             $ 437,156
                                                                         ================    ==================
</TABLE>

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


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

<S>                                                          <C>              <C>              <C>             <C>
Interest on receivables held for sale                        $ 10,892         $ 5,457          $ 21,825        $ 20,028
Retained interest and other                                     4,747           5,943            15,669          23,243
                                                          ---------------  --------------   --------------- ---------------
   Total interest income                                       15,639          11,400            37,494          43,271
Interest expense                                                5,533           4,685            14,351          18,960
                                                          ---------------  --------------   --------------- ---------------
   Net interest margin                                         10,106           6,715            23,143          24,311
Provision for estimated credit losses                           2,195             650             4,309           1,665
                                                          ---------------  --------------   --------------- ---------------
   Net interest margin after provision
     for estimated credit losses                                7,911           6,065            18,834          22,646

Gain on sales of receivables                                        -           7,962             7,283          33,406
Revaluation of retained interest                              (46,764)        (44,000)          (65,600)        (70,496)
Loss on interest rate derivatives
 on securitized receivables                                         -          (2,584)             (976)        (15,412)
Gain (loss) on interest rate derivatives
 on held for sale receivables                                 (10,805)              -           (16,546)          4,769
Servicing fee income                                            5,818           7,610            19,221          23,464
Late charges and other fees                                     2,477           1,505             6,649           4,669
                                                          ---------------  --------------   --------------- ---------------
  Other revenues                                              (49,274)        (29,507)          (49,969)        (19,600)
                                                          ---------------  --------------   --------------- ---------------
Salaries and benefits                                           7,537           7,761            22,020          24,131
Other expenses                                                  5,268           5,504            16,186          16,492
                                                          ---------------  --------------   --------------- ---------------
  Total operating expenses                                     12,805          13,265            38,206          40,623
                                                          ---------------  --------------   --------------- ---------------
   Loss before income tax benefit                             (54,168)        (36,707)          (69,341)        (37,577)
Income tax benefit                                             (2,650)        (13,375)           (8,155)        (13,647)
                                                          ---------------  --------------   --------------- ---------------
Net loss before discontinued operations and
cumulative effect of change in accounting principle           (51,518)        (23,332)          (61,186)        (23,930)
Discontinued operations, net of taxes (Note 8)                  1,033             465             1,583           1,507
Cumulative effect of change in accounting principle,
net of taxes (Note 2)                                               -               -                 -             989
                                                          ---------------  --------------   --------------- ---------------
Net loss                                                    $ (52,551)      $ (23,797)        $ (62,769)      $ (26,426)
                                                          ===============  ==============   =============== ===============

Net loss per common share before discontinued
operations and cumulative effect of change in
accounting principle (basic and diluted)                      $ (1.66)        $ (0.75)          $ (1.98)        $ (1.18)
Discontinued operations  (Note 8)                               (0.03)          (0.02)            (0.05)          (0.07)
Cumulative effect of change in accounting
principle (Note 2)                                                  -               -                 -           (0.05)
                                                          ---------------  --------------   --------------- ---------------
Net loss per common share (basic and diluted)                 $ (1.69)        $ (0.77)          $ (2.03)        $ (1.30)
                                                          ===============  ==============   =============== ===============

Basic weighted average number of
  common shares outstanding                                31,019,150      30,910,074        30,975,995      20,326,958
Dilutive effect of common stock options                             -               -                 -               -
                                                          ---------------  --------------   --------------- ---------------
Diluted weighted average number of
  common shares outstanding                                31,019,150      30,910,074        30,975,995      20,326,958
                                                          ===============  ==============   =============== ===============
</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>
                                                                                         Nine Months Ended
                                                                                           September 30,
                                                                             -----------------------------------------
                                                                                     2002                  2001
                                                                             -------------------   -------------------

Cash flows from operating activities:
<S>                                                                                <C>                   <C>
Net loss                                                                           $ (62,769)            $ (26,426)
   Adjustments to reconcile net loss to net cash
     from operating activities:
        Purchases of receivables held for sale                                      (625,828)             (793,873)
        Principal collections on receivables held for sale,
          net of securitized receivables repurchased                                  15,176                (1,415)
        Dealer premiums paid, net on receivables held for sale                       (12,577)              (22,808)
        Proceeds from securitization of receivables held for sale                    300,000               993,021
        Gain on sales of receivables held for sale                                    (7,642)              (37,399)
        Revaluation of retained interest in securitized assets                        65,600                70,496
        Cumulative effect of change in accounting principal (Note 2)                       -                 1,557
        Accretion of discount on retained interest in securitized assets             (15,523)              (22,385)
        Loss on held for sale assets (Note 8)                                          1,282                     -
        Provision for estimated credit losses                                          4,309                 1,665
        Amortization and depreciation                                                  3,923                 3,547
        Restricted cash                                                               (4,732)                4,120
        Refundable and deferred income taxes,
           other assets and accrued interest receivable                               (7,275)               (3,055)
        Amounts due to trusts                                                            842                 3,726
        Other payables and accrued expenses                                           14,308               (17,238)
                                                                             -------------------   -------------------
                                                                                    (330,906)              153,533
                                                                             -------------------   -------------------
                Net cash provided by (used in) operating activities
Cash flows from investing activities:
Collections on retained interest in securitized assets                                25,592                66,865
Change in spread accounts                                                             (4,758)              (15,612)
Capital expenditures                                                                    (965)                 (484)
                                                                             -------------------   -------------------
                                                                                      19,869                50,769
                                                                             -------------------   -------------------
                Net cash provided by investing activities
Cash Flows from financing activities:
Principal payments on term debt                                                      (43,667)              (22,000)
Stock options exercised                                                                  421                   111
Issuance of common stock, net of offering costs of $1,525                                  -                86,475
Issuance of term debt                                                                 11,000                     -
Net change in notes payable                                                          345,183              (192,915)
Payment of borrowing fees                                                             (1,659)                 (234)
                                                                             -------------------   -------------------
                                                                                     311,278              (128,563)
                                                                             -------------------   -------------------
                Net cash provided by (used in) financing activities
Change in cash and cash equivalents                                                      241                75,739

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

Cash and cash equivalents, end of period                                            $ 14,485              $ 82,185
                                                                             ===================   ===================


                                                                                    $  2,331              $    877
                                                                                    $ 13,291              $ 18,262
</TABLE>


<PAGE>


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

<TABLE>
<CAPTION>
                                                                         Accumulated
                                           Number of                        Other         Retained         Total
                                         Common Stock      Common       Comprehensive     Earnings     Shareholders'
                                         Outstanding        Stock         Earnings        (Deficit)        Equity
                                       ----------------  ------------ ------------------ ------------  ---------------
<S>                 <C> <C>              <C>              <C>              <C>            <C>            <C>
Balance at December 31, 2001             30,926,606       $145,374         $ 450          $ 28,876       $ 174,700

Comprehensive loss:
  Net loss                                        -              -             -           (62,769)        (62,769)
  Net unrealized loss on retained
     interest in securitized assets               -              -          (674)                -            (674)
  Income taxes related to unrealized
     loss on retained interest
     in securitized assets                        -              -           247                 -             247
                                                                                                       ---------------
Total comprehensive loss                                                                                   (63,443)
Stock options exercised                      77,613            421             -                 -             421
Grants of common stock                       14,931            105                                             105

                                       ----------------  ------------ ------------------ ------------  ---------------
Balance at September 30, 2002            31,019,150       $145,900         $  23    $ (33,893)           $ 112,030
                                       ================  ============ ================== ============  ===============
</TABLE>

<PAGE>


Note 1 - Basis of Presentation

The  foregoing   consolidated  condensed  financial  statements  are  unaudited.
However,  in the opinion of  management,  all  adjustments  necessary for a fair
presentation of the results of the interim period  presented have been included.
All  adjustments are of a normal and recurring  nature.  Results for any interim
period are not  necessarily  indicative  of results to be expected  for the year
ending  December 31,  2002.  The  consolidated  condensed  financial  statements
include  the  accounts  of  Union   Acceptance   Corporation   ("UAC")  and  its
subsidiaries (collectively, the "Company").

The consolidated  condensed interim  financial  statements have been prepared in
accordance  with Form 10-Q  specifications  and  therefore  do not  include  all
information  and footnotes  normally  shown in annual  financial  statements.  A
summary of the Company's  significant  accounting policies is set forth in "Note
1" of the "Notes to Consolidated  Financial  Statements" in the Company's Annual
Report on Form 10-K for the six month transition period ended December 31, 2001.
Certain  amounts for the prior period have been  reclassified  to conform to the
current  period  presentation.  The Company  changed  its year end during  2001.
Accordingly,  the periods  presented are consistent  with a December 31 calendar
year end.

Note 2 - Retained Interest in Securitized Assets

Retained Interest in Securitized Assets ("Retained  Interest") is recorded as an
"available  for sale"  security  and is recorded at fair value.  The  associated
unrealized gains and losses  attributable to changes in fair value net of income
taxes are recorded as a separate component of shareholders' equity ("accumulated
other  comprehensive  earnings").  Other than temporary  impairment  charges are
recorded through earnings as a revaluation of retained interest.

The average of the interest rates  received on receivables  exceeds the interest
rates paid on securities  issued in the  securitization.  Accordingly,  Retained
Interest is a significant asset of the Company. In determining the fair value of
the Retained Interest,  the Company must estimate the future prepayments,  rates
of gross credit  losses and credit loss  severity,  and  delinquencies,  as they
impact the amount and timing of the estimated cash flows.

The Company continually assesses the adequacy of its retained interest cash flow
model and if necessary, adjusts its retained interest cash flow model in the
following areas:

     o    credit loss assumptions

     o    interest collections assumptions o prepayment assumptions

     o    cash accounts interest rate assumptions

     o    discount rate assumptions

During the quarter  ended  September  30,  2002,  the  Company  recorded a $46.8
million  other  than  temporary  impairment  in  the  accompanying  Consolidated
Condensed  Statement  of Loss and is reflected  in the  Revaluation  of retained
interest. The majority of the charge for other than temporary impairment related
to increased  loss rate  estimates and a charge from an increase in the discount
rate  assumption.  Each  estimate  used in the  Retained  Interest  valuation is
discussed in detail below.

Credit loss  assumptions - The Company  estimates gross credit losses and credit
loss severity using available  historical  loss data for comparable  receivables
and the specific  characteristics  of the receivables  purchased by the Company.
The  Company  implemented  new loss  curves in June 2001  which are based on the
Company's  relational  risk  management  database  which  dates back to 1992 and
incorporates  approximately 670,000 consumers representing over $10.0 billion in
acquired  receivables.  As of September 30, 2001 and March 31, 2002, the Company
determined  it was  necessary to further  adjust the expected loss rates on most
pools to reflect the losses  experienced  during the  quarters  then ended which
more fully  incorporate the effects of the existing  economic events and trends.
Although the existing loss curves were the basis for the changes in the expected
loss rates, the Company also considers its exposure to credit losses in light of
current  delinquency and loss rates,  consumer  bankruptcy trends,  recessionary
economic trends,  and other events such as zero percent  financing,  among other
things.  During the quarter ended  September 30, 2002,  the Company  implemented
enhanced  loss curves  which  utilized  approximately  20  attributes  of credit
characteristics  to predict losses.  The Company  utilized these loss curves and
also  assumed  an  additional  six  months of  higher  losses  due to  lingering
recessionary  factors to determine the other than  temporary  impairment for the
quarter ended September 30, 2002. Except for the one remaining Tier II pool, the
Company  used net  credit  loss  assumptions  ranging  from  5.06% to 8.69% as a
percentage of the original principal balance over the life of the receivables to
value Retained Interest at September 30, 2002.

Interest collections assumptions - As a result of changes in delinquency and
credit loss rates and the overall condition in the economy, the Company
periodically reviews the impact on expected future interest collections on
securitized receivables.

Prepayment  assumptions  -  The  Company  estimates  prepayments  by  evaluating
historical  prepayment  performance of comparable  receivables and the impact of
events and trends in the economy. The Company's  prepayment  assumptions include
estimates for both voluntary prepayments and involuntary prepayments as a result
of  default.  The  Company  utilizes  a  prepayment  curve  whereby  the  annual
prepayment rate increases as the pool ages.  Annual  prepayment rates within the
curve range from 26.75% to 36.00% at September 30, 2002.

Cash accounts  interest rate assumptions - The Company reviews the current yield
on its cash and spread accounts to the yields originally  expected.  The current
economic and interest rate  environment is  significantly  different than it was
when most of the pools were  securitized.  Accordingly,  the Company  utilizes a
forward interest rate curve which represents  future yield  expectations on such
accounts.

Discount rate  assumptions - The Company  determines the estimated fair value of
its Retained  Interest by discounting  the expected cash flows released from the
Trust (the cash out method) using discount  rates that the Company  believes are
commensurate  with the risks involved.  During the quarter ended March 31, 2002,
the Company  changed its method of determining a market  discount rate to use in
its  valuation  of  Retained  Interest  from one that  primarily  considers  the
remaining  duration  of  the  cash  flows  to  a  methodology  that  takes  into
consideration  the  components of Retained  Interest (i.e.  spread  accounts and
estimated  future  cash  flows).  Due  to  the  continuation  of  credit  losses
experienced,  the Company  increased  its estimate of a market  discount rate to
value Retained Interest at September 30, 2002.

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


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

                                                                 September 30,    December 31,
                                                                     2002             2001
                                                                ---------------  ---------------
Estimated gross interest spread from receivables,
<S>                                                               <C>             <C>
  net of estimated prepayments and fees                           $  210,903      $  285,207
Estimated dealer premium rebates refundable                            5,139           9,335
Estimated credit losses on securitized receivables                  (141,655)       (152,985)
Accelerated principal (1)                                             28,823          28,823
Spread accounts                                                       96,151          91,393
                                                                ---------------  ---------------
  Total estimated future undiscounted cash flows                     199,361         261,773
Less:  Discount to present value                                     (57,834)        (63,522)
                                                                ---------------  ---------------
  Total Retained Interest in Securitized Assets                   $  141,527       $  198,251
                                                                ===============  ===============

Outstanding balance of securitized receivables serviced           $2,127,420       $2,788,006
                                                                ===============  ===============
Estimated credit losses as a percentage of
  securitized receivables serviced                                      6.66%            5.49%
Weighted average discount rate                                         12.03%           10.87%
Weighted average original contract life (in months)                     75.7             75.3
</TABLE>

(1)  Accelerated principal provides for the initial use of excess cash to reduce
     the principal balance of the asset-backed securities.

As further  discussed in Note 9, Union Acceptance  Corporation filed a voluntary
petition for  reorganization  under Chapter 11 of the United  States  Bankruptcy
Code. The  securitization  trusts provide that the Company's  bankruptcy  filing
(and/or  resulting debt rating  downgrades) cause the cash amount required to be
held in the  applicable  spread  account to be  increased  to equal the surety's
obligation  (generally the  outstanding  note balance) until the Company emerges
from  bankruptcy,  or a  replacement  servicer is appointed.  Accordingly,  cash
residual  distributions  by the  trusts are  likely to be  prohibited  while the
bankruptcy is pending.  While the  bankruptcy  event is also an event that would
permit  other  parties  to  invoke  servicer  replacement  procedures  under the
securitizations,  efforts of such  parties to invoke such rights on the basis of
bankruptcy  events are presently  stayed by virtue of the bankruptcy laws. These
events will extend the timing of the ultimate cash flows from the securitization
trusts.  The Company is evaluating the impact on the value of retained  interest
and believes that the timing of the cash flows may  negatively  impact the value
of the retained interest asset.

Note 3 - Notes Payable

Notes  Payable is comprised of  borrowings  on  subsidiaries'  warehouse  credit
facilities  of $445.5  million  and $100.3  million at  September  30,  2002 and
December  31,  2001,  respectively.  At  September  30, the  Company  was not in
compliance with a tangible net worth provision of these facilities.

Note 4 - Residual Facility

As part of the  Company's  overall  term  debt  refinancing  plan,  the  Company
established,  through a subsidiary, a $55.0 million residual funding facility in
April 2002, to be secured upon funding by residual interests in securitizations.
The facility has a 364-day revolving feature and requires a $5.0 million reserve
account when funded and is subject to certain  funding  conditions.  The Company
had not  utilized the  residual  facility at  September  30, 2002 and was not in
compliance  with a tangible net worth  provision  thereof as of such date.  This
facility has since been cancelled.

Note 5 - Term Debt

On May 1, 2002,  the Company  completed a private  placement of $11.0 million of
12.00% unsecured Senior Notes due April 30, 2007 with interest payable quarterly
and principal due at maturity. The Company was not in compliance with a tangible
net worth provision of these Senior Notes at September 30, 2002.

Note 6 - Segment Information

The Company has a single reportable segment which is acquiring, securitizing and
servicing  retail  automobile  installment  sales contracts and installment loan
agreements originated by dealerships  affiliated with major domestic and foreign
automobile manufacturers,  nationally recognized rental car outlets and used car
superstores.  The single reportable segment is based on management's approach to
operating decisions, assessing performance and reporting financial information.



<PAGE>

Note 7 - Earnings Per Share

Options to purchase  shares of common stock are excluded from the calculation of
Earnings Per Share ("EPS")  assuming  dilution when the exercise prices of these
options are greater than the average market price of the common share during the
period or when the shares are  considered to be  anti-dilutive  as a result of a
net loss. The following  chart  indicates the number of shares,  issue date, and
price of the stock options  granted  during the nine months ended  September 30,
2002:
<PAGE>


                             Number of
        Issue date         Options issued        Issue Price
        ----------         --------------        -----------

       January 2002           25,000               $5.0000
       March 2002             10,000               $5.0250
       March 2002             10,000               $5.1500
      August 2002             25,000               $4.2800
      August 2002            250,000*              $5.0000

* Subject to shareholder approval.

The following chart indicates the numbers of shares which were excluded from the
calculation of EPS assuming dilution for the periods indicated:

<TABLE>
<CAPTION>

                                           Quarter ended September 30,        Nine months ended September 30,
                                         --------------------------------   ------------------------------------
                                              2002             2001              2002                2001
                                         ---------------   --------------   ---------------    -----------------

<S>                                         <C>               <C>                <C>                 <C>
Anti-dilutive effect (1)                            -         225,687             6,134               91,868
Exercise price greater than fair value      1,000,492         823,492           994,358              957,311
                                         ---------------   --------------   ---------------    -----------------
                                            1,000,492       1,049,179         1,000,492            1,049,179
                                         ===============   ==============   ===============    =================
</TABLE>


(1)  The  calculation  for dilutive  earnings per share for the quarter and nine
     months ended  September  30, 2002 and 2001 was based upon the common shares
     as the effect of the outstanding  stock options for which the fair value is
     greater than the exercise price were  anti-dilutive due to the net loss for
     the quarter and nine months ended September 30, 2002 and 2001.

Note 8 - Discontinued Operations

In the quarter ended  September 30, 2002, the Company  recorded a charge of $1.3
million  ($814,000 after taxes) related to the  classification  of the assets of
the Company's new car  dealership as held for sale in accordance  with Statement
of Financial  Accounting  Standards No. 144 - Accounting  for the  Impairment or
Disposal  of  Long-Lived  Assets  ("SFAS No.  144").  On October 23,  2002,  the
dealership was sold. Any future results of operations from the Company's new car
dealership will be reported as discontinued operations. The held for sale assets
are as follows at September 30, 2002 (in thousands):


Property and equipment, net of accumulated depreciation               $ 3,479
Franchise fee                                                              21
Parts inventory                                                            30
New vehicle inventory                                                     471
                                                                      -------
Total fair value of assets held for sale                              $ 4,001
                                                                      =======

The results of discontinued  operations for the Company's new car dealership for
the quarter and nine months ended  September 30, 2002 and September 30, 2001 are
(in thousands):

<TABLE>
<CAPTION>

Discontinued operations
   Loss from operations of discontinued
<S>                                      <C>            <C>            <C>           <C>
     dealership                          $ 344          $ 732          $ 986         $ 2,369
   Loss on disposal                      1,282              -          1,282               -
   Income tax benefit                     (593)          (267)          (685)           (862)
                                    -----------  -------------  -------------  --------------
   Net loss on discontinued
     operations                         $ 1,033          $ 465        $ 1,583         $ 1,507
                                    ===========  =============  =============  ==============
</TABLE>


Note 9 - Chapter 11 Bankruptcy

On October 31, 2002, Union Acceptance Corporation filed a voluntary petition for
reorganization  under  Chapter 11 of the United  States  Bankruptcy  Code in the
United  States   Bankruptcy   Court  for  the  Southern   District  of  Indiana,
Indianapolis  Division  (the  "Court").  The  proceeding  does not include UAC's
wholly-owned   subsidiaries.   UAC   continues  to  manage  its  business  as  a
debtor-in-possession.  As a  debtor-in-possession,  management  is authorized to
operate the business,  but may not engage in  transactions  outside the ordinary
course of  business  without  Court  approval.  Subsequent  to the filing of the
Chapter 11 petition, UAC obtained several Court orders that authorized it to pay
certain pre-petition  liabilities (such as employee wages and benefits) and take
certain  actions that will  preserve the going  concern  value of the  business,
thereby  enhancing the prospects of  reorganization.  On November 7, the Company
announced it would discontinue  receivable  acquisitions because it was not able
to establish timely arrangements for further acquisition funding.

These financial  statements  have been prepared on a going concern basis,  which
contemplates  continuity of operations,  realization  of assets,  and payment of
liabilities  in the ordinary  course of business.  As a result of the Chapter 11
filing,  there is no  assurance  that the  carrying  amounts  of assets  will be
realized  or that  liabilities  will be  settled  for  amounts  recorded.  After
negotiations with various parties in interest,  UAC expects to present a plan of
reorganization  to  the  Court  to  reorganize  the  Company's  business  and to
restructure  its  obligations.  This plan of  reorganization  could  change  the
amounts reported in the financial  statements and cause a material change in the
carrying amount of assets and liabilities.  Future financial  statements will be
prepared in accordance  with the AICPA's  Statement of Position  90-7  Financial
Reporting by Entities in  Reorganization  Under the Bankruptcy  Code (SOP 90-7).
SOP 90-7  requires  segregating  pre-petition  liabilities  that are  subject to
compromise  and  identifying  all  transactions  and  events  that are  directly
associated with the  reorganization of the Company. A portion of the liabilities
recorded at September 30, 2002 are expected to be subject to compromise. Also in
accordance  with SOP 90-7,  after the filing  date,  interest  will no longer be
accrued on any unsecured debt.

Under bankruptcy law, actions by creditors to collect pre-petition  indebtedness
owed by UAC at the filing  date are stayed  and other  pre-petition  contractual
obligations  may not be enforced  against UAC. In  addition,  UAC has the right,
subject  to Court  approval  and other  conditions,  to  assume  or  reject  any
pre-petition executory contracts and unexpired leases. Parties affected by these
rejections  may file claims with the Court.  UAC is in the process of  preparing
and submitting the schedules  setting forth the Company's assets and liabilities
as of the date of the  petition as  reflected  in its  accounting  records.  The
amounts of claims filed by creditors could be significantly different from their
recorded amounts. Due to material  uncertainties,  it is not possible to predict
the length of time UAC will operate under Chapter 11 protection,  the outcome of
the  proceedings  in  general,  whether UAC will  continue to operate  under its
current  organizational  structure,  the effect of the  proceedings on the UAC's
businesses or the recovery by creditors and equity holders of UAC.

The  recessionary  trends in the economy have  significantly  affected losses on
consumer  receivables.  As a result of the  continued  effects  of the  economy,
consumer  bankruptcy filings and lower automobile  auction values,  greater than
expected  delinquencies and credit losses have arisen in the Company's servicing
portfolio,  particularly  in respect of  receivables  acquired in 1999 and 2000.
These trends impaired the value of the retained  interest in securitized  assets
held by the Company's  subsidiary.  This weakened the Company's  overall capital
position and created a need to raise additional  capital.  The Company has $43.3
million  in senior  notes due in  December,  2002,  and $46.0  million in senior
subordinated  notes coming due in March,  2003.  During 2002 and continuing into
the current fiscal quarter,  the Company sought to strengthen its equity capital
and liquidity to be in a position to meet these obligations.

In connection  with the renewal of one of the Company's  subsidiary's  warehouse
credit  facilities  in late  August,  2002,  the surety  which  provides  credit
enhancement  in  respect  of such  warehouse  required  the  Company  to execute
servicing  term  agreements  which provide that the  Company's  term as servicer
under its  securitizations  (on which such surety provides  credit  enhancement)
continues  for  successive  periods  of 60  days,  subject  to  renewal  in  the
discretion of the surety. See "Part II, Item 1. Legal Proceedings."

Potential  equity  investors  proved  unwilling  to commit  funds to the Company
because of issues relating to its  relationship  with the surety provider on the
Company's  outstanding  securitizations  and  related  questions  regarding  the
Company's  ability to  continue  as servicer  of its  servicing  portfolio.  The
Company  ultimately   determined  it  was  necessary  to  commence  a  voluntary
proceeding under Chapter 11 of the Bankruptcy Code.

Note 10 -- Income Taxes

The  Company  expects  to have a  financial  accounting  loss for the year ended
December  31, 2002 and federal  income tax losses for the fiscal tax years ended
June 30, 2002 and 2003. During 2001 the Company changed its financial  reporting
year end to  December 31 but  retained  its tax year end of June 30. The Company
intends to carry back the net losses incurred for federal income tax purposes to
prior tax periods to the extent  allowable  and carry  forward any remaining tax
losses to future periods.  Statement of Financial Accounting Standards No. 109 -
Accounting  for Income Taxes ("SFAS No. 109")  requires that the Company  reduce
the  deferred  tax assets by a valuation  allowance  if,  based on the weight of
available evidence, it is more likely than not that some portion of the deferred
tax asset will not be realized.

As a result of the events  which  resulted  in the  Company's  decision to cease
originating  receivables on November 7, 2002, the Company deemed it necessary to
provide a valuation  allowance  for its deferred  tax asset as of September  30,
2002 since realization of the asset was contingent upon achieving taxable income
in future years.  The impact on the statement of loss was to reduce the non-cash
income tax benefit and increase the net loss for the quarter ended September 30,
2002 by $17.1  million  ($.55 per diluted  share).  The Company will continue to
evaluate the need for a valuation  allowance for the Company's  deferred  income
tax asset  until it  returns to an  appropriate  level of  cumulative  financial
accounting and taxable income.

The ultimate  realization  of the deferred  tax asset  depends on the  Company's
ability to generate  sufficient  taxable income in the future. If the Company is
able to  generate  sufficient  taxable  income in the future,  the Company  will
reduce the valuation  allowance  through a reduction of income tax expense.  Any
liabilities  cancelled as a result of a plan of reorganization  under Chapter 11
may create taxable income.


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

Chapter 11 Bankruptcy

On October 31, 2002,  Union  Acceptance  Company filed a voluntary  petition for
reorganization  under  Chapter 11 of the United  States  Bankruptcy  Code in the
United  States   Bankruptcy   Court  for  the  Southern   District  of  Indiana,
Indianapolis   Division  ("Court").   The  proceeding  does  not  include  UAC's
subsidiaries. UAC continues to manage its business as a debtor-in-possession. As
a  debtor-in-possession,  management is authorized to operate the business,  but
may not engage in transactions  outside the ordinary course of business  without
Court  approval.  Subsequent  to the  filing of the  Chapter  11  petition,  UAC
obtained  several Court orders that  authorized  it to pay certain  pre-petition
liabilities  (such as employee wages and benefits) and take certain actions that
will preserve the going concern  value of the  business,  thereby  enhancing the
prospects of reorganization.

In an effort to further  curtail  expenses  and  conserve  cash  resources,  the
Company  effected a  significant  reduction  in force on  November  7, 2002.  It
released its originations  staff and retained  approximately  290 core servicing
employees.  The  reduction  in force  was  carefully  planned  to  preserve  the
Company's  high  quality  servicing  operation.  The Company is working with its
reorganization  management  consultant  to develop an employee  retention  plan,
which will be subject to bankruptcy court approval.

The financial statements in this Form 10-Q have been prepared on a going concern
basis, which contemplates  continuity of operations,  realization of assets, and
payment of  liabilities in the ordinary  course of business.  As a result of the
Chapter 11 filing,  there is no assurance  that the  carrying  amounts of assets
will be realized or that liabilities will be settled for amounts recorded. After
negotiations with various parties in interest,  UAC expects to present a plan of
reorganization  to  the  Court  to  reorganize  the  Company's  business  and to
restructure  its  obligations.  This plan of  reorganization  could  change  the
amounts reported in the financial  statements and cause a material change in the
carrying amount of assets and liabilities.  Future financial  statements will be
prepared in accordance  with the AICPA's  Statement of Position  90-7  Financial
Reporting by Entities in  Reorganization  Under the Bankruptcy  Code (SOP 90-7).
SOP 90-7  requires  segregating  pre-petition  liabilities  that are  subject to
compromise  and  identifying  all  transactions  and  events  that are  directly
associated with the  reorganization of the Company. A portion of the liabilities
recorded at September 30, 2002 are expected to be subject to compromise. Also in
accordance  with SOP 90-7,  after the filing  date,  interest  will no longer be
accrued on any unsecured debt.

Under bankruptcy law, actions by creditors to collect pre-petition  indebtedness
owed by UAC at the filing  date are stayed  and other  pre-petition  contractual
obligations  may not be enforced  against UAC. In  addition,  UAC has the right,
subject  to Court  approval  and other  conditions,  to  assume  or  reject  any
pre-petition executory contracts and unexpired leases. Parties affected by these
rejections  may file claims with the Court.  UAC is in the process of  preparing
and submitting the schedules  setting forth the Company's assets and liabilities
as of the date of the  petition as  reflected  in its  accounting  records.  The
amounts of claims filed by creditors could be significantly different from their
recorded amounts. Due to material  uncertainties,  it is not possible to predict
the length of time UAC will operate under Chapter 11 protection,  the outcome of
the  proceedings  in  general,  whether UAC will  continue to operate  under its
current  organizational  structure,  the effect of the  proceedings on the UAC's
businesses or the recovery by creditors and equity holders of UAC.

The Company has retained a reorganization  management  firm,  Reese McMahon,  to
work with the Company during the reorganization  process,  subject to bankruptcy
court  approval.  Such  firm  has  prior  experience  in  auto  finance  company
reorganization.

Events Leading to Chapter 11 Petition

The  recessionary  trends in the economy have  significantly  affected losses on
consumer  receivables.  As a result of the  continued  effects  of the  economy,
consumer  bankruptcy filings and lower automobile  auction values,  greater than
expected  delinquencies and credit losses have arisen in the Company's servicing
portfolio,  particularly  in respect of  receivables  acquired in 1999 and 2000.
These trends impaired the value of the retained  interest in securitized  assets
held by the Company's  subsidiary.  This weakened the Company's  overall capital
position and created a need to raise additional  capital.  The Company has $43.3
million  in senior  notes due in  December,  2002,  and $46.0  million in senior
subordinated  notes coming due in March,  2003.  During 2002 and continuing into
the current fiscal quarter,  the Company sought to strengthen its equity capital
and liquidity to be in a position to meet these obligations.

In connection  with the renewal of one of the Company's  subsidiary's  warehouse
credit  facilities  in late  August,  2002,  the surety  which  provides  credit
enhancement  in  respect  of such  warehouse  required  the  Company  to execute
servicing  term  agreements  which provide that the  Company's  term as servicer
under its  securitizations  (on which such surety provides  credit  enhancement)
continues  for  successive  periods  of 60  days,  subject  to  renewal  in  the
discretion of the surety. See "Part II, Item 1. Legal Proceedings."

Potential  equity  investors  proved  unwilling  to commit  funds to the Company
because of issues relating to its  relationship  with the surety provider on the
Company's  outstanding  securitizations  and  related  questions  regarding  the
Company's  ability to  continue  as servicer  of its  servicing  portfolio.  The
Company  ultimately   determined  it  was  necessary  to  commence  a  voluntary
proceeding under Chapter 11 of the Bankruptcy Code.

General

Acquisition Volume and Pricing.

On  November 7, 2002,  the Company  announced  it would  discontinue  receivable
acquisitions  because  it was not  able to  establish  timely  arrangements  for
further acquisition funding.

The Company heretofore acquired  receivables in 39 states from over 5,900 retail
automobile dealers,  focusing its efforts on acquiring receivables on late model
used and, to a lesser  extent,  new  automobiles  from  purchasers who exhibit a
favorable  credit  profile  ("Tier I"). The Company  acquired  $223.3 million of
receivables  for the quarter ended September 30, 2002, a 13.6% decrease from the
$258.4  million  acquired  during the quarter  ended  September  30,  2001.  The
Company's decrease in acquisitions from the quarter ended September 30, 2001 was
partially  attributed to  management's  discipline in pricing and purchasing its
receivables.   This   discipline  in  the  Company's   pricing   resulted  in  a
significantly  lower number of applications  for the quarter ended September 30,
2002 when compared to the quarter ended September 30, 2001, but this decrease in
applications  was  partially  offset by higher  approval  and  contract  cashing
ratios.  The Company also  experienced a softening in the used car market in the
quarter ended September 30, 2002 due to the return of the auto  manufacturers to
0% financing for longer terms on new car sales, also contributing to the decline
in acquisitions from the September 2001 quarter to the September 2002 quarter.

Beginning  in the  December  2001  quarter,  the  Company  tightened  its credit
standards given the recessionary  economic  environment,  which resulted in well
priced and high  quality  receivables  with high  credit  scores.  Although  the
Company did not achieve its  acquisition  volume  targets,  this  tightening has
resulted in three  quarters of high  quality  receivables  priced to support the
Company's  targeted return on managed assets ("ROMA") of 1.50%.  This tightening
was  accomplished  mainly by  virtually  eliminating  the  number  of  contracts
purchased  with  credit  scores less than 625,  by more  carefully  scrutinizing
receivables with credit scores above 625, and by appropriately pricing the major
risk parameters in the Company's chosen credit grade.

The  Company has  approved  applications  utilizing  the  Company's  proprietary
risk-based  pricing  model.  The Company  began  development  of its  risk-based
pricing  model in June 2000 with  major  enhancements  periodically  implemented
beginning in February  2001.  The Company has  continually  enhanced its pricing
model,  having  implemented  its sixth  version  in the June 2002  quarter.  The
Company's  risk-based  pricing model is designed to price new receivables on the
basis of mathematical  indicators derived from the Company's historical database
and incorporate those parameters most predictive of loss and profitability  into
the  Company's  chosen  credit  grades.  Therefore,  customers  with good credit
quality and other  favorable  characteristics  are rewarded with lower rates and
higher  risk  accounts  are  priced  at  higher  rates.  The use of the  refined
risk-based  pricing  model has resulted in  favorable  trends in factors such as
credit  scores,  while  at the  same  time  allowing  the  Company  to  purchase
receivables  projected  to support a  targeted  return on  managed  assets.  The
average credit score of newly acquired  receivables was 698, 702 and 692 for the
quarters  ended  September  30,  2002,  June 30, 2002 and  September  30,  2001,
respectively.  As of September  30, 2002  approximately  41% of the  outstanding
portfolio  was  priced  at  a  level  estimated  to  support   targeted  returns
representing  receivable  acquisitions  since February 2001. See  "Discussion of
Forward-Looking Statements."

Critical Accounting Policies

In preparing  consolidated  financial  statements in conformity  with accounting
principles  generally  accepted  in the United  States of  America  and with the
general  practices  of those in the consumer  finance  industry,  management  is
required to make estimates and assumptions  that affect the reported  amounts of
assets and liabilities at the date of the consolidated  financial statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual  results could differ  significantly  from those  estimates.  The Company
believes that the following  represents  the more critical  accounting  policies
used  in  the  preparation  of  its  consolidated   financial  statements.   See
"Discussion of Forward-Looking Statements."

Retained  Interest in  Securitized  Assets and Gain on Sale of Receivables - The
Company has  historically  acquired  receivables with the intention of reselling
them through securitizations.  In the securitization  transactions,  the Company
sold a portfolio of  receivables  to a wholly owned special  purpose  subsidiary
("SPS")  established  for the  limited  purpose  of  buying  and  reselling  the
Company's  receivables.  The SPS would transfer the same  receivables to a trust
vehicle (the "Trust"),  which issued interest-bearing  asset-backed  securities.
"Asset-backed  securities" is a general  reference to securities that are backed
by financial assets such as automobile receivables. The securities are generally
sold to investors in the public market.  The Company provides credit enhancement
for the  benefit of the  investors  in  various  forms.  The credit  enhancement
utilized in the securitization  during the nine months ended September 30, 2002,
was in the form of a specific cash account ("Spread  Account") held by the Trust
and a surety bond. The Spread Accounts are required by the applicable agreements
to be maintained at specified levels.

At the closing of each  securitization,  the Company has  allocated its basis in
the  receivables  between  the  portion  of the  receivables  sold  through  the
securities and the portion of the receivables  retained from the securitizations
("Retained Interest") based on the relative fair values of those portions at the
date of the sale.  The fair value is based upon the cash  proceeds  received for
the  receivables  sold and the  estimated  fair value of the Retained  Interest.
Retained Interest consists of the discounted estimated cash flows to be received
by the Company.  The excess of the cash received over the basis allocated to the
receivables sold, less transaction costs, equals the gain on sale of receivables
recorded by the Company.

The Company receives base servicing fees for the servicing and collection of the
receivables.  The Company is entitled to the residual  cash flows from the trust
(Retained  Interest) that represent  collections on the receivables in excess of
the amounts required to pay the principal and interest on the securities  issued
in the  securitization,  the base  servicing fees and certain other fees such as
credit  enhancement fees. In general,  at the end of each collection period, the
aggregate cash  collections from the receivables are allocated first to the base
servicing fees,  then to the security  holders for interest at the interest rate
on  the  securities  plus  principal  as  defined  in the  applicable  servicing
agreement,  and finally to the credit  enhancement  fees.  If the amount of cash
required  for the above  allocations  exceeds  the amount  collected  during the
collection period,  the shortfall is drawn from the Spread Account.  If the cash
collected  during  the  period  exceeds  the  amount  necessary  for  the  above
allocations,  and the related Spread Account is not at the required  level,  the
excess cash  collected  is retained in the Spread  Account  until the  specified
level is achieved.  The level of cash  required to be  maintained  in the Spread
Account may increase,  based on contractual  provisions if portfolio performance
varies from  prescribed  ranges of credit losses,  excess yield or other events.
The cash in the Spread  Accounts is restricted  from use by the Company and such
amounts are included as a component of the Retained Interest.  Once the required
Spread  Account level is achieved,  the excess is released from the Trust to the
Company.  The  securitization  trusts  provide that the Spread  Account  deposit
requirements  increase as a result of the Company's bankruptcy filing as further
discussed  below.  Cash held in the various Spread  Accounts is invested in high
quality liquid investment  securities,  as specified in the applicable servicing
agreement. The specified credit enhancement levels are defined in the applicable
servicing  agreement as the Spread Account balance and the subordinate  class of
notes expressed generally as a percentage of the original  collateral  principal
balance.

The  average of the  interest  rates  received  on the  receivables  exceeds the
interest rates paid on the securities issued in the securitization. Accordingly,
the Retained Interest described above is a significant asset of the Company.  In
determining the fair value of the Retained  Interest,  the Company must estimate
the future  prepayments,  rates of gross credit losses and credit loss severity,
and  delinquencies,  as they impact the amount and timing of the estimated  cash
flows.

The Company continually assesses the adequacy of its retained interest cash flow
model and if  necessary,  adjusts its retained  interest  cash flow model in the
following areas:

     o    credit loss assumptions

     o    interest collections assumptions o prepayment assumptions

     o    cash accounts interest rate assumptions

     o    discount rate assumptions

During the quarter  ended  September  30,  2002,  the  Company  recorded a $46.8
million  other  than  temporary  impairment  in  the  accompanying  Consolidated
Condensed  Statement  of Loss and is reflected  in the  Revaluation  of retained
interest. The majority of the charge for other than temporary impairment related
to increased  loss rate  estimates and a charge from an increase in the discount
rate  assumption.  Each  estimate  used in the  Retained  Interest  valuation is
discussed in detail below.

Credit loss  assumptions - The Company  estimates gross credit losses and credit
loss severity using available  historical  loss data for comparable  receivables
and the specific  characteristics  of the receivables  purchased by the Company.
The  Company  implemented  new loss  curves in June 2001  which are based on the
Company's  relational  risk  management  database  which  dates back to 1992 and
incorporates  approximately 670,000 consumers representing over $10.0 billion in
acquired  receivables.  As of September 30, 2001 and March 31, 2002, the Company
determined  it was  necessary to further  adjust the expected loss rates on most
pools to reflect the losses  experienced  during the  quarters  then ended which
more fully  incorporate the effects of the existing  economic events and trends.
Although the existing loss curves were the basis for the changes in the expected
loss rates, the Company also considers its exposure to credit losses in light of
current  delinquency and loss rates,  consumer  bankruptcy trends,  recessionary
economic trends,  and other events such as zero percent  financing,  among other
things.  During the quarter ended  September 30, 2002,  the Company  implemented
enhanced  loss curves  which  utilized  approximately  20  attributes  of credit
characteristics  to predict losses.  The Company  utilized these loss curves and
also  assumed  an  additional  six  months of  higher  losses  due to  lingering
recessionary  factors to determine the other than  temporary  impairment for the
quarter ended September 30, 2002. Except for the one remaining Tier II pool, the
Company  used net  credit  loss  assumptions  ranging  from  5.06% to 8.69% as a
percentage of the original principal balance over the life of the receivables to
value Retained Interest at September 30, 2002.

Interest  collections  assumptions - As a result of changes in  delinquency  and
credit  loss  rates  and the  overall  condition  in the  economy,  the  Company
periodically  reviews  the impact on expected  future  interest  collections  on
securitized receivables.

Prepayment  assumptions  -  The  Company  estimates  prepayments  by  evaluating
historical  prepayment  performance of comparable  receivables and the impact of
events and trends in the economy. The Company's  prepayment  assumptions include
estimates for both voluntary prepayments and involuntary prepayments as a result
of  default.  The  Company  utilizes  a  prepayment  curve  whereby  the  annual
prepayment rate increases as the pool ages.  Annual  prepayment rates within the
curve range from 26.75% to 36.00% at September 30, 2002.

Cash accounts  interest rate assumptions - The Company reviews the current yield
on its cash and spread accounts to the yields originally  expected.  The current
economic and interest rate  environment is  significantly  different than it was
when most of the pools were  securitized.  Accordingly,  the Company  utilizes a
forward interest rate curve which represents  future yield  expectations on such
accounts.

Discount rate  assumptions - The Company  determines the estimated fair value of
its Retained  Interest by discounting  the expected cash flows released from the
Trust (the cash out method) using discount  rates that the Company  believes are
commensurate  with the risks involved.  During the quarter ended March 31, 2002,
the Company  changed its method of determining a market  discount rate to use in
its  valuation  of  Retained  Interest  from one that  primarily  considers  the
remaining  duration  of  the  cash  flows  to  a  methodology  that  takes  into
consideration  the  components of Retained  Interest (i.e.  spread  accounts and
estimated  future  cash  flows).  Due  to  the  continuation  of  credit  losses
experienced,  the Company  increased  its estimate of a market  discount rate to
value Retained Interest at September 30, 2002.

Retained  Interest  is  recorded  as an  "available  for sale"  security  and is
recorded at fair value. The associated  unrealized gains and losses attributable
to  changes  in fair  value  net of  income  taxes are  recorded  as a  separate
component of shareholders' equity ("accumulated other comprehensive  earnings").
Other than  temporary  impairment  charges are  recorded  through  earnings as a
revaluation of retained interest.

The  Company  is  seeking  to  dispose  of the held for sale  portfolios  in its
warehouse   subsidiaries   as  whole  loan  sales.  It  does  not  anticipate  a
securitization in the near term and, accordingly,  does not currently anticipate
accruing additional retained interest on securitized assets.

Results of Operations

Net earnings  (loss) are  summarized in the table below.  The net loss was $52.6
million,  or $1.69 per diluted share,  for the quarter ended September 30, 2002,
compared  to net loss of $23.8  million,  or $0.77 per  diluted  share,  for the
quarter ended  September 30, 2001. The change from the same quarter of the prior
year is primarily due to the recording of a $17.1 million valuation allowance on
the Company's deferred tax asset as a result of the events occurring on November
7, 2002, $46.8 million charge for the revaluation of retained interest, the loss
on interest rate  derivatives on held for sale  receivables of $10.8 million and
the fact that the  Company did not effect a  securitization  and  experienced  a
higher net interest  margin during the quarter ended September 30, 2002 compared
to September 30, 2001.

For the nine months ended September 30, 2002, the net loss was $62.8 million, or
$2.03 per share,  compared to a net loss of $26.4  million,  or $1.30 per share,
for the nine months  ended  September  30, 2001.  The decrease is primarily  the
result  of the  valuation  allowance  on the  Company's  deferred  tax  asset as
discussed above and a decrease in the number of securitizations  effected in the
nine months ended September 30, 2002 compared to the same period ended September
30, 2001. One securitization was effected in the nine months ended September 30,
2002, while three were effected in the nine months ended September 30, 2001.

<TABLE>
<CAPTION>

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

<S>                                    <C>              <C>                 <C>                 <C>
Net earnings (loss)                    ($52,551)        $ (23,797)          ($62,769)           $ (26,426)
Net earnings (loss) per share            ($1.69)          $ (0.77)            ($2.03)             $ (1.30)
  (basic and diluted)
</TABLE>


Interest  on  receivables  held for sale  increased  99.6% to $10.9  million and
increased 9.0% to $21.8 million for the quarter and nine months ended  September
30,  2002,  respectively,  compared to $5.5  million  and $20.0  million for the
quarter and nine months ended  September  30, 2001,  respectively.  The increase
over the prior  corresponding  periods relates to a higher average held for sale
portfolio  offset by a lower weighted  average  contract rate during the quarter
and nine months ended September 30, 2002 compared to the quarter and nine months
ended September 30, 2001 as shown in the following table:

<TABLE>
<CAPTION>

                                        Quarter ended SeptembeNine,months ended September 30,
                                        --------------------  -----------------------
                                           2002        2001        2002        2001
                                        --------    --------  -----------  ----------

<S>                                     <C>          <C>         <C>        <C>
Average held for sale (in thousands)    $422,327     $139,776    $283,235   $181,128
Weighted average contract rate             11.18%       12.06%      11.02%     12.62%

</TABLE>

Retained  interest and other interest income decreased 20.1% to $4.7 million and
decreased 32.6% to $15.7 million for the quarter and nine months ended September
30,  2002,  respectively,  compared to $5.9  million  and $23.2  million for the
quarter and nine months ended  September 30, 2001,  respectively.  The accretion
rate has  decreased  on all  impaired  pools as the book  value  and  associated
expected total future cash flows were adjusted in connection with the other than
temporary  impairments taken in previous quarters.  The individual components of
Retained interest and other interest income are shown in the following table:

<TABLE>
<CAPTION>

                                 Quarter ended September 30,         Nine months ended September 30,
                              ----------------------------------   ------------------------------------
                                  2002                2001              2002                2001
                              --------------     ---------------   ---------------     ----------------
                                (In thousands)

<S>                             <C>                 <C>              <C>                  <C>
Discount accretion              $ 4,726             $ 5,724          $ 15,547             $ 22,529
Other interest income                21                 219               122                  714
                              --------------     ---------------   ---------------     ----------------
                                $ 4,747             $ 5,943          $ 15,669             $ 23,243
                              ==============     ===============   ===============     ================

</TABLE>


Interest  expense  increased  18.1% to $5.5 million and decreased 24.3% to $14.4
million for the quarter and nine months ended September 30, 2002,  respectively,
compared to $4.7 million and $19.0 million for the quarter and nine months ended
September  30,  2001,  respectively.  Interest  expense  for the  quarter  ended
September 30, 2002  increased due to higher average held for sale balances which
was  partially  offset by a decrease in the  warehouse  cost of funds during the
quarter ended September 30, 2002 compared to the same period ended September 30,
2001.  Interest  expense for the nine months ended  September 30, 2002 decreased
due to lower  term  debt  interest  expense  as a result of the  required  $21.7
million and $22.0 million principal  payments made on the Company's term debt in
April 2002 and August 2002, respectively.

Provision for estimated  credit losses increased to $2.2 million for the quarter
ended September 30, 2002,  compared to $650,000 for the same period of 2001. The
increase for the quarter ended September 30, 2002 over the corresponding quarter
is primarily  due to the increase in the level of  receivables  held for sale at
September  30, 2002 compared to September 30, 2001.  The  provisions  for losses
increased to $4.3 million for the nine months ended September 30, 2002 from $1.7
million for the nine months ended September 30, 2001. This increase is primarily
the result of the frequency of the delivery of the  securitized  receivables and
the higher  average  held for sale  balances  during the nine month period ended
September  30, 2002 compared to the same period ended  September  30, 2001.  One
securitization  was effected in the nine months ended September 30, 2002,  while
three were effected during the same period ended September 30, 2001.

Gain on sale of  receivables.  The gain on sale of receivables was zero and $7.3
million for the quarter and nine months ended September 30, 2002,  respectively,
compared  to a gain of $8.0  million  and $33.4  million  for the  corresponding
periods ended September 30, 2001, respectively.  This is primarily the result of
no  securitizations  effected  during  the  quarters  ended  June  30,  2002 and
September 30, 2002.

<TABLE>
<CAPTION>

Selected Securitization Data (1) (2):                       Quarter ended             Quarter ended
                                                         ---------------------    -----------------------
                                                            March 31, 2002          September 30, 2001
                                                         ---------------------    -----------------------

                                                               2002 - A                  2001 - C

<S>                           <C>                               <C>                       <C>
Original amount (in millions) (3)                               $300.0                    $330.0
Weighted average receivable rate                                11.02%                    11.91%
Weighted average certificate rate                               4.11%                     4.16%
Gross spread (4)                                                6.91%                     7.75%
Net spread (5)                                                  5.29%                     5.97%
Weighted average remaining maturity (in months)                  65.9                      70.7
Weighted average estimated life (in years)                       1.93                      2.06
Annual credit loss assumption (6)                               2.33%                     2.31%
Cumulative credit loss assumption                               4.50%                     4.75%
Average prepayment speed assumption                             31.41%                    32.39%
Discount rate assumption                                        11.64%                    13.50%

</TABLE>


(1)  The Company did not effect  securitizations  during the quarters ended June
     30, 2002 and September 30, 2002.

(2)  Information at time of securitization.

(3)  For Securitization 2001C, $270 million of the receivables were delivered in
     September 2001, and the remaining $60 million of receivables were delivered
     in October 2001.

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

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

(6)  Computed as the cumulative  credit loss assumption  divided by the weighted
     average estimated life.

Revaluation of retained interest.  The revaluation of retained interest recorded
for the quarter and the nine months ended  September  30, 2002 was $46.8 million
and $65.6 million, respectively, compared to $44.0 million and $70.5 million for
the quarter and nine months  ended  September  30, 2001,  respectively.  For the
quarter and nine months ended September 30, 2002, the majority of the charge for
revaluation of retained  interest related to increased loss rate estimates and a
charge  from  changes  in the  discount  rate  assumption.  Some of the  factors
considered in this evaluation are discussed further in the Notes to Consolidated
Financial Statements. See "Critical Accounting Policies."

The  Company  implemented  new loss  curves in June 2001  which are based on the
Company's  relational  risk  management  database  which  goes  back to 1992 and
incorporates  approximately 670,000 consumers representing over $10.0 billion in
acquired  receivables.  As of March 31,  2002,  the  Company  determined  it was
necessary to further adjust the expected loss rates on most pools to reflect the
loss data  experienced in recent months which more fully reflects the effects of
the recent  economic  events and trends.  During the quarter ended September 30,
2002, risk management developed enhanced loss curves utilizing  approximately 20
attributes of credit  characteristics  to predict losses.  The Company  utilized
these loss curves and also assumed an additional six months of higher losses due
to lingering recessionary factors to determine the $46.8 million impairment,  as
well as increasing the discount rate.  Although the existing loss curves are the
basis for the changes in the expected loss rates, the Company also considers its
exposure  to  credit  losses in light of  current  delinquency  and loss  rates,
consumer bankruptcy trends, and recessionary  economic events and trends.  These
modeling  enhancements are further discussed in "Critical  Accounting  Policies"
and "Discussion of Forward-Looking Statements."

Gain (loss) on interest rate derivatives on securitized  receivables.  There was
no gain (loss) on interest rate  derivatives on securitized  receivables for the
quarter  ended  September  30, 2002,  compared to a loss of $2.6 million for the
quarter  ended  September  30,  2001,  due to the fact that the  Company did not
effect a securitization during the quarter ended September 30, 2002. The loss on
interest rate  derivatives on securitized  receivables for the nine months ended
September  30, 2002 was $1.0  million,  compared  to $15.4  million for the nine
months ended  September 30, 2001.  This decrease was primarily the result of the
interest rate environment at the time of the  securitization  during the quarter
ended March 31, 2002  compared to that in the nine months  ended  September  30,
2001. See the  "Financial  Condition"  section below for additional  discussions
regarding the Company's interest rate derivative strategy.

Gain (loss) on interest rate derivatives on held for sale receivables. There was
a loss on  interest  rate  derivatives  on held  for sale  receivables  of $10.8
million and $16.5  million for the quarter and nine months ended  September  30,
2002, respectively,  compared to a gain on interest rate derivatives on held for
sale  receivables of zero and $4.8 million for the quarter and nine months ended
September 30, 2001  respectively.  Gain (loss) on interest rate  derivatives  on
held for sale receivables is the result of a net increase (decrease) in interest
rates  from the  time of the  initiation  of the  derivative  agreements.  These
changes  in the  fair  value  of  interest  rate  derivatives  on held  for sale
receivables  result in a cash impact at the time a receivable  sale is effected.
This cash  impact  has  historically  been  mostly  offset  over the life of the
securitization  because the same change in market  rates  generally  result in a
higher or lower average interest rate on the notes issued in the securitization.
These  derivative  instruments  on held for  sale  receivables  are  established
through the Company's warehouse subsidiaries.  These instruments would be closed
and paid in connection  with  liquidation of the held for sale  portfolios.  See
"Discussion  of  Forward-Looking  Statements"  and  "Item 3 -  Quantitative  and
Qualitative Disclosures About Market Risk."

Servicing  fee  income  is  the  contractual  fee,   typically  one  percent  of
receivables  serviced,  earned from each trust.  Servicing fee income  decreased
23.5% to $5.8 million for the quarter ended September 30, 2002, compared to $7.6
million for the quarter ended September 30, 2001. Servicing fees decreased 18.1%
to $19.2 million for the nine months ended  September 30, 2002 compared to $23.5
million for the nine months ended  September 30, 2001. The decrease in servicing
fees for the quarter ended  September 30, 2002 is a result of the 26.1% decrease
in the average  securitized  servicing portfolio of $2.2 billion for the quarter
ended  September  30,  2002  compared  to $3.0  billion  for the  quarter  ended
September  30, 2001.  The  decrease in servicing  fees for the nine months ended
September 30, 2002 is a result of the 19.7% decrease in the average  securitized
servicing portfolio of $2.5 billion for the nine months ended September 30, 2002
compared to $3.1 billion for the nine months ended September 30, 2001.

Late charges and other fees increased  68.2% to $2.5 million and increased 43.6%
to $6.7  million  for the  quarter and nine months  ended  September  30,  2002,
respectively, from $1.5 million and $4.7 million for the quarter and nine months
ended September 30, 2001.  Other fees consist  primarily of late charges,  phone
pay fees and other fee income. Beginning in the quarter ended December 31, 2001,
the Company  implemented a new fee charged to customers for making payments over
the phone,  which is also  referred to as "phone pay fees." During the June 2002
quarter,  the  Company  implemented  the  detailed  monthly  mailing of customer
statements which notified customers of any fees being assessed.  The increase in
the quarter and nine months ended  September  30, 2002 over the quarter and nine
months ended  September 30, 2001 resulted  primarily from increased late charges
and phone pay fees.

Total  operating  expenses  decreased  3.5% and 6.0% to $12.8  million and $38.2
million for the quarter and nine months ended September 30, 2002,  respectively,
compared  to $13.3  million  and $40.6  million  for the quarter and nine months
ended  September 30, 2001,  respectively.  During the quarter ended December 31,
2001,  management  implemented  several expense  reduction  initiatives aimed at
lowering the operating  expense ratio through operating  efficiencies,  improved
technology and appropriate  staffing levels.  A Company wide operational  review
was performed and numerous cost-saving improvements were put into practice.

Total operating expenses as a percentage of the average servicing  portfolio was
1.93% and 1.85% for the  quarter  and nine  months  ended  September  30,  2002,
respectively,  compared to 1.68% and 1.66% for the quarter and nine months ended
September  30,  2001,  respectively.  The  increase in  operating  expenses as a
percentage of the average  servicing  portfolio can be attributed to a 16.0% and
15.5%  decrease in the  average  servicing  portfolio  over the quarter and nine
months ended September 30, 2001, respectively.

The Company anticipates a significant increase in professional fees and expenses
associated  with the  bankruptcy  proceeding.  Such  professional  fees  will be
subject  to  Bankruptcy  court  approval.  See  "Discussion  of  Forward-Looking
Statements."

Salaries and benefits  decreased 2.9% and 8.7% to $7.5 million and $22.0 million
for the quarter and nine months ended  September  30, 2002,  respectively,  from
$7.8 million and $24.1  million for the quarter and nine months ended  September
30,  2001,  respectively.  The  decrease  for the quarter and nine months  ended
September  30,  2002 was  primarily  related  to the staff  reductions,  thereby
lowering  payroll and  related tax  expenses  but was  partially  offset by some
compensation expense related to those reductions.

In an effort to further  curtail  expenses  and  conserve  cash  resources,  the
Company  effected a  significant  reduction  in force on  November  7, 2002.  It
released its originations  staff and retained  approximately  290 core servicing
employees.  The  reduction  in force  was  carefully  planned  to  preserve  the
Company's  high  quality  servicing  operation.  The Company is working with its
reorganization  management  consultant  to develop an employee  retention  plan,
which will be subject to bankruptcy court approval.

Provision  for income taxes was a $2.7 million and $8.2 million  benefit for the
quarter and nine months ended  September 30, 2002,  respectively,  compared to a
$13.4 million and $13.7 million benefit for the  corresponding  quarter and nine
months ended  September 30, 2001.  The change for the quarter and nine months is
the result of the $17.1 million  valuation  allowance on the Company's  deferred
tax asset as a result of the events occurring on November 7, 2002 and a net loss
before  income taxes of $54.2 million and $69.3 million for the quarter and nine
months  ended  September  30,  2002,  respectively,  compared to net loss before
income taxes of $36.7  million and $37.6 million for the quarter and nine months
ended September 30, 2001, respectively. The valuation allowance on the Company's
deferred tax asset is more fully described in Item 1, Note 10.

Discontinued  operations.  In the quarter ended  September 30, 2002, the Company
recorded a charge of $1.3 million  ($814,000 million after taxes) related to the
classification  of the  assets  of its new car  dealership  as held  for sale in
accordance with Statement of Financial Accounting Standards No. 144 - Accounting
for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). On October
23, 2002, the  dealership  was sold.  Any future results of operations  from the
Company's new car dealership will be reported as discontinued operations.

The results of discontinued operations for the Company's new car dealership for
the quarter and nine months ended September 30, 2002 and September 30, 2001 are
(in thousands):

<TABLE>
<CAPTION>

                                    Quarter ended September 30, Nine months ended September 30,
                                    --------------------------  -------------------------------
                                       2002          2001           2002           2001
                                    -----------  -------------  -------------  --------------

Discontinued operations
   Loss from operations of
<S>                                    <C>              <C>          <C>             <C>
     discontinued dealership           $   344          $ 732        $   986         $ 2,369
   Loss on disposal                      1,282              -          1,282               -
   Income tax benefit                     (593)          (267)          (685)           (862)
                                    -----------  -------------  -------------  --------------
   Net loss on discontinued operations $ 1,033          $ 465        $ 1,577         $ 1,507
                                    ===========  =============  =============  ==============
</TABLE>



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

Financial Condition

Receivables  held for sale, net and servicing  portfolio.  Receivables  held for
sale, net includes:

o    the  principal  balance  of  receivables  held for  sale,  net of  unearned
     discount

o    allowance for estimated credit losses

o    receivables in process

o    dealer premiums

The principal  balance for receivables held for sale, net is higher at September
30, 2002 than at December 31, 2001 primarily  because the Company did not effect
a securitization during the quarters ended June 30, 2002 and September 30, 2002.
Selected  information  regarding  the  Receivables  held for  sale,  net and the
servicing portfolio at September 30, 2002 and December 31, 2001 is summarized in
the following table:

<TABLE>
<CAPTION>

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

<S>                                                <C>                       <C>
Receivables held for sale, net                     $ 487,906                 $  176,511
Allowance for net credit losses                       (3,045)                    (2,054)
Securitized assets serviced                        2,127,420                  2,788,006
Total servicing portfolio                          2,608,975                  2,962,075
</TABLE>



Receivables  held for sale, net at October 31, 2002, was $528.9  million.  These
receivables are held through the Company's warehouse  subsidiaries which are not
in bankruptcy.

Retained interest in securitized assets ("Retained Interest"). Retained Interest
decreased  $56.8 million to $141.5  million at September  30, 2002,  from $198.3
million at December  31,  2001.  The  Retained  Interest  balance  increased  or
decreased by the amounts  capitalized  upon  consummation of the  securitization
during the quarter  ended  March 31, 2002  including  estimated  dealer  premium
rebates,  collections,  accretion of discount,  change in spread accounts, other
than  temporary  impairment  and net change in  unrealized  gain.  The Company's
collections,  detailed in the table  below,  are the receipt of the net interest
spread,  including  dealer  rebates.  Some of the  receipts  related  to the net
interest  spread  may  remain  in  the  spread  account.   The  following  table
illustrates, in thousands, the components of the change in Retained Interest.


Balance at December 31, 2001                                        $ 198,251

Amounts capitalized (including estimated dealer rebates)               14,860
Collections                                                           (25,592)
Accretion of discount                                                  15,523
Change in spread accounts                                               4,758
Revaluation of retained interests in securitized assets               (65,600)
Net change in unrealized gain                                            (673)
                                                                  ------------
Balance at September 30, 2002                                       $ 141,527
                                                                  ============


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


Balance at December 31, 2001                                           $ 91,393

Net excess cash flows deposited to spread accounts                       24,291
Initial spread account deposits                                           2,850
Interest earned on spread accounts                                        1,259
Less:  excess cash flows released to the Company                        (23,642)
                                                                   -------------

Balance at September 30, 2002                                          $ 96,151
                                                                   =============

Allowance  for net credit  losses on  securitized  receivables  is included as a
component of Retained Interest. At September 30, 2002, the allowance relating to
securitized   receivables   totaled  $141.7  million,  or  6.66%  of  the  total
securitized  receivable  portfolio,  compared to $153.0  million,  or 5.49%,  at
December 31, 2001. See "Critical Accounting Policies" for additional discussions
regarding Retained Interest and "Discussion of Forward-Looking Statements."

Recent developments and the effects of the pending bankruptcy reorganization may
adversely  affect the value of retained  interest in  securitized  assets.  (See
"Item 1, Note 2 and Note 9".) The effect of the  bankruptcy to delay the release
of cash from the securitization trusts may adversely affect the present value of
those future cash flows.  Also,  dealer premium rebates may be more difficult to
collect without an active originations  operation.  Also, if the Company were to
transition  servicing  on its  portfolio,  there  may be a  loss  of  consistent
effectiveness  of  collection  efforts in connection  with a transition  and the
successor  servicer's  systems and  operations  may be less  effective  than the
Company's.  These factors could  significantly  affect retained  interest values
prospectively.

Held for sale assets totaled $4.0 million compared to zero at December 31, 2001.
In the quarter ended  September 30, 2002, the Company  recorded a charge of $1.3
million  ($814,000 after taxes) related to the  classification  of the assets of
the Company's new car  dealership as held for sale in accordance  with Statement
of Financial  Accounting  Standards No. 144 - Accounting  for the  Impairment or
Disposal  of  Long-Lived  Assets  ("SFAS  No.  144").  On October  23,  2002 the
dealership  was sold.  See  "Note 8" in the  "Notes  to  Consolidated  Condensed
Financial  Statements." The held for sale assets are as follows at September 30,
2002 (in thousands):


Property and equipment, net of accumulated depreciation       $ 3,479
Franchise fee                                                      21
Parts inventory                                                    30
New vehicle inventory                                             471
                                                         -------------
  Total market value of assets held for sale                  $ 4,001
                                                         =============


Refundable  and deferred  income taxes was $22.1  million at September  30, 2002
compared to $9.2 million at December 31, 2001. The increase is the result of the
net loss for the nine months ended  September 30, 2002,  offset by the valuation
allowance of $17.1 million on the deferred tax assets.

Other Assets are as follows (in thousands):


                                September 30,           December 31,
                                    2002                    2001
                                -------------           ------------
Repossessed assets                 $ 6,416                $ 9,566
Accrued servicing fees               2,086                  3,086
Other                                9,174                 10,542
                                ------------            ------------
                                   $ 17,676               $ 23,194
                                ============            ============


The  decrease  in the  repossessed  assets  is the  result  of a lower  level of
inventory of repossessed  vehicles.  The level of inventory is largely dependent
on factors such as the number of  repossessions  and  fluctuations  in the local
wholesale and retail  markets.  The decrease in other is primarily the result of
the hedging  activities.  At December 31,  2001,  the fair value of the interest
rate derivatives was approximately  $4.0 million and was included on the balance
sheet as an other asset.  At September 30, 2002,  the fair value of the interest
rate  derivatives on held for sale  receivables was a liability and was included
in Other payables and accrued expenses.

Notes  payable  were $445.5  million at September  30, 2002,  compared to $100.3
million at  December  31,  2001.  The  increase is the result of the Company not
effecting a securitization  in the June 2002 and September 2002 quarters.  These
notes payable are obligations of the Company's warehouse subsidiaries, which are
not in bankruptcy, and are secured by the held for sale receivable portfolios.

Term debt was $100.3  million at September 30, 2002,  compared to $133.0 million
at  December  31,  2001.  The  decrease  was the result of a required  principal
payment made on the Company's senior notes in March 2002 of $21.7 million and in
August  2002 of $22.0  million,  offset by the  $11.0  million  of senior  notes
privately issued by the Company during May 2002.

Liquidity and Capital Resources

Sources and Uses of Cash in  Operations.  Net cash used in operating  activities
was $330.9  million  compared to net cash  provided by operating  activities  of
$153.5  million  for  the  nine  months  ended  September  30,  2002  and  2001,
respectively.  The  change  was  primarily  attributable  to  lower  receivables
securitized  than  acquired  during the nine  months  ended  September  30, 2002
compared to the nine months  ended  September  30,  2001.  Net cash  provided by
investing  activities  was $19.9  million and $50.8  million for the nine months
ended June 30, 2002 and 2001,  respectively.  The decrease from the prior period
primarily  relates to the decrease in the  collections  on retained  interest in
securitized  assets but was partially offset by a smaller use of cash related to
the spread  accounts.  Net cash  provided by financing  activities  for the nine
months ended September 30, 2002 was $311.3 million  compared to net cash used in
financing  activities of $128.6 million for the nine months ended  September 30,
2001.  The primary factor for this change is the difference in the timing of the
securitizations   and  receivables   acquisition   volume   subsequent  to  each
securitization  for the nine months  ended  September  30, 2002  compared to the
quarter ended  September 30, 2001 as well as total  principal  payments of $43.7
million  made on the  Company's  senior  notes  during  the  nine  months  ended
September 30, 2002 compared to $22.0 million for the same period ended September
30, 2001.

On  September  30,  2002,  the Company had cash on hand of $14.5  million and an
additional  $22.1  million  was  available  to borrow  utilizing  its  warehouse
facilities based on the outstanding  principal balance of eligible  receivables,
although the Company was not in compliance  with a tangible net worth  condition
provided  therein.  At October 31, 2002, the Company filed its voluntary Chapter
11 bankruptcy proceeding. No further receivable acquisition funding is available
under the  subsidiaries'  warehouse  facilities.  The Company's  residual credit
facility was also terminated in November, 2002.

The Company  has  ongoing  cash flow  requirements  to support  its  operations,
notwithstanding  the  discontinuance of receivable  originations.  The Company's
sources of liquidity are limited currently and consist of cash on hand and funds
from  operations,  whole loan sale  transactions,  tax refunds,  and, subject to
conditions   described   below,    distributions   of   residual   interest   in
securitizations.  The  company  is in  negotiations  for a debtor  in-possession
secured  working  capital  facility  in the  range  of up to $5  million  to $10
million.  Such  facility  is  subject  to  definitive  documentation  and  court
approval. There is no assurance it will be available.

Derivative financial instruments.  Derivative financial instrument  transactions
(generally,  a gain or loss on interest rate derivatives) may represent a source
or a use of cash  during a given  period  depending  on the  change in  interest
rates.  In the nine  months  ended  September  30,  2002,  derivative  financial
instrument transactions used cash of $1.0 million compared to cash used of $15.4
million  during  the nine  months  ended  September  30,  2001.  This  change is
primarily the result of the  implementation  of the use of interest rate caps in
May 2001.

Warehouse  facilities.  The Company has credit facilities  through its warehouse
subsidiaries,  not in bankruptcy,  with independent  financial  institutions.  A
$350.0  million  credit  facility  is  insured  by a surety  bond while a $200.0
million  credit  facility is not. At September 30, 2002,  $445.5  million of the
capacity was utilized,  and an additional  $22.1 million was available to borrow
based on the outstanding principal balance of eligible receivables, although the
Company  was not in  compliance  with  tangible  net worth  provisions  of these
facilities at such date. See "Part II, Item 1., Legal  Proceedings."  At October
31,  2002,  no  further  funding  is  available  for  receivable   acquisitions.
Receivables  held for sale in these facilities at October 31, 2002, is indicated
below.

                              Credit Facility                Receivables
      Subsidiary              Advances Outstanding          Held For Sale
------------------------   ----------------------     --------------------------
                               (in millions)
 UAFC Corporation                 $317.00                      $321.8
 UAFC-2 Corporation               $197.00                      $207.1


Derivative  instruments  established through the warehouse subsidiaries would be
closed  and  paid in  connection  with  the  liquidation  of the  held  for sale
portfolios.  Closing those  positions  would  represent a combined cost of $16.0
million at October 31, 2002.

Term debt.  The Company's  term debt consists of Senior and Senior  Subordinated
Notes.  The Company  issued  $110.0  million of 8.53% Senior Notes due August 1,
2002, in connection with the Company's initial public offering.  Interest on the
Notes was payable semiannually, and principal payments of $22.0 million began on
August 1, 1998 and were due  annually  on August 1 until  maturity.  The Company
made its final  principal  payment on these  notes on August 1,  2002.  In April
1996, the Company completed a private placement of $46.0 million of 9.99% Senior
Subordinated  Notes due March 30, 2003,  with  interest  payable  quarterly  and
principal due at maturity.  In March 1997,  the Company  issued $65.0 million of
Senior Notes due  December 27, 2002.  The Notes were issued as "Series A" in the
principal  amount of $50.0  million  at 7.75%  interest  and  "Series  B" in the
principal  amount of $15.0 million at 7.97%  interest.  Interest on the Notes is
payable  semiannually,  and a principal  payment was made in March 2002,  in the
amount equal to approximately 33 1/3% of the stated original  balance,  or $21.7
million.  As an  additional  part of the Company's  refinancing  plan, on May 1,
2002,  the Company  completed  a private  placement  of $11.0  million of 12.00%
unsecured  Senior Notes due April 30, 2007 with interest  payable  quarterly and
principal due at maturity. The Company was not in compliance with a tangible net
worth covenant under these Senior Notes as September 30, 2002.

Securitization  Residual  Cash Flows.  The Company's  securitization  agreements
require  compliance  with monthly,  quarterly and cumulative  tests.  If certain
events or "triggers"  occur,  certain of the Company's  future cash flows may be
negatively  impacted.  These triggering events include,  but are not limited to,
greater than expected loss experience,  negative changes in the Company's credit
ratings,  and for pools including and subsequent to 2000-B,  non-compliance with
certain financial  covenants within the  securitization.  Hitting these triggers
results in  restriction  on the receipt of future  residual  cash flows from the
securitizations.  In  addition,  the  Company may also lose its rights to be the
servicer of the securitizations  along with the associated servicing fee income.
The Company has hit certain of the first level  financial  triggers from time to
time which have the effect of  increasing  Spread  Account  requirements  in the
securitizations,  and currently has first level triggers not yet cured requiring
increased cash  enhancement  levels in its outstanding  securitizations,  1998-A
through 2001-A,  inclusive.  The Company regularly posts servicer reports on its
website for its  securitizations  which show  deficiencies  in  required  spread
amounts.  In addition,  the UACSC 2000-B  securitization  has experienced credit
losses  at the  higher  trigger  level  which  permits  other  parties  to  that
transaction to invoke procedures to replace the Company as servicer  thereunder.
Moreover, the securitization trusts provide that the Company's bankruptcy filing
(and/or  resulting debt rating  downgrades) cause the cash amount required to be
held in the  applicable  spread  account to be  increased  to equal the surety's
obligation  (generally the  outstanding  note balance) until the Company emerges
from  bankruptcy,  or a  replacement  servicer is appointed.  Accordingly,  cash
residual  distributions  by the  trusts are  likely to be  prohibited  while the
bankruptcy is pending.  While the  bankruptcy  event is also an event that would
permit  other  parties  to  invoke  servicer  replacement  procedures  under the
securitizations,  efforts of such  parties to invoke such rights on the basis of
bankruptcy events are presently stayed by virtue of the bankruptcy laws.

Moreover,  the surety of the securitizations  required the Company to enter into
servicing term agreements in September,  2002, which provide that the surety has
discretion  whether  to  renew  the  Company's  appointment  as  servicer  after
successive 60-day periods. See "Part II, Item I, Legal Proceedings." Termination
of the Company's  rights as servicer of any portion of its  servicing  portfolio
could have a material  adverse  effect on the Company's cash flows and prospects
and  impair  its  ability  to   effectively   manage  its  pending   Chapter  11
reorganization.

Current  Liquidity Issues. At the present time, the Company is largely dependent
on its regular servicing fees for cash flows to maintain  operations.  While the
Company  retains  its rights to  residual  securitization  cash flows  through a
subsidiary  (not in  bankruptcy)  those cash flows are  currently  suspended  as
described  above.  The Company  anticipates  applying  for a federal  income tax
refund of  approximately  $11.0  million and  expects to receive  that refund in
December (but cannot  provide  assurance of the timing of receipt).  The Company
also  expects  to  generate  significant  cash flows  from  distribution  by its
subsidiary  of net proceeds from the sale of  receivables  held in the warehouse
portfolio,  currently  estimated at approximately  $10.0 to $15.0 million if the
portfolios  are sold at par. The Company has solicited  bids for the  portfolios
held by its  subsidiaries  (not in bankruptcy).  Such  subsidiaries  will pursue
whole loan sales as promptly as  practicable,  in a manner  consistent  with the
requirements of the parent company's bankruptcy proceeding.

Because  the Company  cannot be assured of the timing or amount of net  proceeds
from whole loan  sales or tax  refunds,  management  is seeking to  establish  a
debtor-in-possession  credit line with a third  party.  Such an  arrangement  is
likely to feature  available credit in the amount of up to $5.0 million to $10.0
million, fully secured by a priority lien on all parent company assets and would
be subject to bankruptcy court approval. The Company cannot provide assurance as
to whether any such facility will be available, the terms thereof, or whether it
will receive bankruptcy court approval.

The  Company's  longer  term  cash  flow  requirements  for  operations  will be
dependent  on the  outcome  of the  plan  of  reorganization  in the  bankruptcy
proceeding. Management believes it is unlikely that the reorganization plan will
provide for re-commencement of receivable acquisition activities. Subject to the
uncertainties of the availability of cash flows from the sources described above
in the near term,  the  Company  believes  that its cash flows over time will be
sufficient to sustain its requirements to maintain essential servicing functions
and repay its creditors.  The Company  currently  believes its assets and future
cash flows will be  sufficient  to repay  creditors,  with value  remaining  for
shareholders.  It is not  possible  to  quantify  the value  that may remain for
equity holders due to the uncertainty and  unpredictability of factors affecting
the reorganization process. See "Discussion of Forward-Looking Statements."

Asset Quality

Set  forth  below  is  certain  information   concerning  the  credit  loss  and
delinquency experiences on the fixed rate retail automobile receivables serviced
by the Company. There can be no assurance that future delinquency and net credit
loss experience on the  receivables  will be comparable to that set forth below.
See "Discussion of Forward-Looking Statements."

<TABLE>
<CAPTION>

                                                                            Credit Loss Experience
                                                                            For the Quarter Ended
                                      --------------------------------------------------------------------------------------
                                         September 30, 2002               June 30, 2002                  March 31, 2002
                                      -------------------------- -------------------------------  --------------------------
                                        Number of                    Number of                      Number of
                                       Receivables     Amount       Receivables      Amount        Receivables    Amount
                                       -----------     ------       -----------      ------        -----------    ------
<S>                                     <C>          <C>              <C>         <C>                <C>        <C>
Average servicing portfolio             215,850      $2,647,480       224,928     $ 2,750,719        234,476    $2,871,966

Gross charge-offs                         3,676      $   44,134         3,584     $    44,146          4,531    $   54,075
Recoveries                                               14,382                        16,104                       20,101
                                                  --------------                 ---------------              --------------
  Net charge-offs                                    $   29,752                   $    28,042                   $   33,974
                                                  ==============                 ===============              ==============

Gross charge-offs as a percentage
  of average servicing portfolio (1)       6.81%           6.67%        6.37%            6.42%          7.73%         7.53%
Recoveries as a percentage of
  gross charge-offs                                       32.59%                        36.48%                       37.17%
Net charge-offs as a percentage
  of average servicing portfolio (1)                       4.50%                         4.08%                        4.73%

</TABLE>

<TABLE>
<CAPTION>

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

                                      September 30, 2002          September 30, 2001
                                      --------------------------- ---------------------------
                                                    (Dollars in thousands)

                                        Number of                   Number of
                                       Receivables    Amount       Receivables    Amount
                                       -----------    ------       -----------    ------
<S>                                     <C>        <C>              <C>        <C>
Average servicing portfolio             225,085    $ 2,756,721      261,667    $ 3,260,658

Gross charge-offs                        11,791    $   142,354        9,692    $   121,744
Recoveries                                              50,587                      47,097
                                                  ---------------             ---------------
  Net charge-offs                                  $    91,767                 $    74,647
                                                  ===============             ===============

Gross charge-offs as a percentage
  of average servicing portfolio (1)       6.98%           6.89%       4.94%          4.98%
Recoveries as a percentage of
  gross charge-offs                                       35.54%                     38.69%
Net charge-offs as a percentage
  of average servicing portfolio (1)                       4.44%                      3.05%
    (1) Annualized

</TABLE>

<TABLE>
<CAPTION>

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

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

                                         Number of                       Number of                      Number of
                                        Receivables     Amount          Receivables     Amount         Receivables        Amount
                                        -----------     ------          -----------     ------         -----------        ------
<S>                                       <C>         <C>                 <C>         <C>               <C>             <C>
Servicing portfolio                       212,495     $2,608,748          221,884     $2,711,525        231,676         $2,838,139
Delinquencies:
  30-59 days                                5,373     $   63,036            5,260     $   61,235          5,665         $   66,393
  60-89 days                                2,997         35,032            2,614         31,052          2,641             33,105
  90 days or more                           1,083         11,960              906         10,561          1,000             11,517
                                          -------     ----------          --------     ----------        -------         ----------

Total delinquencies                         9,453     $  110,028            8,780     $  102,848          9,306         $  111,015
                                          =======     ==========          =======     ==========         =======        ==========


Delinquency as a percentage
  of servicing portfolio                     4.45%          4.22%            3.96%          3.79%          4.02%              3.91%

Delinquency as a percentage
  of servicing portfolio
  excluding bankruptcies                                    3.56%                           3.14%                             3.14%
</TABLE>


<TABLE>
<CAPTION>


                                                  Delinquency Experience
                                                ---------------------------
                                        At December 31, 2001    At September 30, 2001
                                        --------------------    ---------------------
                                                 (Dollars in thousands)

                                         Number of                   Number of
                                        Receivables     Amount      Receivables     Amount
                                        -----------     ------      -----------     ------
<S>                                      <C>          <C>            <C>          <C>
Servicing portfolio                      241,178      $2,961,737     252,638      $3,127,164
Delinquencies:
  30-59 days                               7,329      $   84,748       5,879      $   65,779
  60-89 days                               3,605          44,100       3,001          36,804
  90 days or more                          1,504          17,121       1,223          14,055
                                        ---------     ----------     --------     ----------
Total delinquencies                       12,438      $  145,969      10,103      $  116,638
                                        =========     ==========     ========     ==========

Delinquency as a percentage
  of servicing portfolio                    5.16%           4.93%       4.00%           3.73%

Delinquency as a percentage
  of servicing portfolio
  excluding bankruptcies                                    4.12%                       2.96%
</TABLE>

Net credit losses as a percentage of the average servicing  portfolio were 4.50%
for the quarter  ended  September 30, 2002, an increase from 4.08% and 3.67% for
the  quarters  ended June 30, 2002 and  September  30, 2001,  respectively.  The
increase  in losses for the quarter  ended  September  30, 2002  compared to the
prior  quarter is  partially  a result of the  diminishing  recovery  rates,  as
discussed below, as well as continued  effects of recession and some seasonality
effects.  Net credit losses as a percentage of the average  servicing  portfolio
increased  to 4.44% for the nine months  ended  September  30, 2002  compared to
3.05% for the nine months ended  September 30, 2001.  The increase in losses for
the nine months ended  September  30, 2002 can  primarily be  attributed  to the
continued  effects of a  recessionary  economy,  offset by  improved  collection
activities in the quarters  ended June 30, 2002 and  September  30, 2002.  These
external  economic  factors  along with the aging of the  portfolio  combined to
increase the Company's net credit losses for the nine months ended September 30,
2002.

Recoveries as a percentage of gross  charge-offs were 32.59%,  36.48% and 37.95%
for the quarters ended September 30, 2002, June 30, 2002 and September 30, 2001,
respectively. Recovery rates dropped from the June 2002 quarter to the September
2002  quarter  due to a weaker  used  vehicle  market as the  result of  greater
incentives offered by the auto manufacturers to incent the purchase of new cars.
In  addition,  the type of used  vehicles  that have been moving into the market
tend  to  be  the  certified  pre-owned  vehicles  which  meet  the  eligibility
requirements  to be financed  through the captive  finance  companies  currently
offering  the  increased  incentives.  This  movement  can  have the  effect  of
depressing the market for the remaining used vehicles.

As  indicated  in the above  table,  delinquency  rates  based upon  outstanding
receivable  balances of accounts 30 days past due and over increased to 4.22% at
September 30, 2002 compared to 3.79% at June 30, 2002 and 3.73% at September 30,
2001. The increase in delinquencies  over the prior quarter is consistent with a
seasonal  delinquency  increase experienced over prior years. See "Discussion of
Forward-Looking Statements."

Several additional factors have contributed to the higher delinquency and credit
loss rates for the quarter  ended  September  30,  2002.  One such factor is the
declining  servicing  portfolio.  The total  servicing  portfolio  has been on a
steady  decline for five  quarters  dropping  from $3.1 billion at September 30,
2001 to $2.6 billion at September 30, 2002. The delinquency and quarterly credit
loss  percentages as of, and for the quarter ended September 30, 2002,  would be
3.52%  and 3.78%  using a twelve  month lag  which  isolates  the  effect of the
portfolio  decline.  External  economic  factors such as increased  unemployment
rates due to a weakened  economy  and  increased  bankruptcy  filings  have also
contributed to the increased delinquency and loss rates during the quarter ended
September 30, 2002. Since September 30, 2001,  bankruptcy filings have increased
22.8%. Management attributes this increase mostly to the heightened awareness of
the pending bankruptcy reform legislations, as well as general economic factors.
See "Discussion of Forward-Looking Statements."

Provisions  are made for estimated net credit  losses in  conjunction  with each
securitization. The cumulative credit loss assumption used on the securitization
during the nine months ended September 30, 2002 was 4.50%, compared to 4.75% for
the prior year corresponding period. The reduction in the credit loss assumption
from the prior year  quarter is due to  improved  credit  quality in  receivable
acquisitions.  See additional  discussions regarding the Company's credit scores
in the  "Acquisition  Volume and  Pricing"  section  above.  The  allowance  for
estimated  credit losses on all  securitized  receivables  (inherent in Retained
Interest)  was 6.66% at September  30, 2002,  compared to 5.26% at June 30, 2002
and 5.87% at September 30, 2001.

Over the past year,  the Company has put forth  extensive  effort to improve the
accuracy of cash flow projections related to the components of Retained Interest
and  to  fully  leverage  its  risk-based   relational  database.   The  Company
implemented  new loss  curves  in June 2001  which  are  based on the  Company's
relational  risk management  database which dates back to 1992 and  incorporates
approximately  670,000  consumers  representing  over $10.0  billion in acquired
receivables. As of September 30, 2001 and March 31, 2002, the Company determined
it was  necessary  to further  adjust the  expected  loss rates on most pools to
reflect  the loss  experience  during the  quarters  then ended which more fully
incorporate the effects of the existing  economic events and trends.  During the
quarter ended September 30, 2002, the Company  implemented  enhanced loss curves
which utilized  approximately 20 attributes of credit characteristics to predict
losses.  The  Company  utilized  these loss  curves and also added six months of
higher losses due to lingering  recessionary factors to determine the other than
temporary  impairment for the quarter ended  September 30, 2002.  Except for the
one remaining Tier II pool, the Company used net credit loss assumptions ranging
from 5.06% to 8.69% as a percentage of the original  principal  balance over the
life of the  receivables  to value  Retained  Interest at  September  30,  2002.
Although the existing  loss curves are the basis for the changes in the expected
loss rates, the Company also considers its exposure to credit losses in light of
current delinquency and loss rates, consumer bankruptcy trends, and recessionary
economic events and trends. See "Critical  Accounting  Policies" and "Discussion
of Forward-Looking Statements."



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

<TABLE>
<CAPTION>

                                                              Remaining
                                                              Balance at        Net Loss       Expected
                                             Original        September 30,     to Original    Cumulative
            Securitizations                   Amount              2002          Balance        Net Loss
--------------------------------------------------------------------------------------------------------
                                                                                  (1)             (2)
                                               (Dollars in thousands)
<S>    <C>                                   <C>              <C>                <C>             <C>
UACSC  2002-A Auto Trust                     $ 300,029        $ 232,560          0.50%           5.44%
UACSC  2001-C Auto Trust                       330,002          224,491          1.29%           5.98%
UACSC  2001-B Auto Trust                       150,002           92,607          1.72%           6.10%
UACSC  2001-A Auto Trust                       573,010          301,176          3.04%           6.69%
UACSC  2000-D Auto Trust                       510,002          250,565          3.96%           7.35%
UACSC  2000-C Auto Trust                       499,999          217,761          4.06%           7.19%
UACSC  2000-B Auto Trust                       534,294          222,873          5.56%           8.53%
UACSC  2000-A Auto Trust                       282,721           94,094          5.04%           7.19%
UACSC  1999-D Auto Trust                       302,693           93,795          6.64%           8.69%
UACSC  1999-C Auto Trust                       364,792          102,105          5.96%           7.58%
UACSC  1999-B Auto Trust                       340,233           82,772          6.32%           7.92%
UACSC  1999-A Auto Trust                       320,545           64,534          6.44%           7.76%
UACSC  1998-D Auto Trust                       275,914           44,484          5.53%           6.23%
UACSC  1998-C Auto Trust                       351,379           49,880          5.16%           5.87%
UACSC  1998-B Auto Trust                       267,980           29,611          4.59%           5.25%
UACSC  1998-A Auto Trust                       228,938           21,471          4.54%           5.06%
                                         ------------------------------------
  Total Tier I Securitized Trusts            5,632,533        2,124,779

PSC 1998-1 Grantor Trust                        28,659            2,641         10.91%          12.00%
                                         ------------------------------------
       Grand Total                          $5,661,192       $2,127,420
                                         ====================================

</TABLE>


(1)  Net loss to original balance at September 30, 2002.

(2)  Forward - looking information.

Discussion of Forward-Looking Statements

This  report  contains  forward-looking  statements  regarding  sources  of, and
demands on,  operating cash flows, the impact and outcome of the pending Chapter
11 bankruptcy proceeding, the potential impact of pending litigation,  prospects
for receivable sale transactions,  results of operations,  effects of changes in
accounting policies,  potential credit losses, recovery rates, prepayment rates,
future  dealer  premium  rebates,  servicing  income,  and other  aspects of the
Company's  business.  Similar  forward-looking  statements  may be  made  by the
Company  from  time  to  time.  In  particular,  the  Company's  gain on sale of
receivables  and  retained  interest in  securitized  assets are reported on the
basis  of  significant   estimates  of  future   portfolio   performance.   Such
forward-looking  statements  are subject to a number of  important  factors that
cannot be predicted  with  certainty and which could cause such  forward-looking
statements to be materially  inaccurate.  Such factors include, for example, the
unpredictability   of  the   consequences   and   outcome   of  the   bankruptcy
reorganization, the risk that the Company may be forced to transfer servicing of
its    portfolio,     availability    of    capital    resources,     especially
debtor-in-possession  financing,  changes in interest rates, consumer credit and
delinquency trends, and risk of employee attrition.  The Company emphasizes that
it is not possible to predict the length of time UAC will operate  under Chapter
11  protection,  the  outcome of the  proceedings  in  general,  whether it will
continue to operate under the current organizational structure, or the effect of
the  proceedings on its  businesses  and the interests of various  creditors and
shareholders.   See  the  "Discussion  of  Forward-Looking   Information"  under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  in the  Company's  Annual  Report  on Form  10-K for the  six-month
transition period ended December 31, 2001.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company's  sources for  short-term  funds  generally  have variable rates of
interest,  and its  receivable  portfolio  bears  interest at fixed  rates.  The
Company  therefore  bears  interest  rate  risk on  receivables  until  they are
securitized and employs an economic  hedging strategy to mitigate this risk. The
Company uses an economic  hedging  strategy that  primarily  consists of forward
interest rate derivatives  having a maturity  approximating the average maturity
of the  acquisition  volume  during  the  relevant  period.  At  such  time as a
securitization is committed,  the interest rate derivatives are terminated.  The
Company's  economic  hedging  strategy  is an integral  part of its  practice of
periodically securitizing receivables.  The commercial paper conduit pursuant to
which the Company  securitized  $500.0  million in receivables in September 2000
and $150.0  million in  receivables  in June 2001, and which it may utilize from
time to time in the future,  provides for issuance of a note bearing interest at
a  floating  rate with the  resulting  interest  rate risk  covered by a related
interest rate swap arrangement. There is no assurance that these strategies will
completely  offset changes in interest  rates.  In particular,  such  strategies
depend on  management's  estimates  of  receivable  acquisition  volume  and the
interest rate on those receivables. The Company generally realizes a gain on its
economic hedging  transactions  during periods of increasing  interest rates and
generally  realizes a loss on such  transactions  during  periods of  decreasing
interest  rates.  At September 30, 2002,  the Company has an unrealized  hedging
loss of $16.1 million based on notional  amounts  outstanding of $539.5 million.
The fair value of term debt increases or decreases as market  interest rates are
reduced or increased, respectively.

The following table presents the principal cash repayments and related  weighted
average  interest rates by maturity date for the current  variable rate and term
debt at September 30, 2002:

                                 Three months
                                    ended
                                 December 31,
                                    2002          2003        2007      Total
                                 ---------------------------------------------
                                          (Dollars in thousands)

Notes Payable                    $ 445,483      $ -         $ 445,483
 Weighted average variable rate       3.09%

Term debt                        $  43,333      $ 46,000    $  11,000  $100,333
   Weighted average fixed rate        7.80%         9.99%       12.00%     9.26%


Sensitivity Analysis on Retained Interest

The Company bears the primary risk of loss due to credit losses in its servicing
portfolio.  Credit loss rates are  impacted  by general  economic  factors  that
affect  customers'  ability  to  continue  to  make  timely  payments  on  their
indebtedness.  Prepayments on receivables in the servicing  portfolio reduce the
size of the  portfolio and reduce the Company's  servicing  income.  The gain on
sales of receivables in connection with each securitization  transaction and the
amount of Retained Interest  recognized in each transaction  reflect  deductions
for estimates of future defaults and prepayments. The carrying value of Retained
Interest may be adjusted  periodically to reflect  differences between estimated
and actual net credit losses and prepayments on past securitizations.

At September  30, 2002,  key economic  assumptions  and the  sensitivity  of the
current fair value of Retained Interest to immediate 10% and 20% adverse changes
in assumed economics is as follows (in thousands):

<TABLE>
<CAPTION>
                                     Expected
                                    Cumulative                                                  Spread
                                    Net Credit          Discount          Prepayment           Interest
                                     Losses               Rate              Speed                Rate
                                 (pool life rate)     (annual rate)        (curve)             (curve)
                                 -----------------  -----------------  -----------------   -----------------

Impact on fair value of
<C>                                 <C>                 <C>                <C>                 <C>
10% adverse change                  $ (30,894)          $ (4,652)          $ (4,242)           $ (1,684)
20% adverse change                  $ (61,527)          $ (9,124)          $ (8,190)           $ (3,356)
</TABLE>



These  sensitivities  are hypothetical  and should be used with caution.  As the
amounts  indicate,  any change in fair value  based on a  particular  percentage
variation in assumptions cannot be extrapolated  because the relationship of the
change  in fair  value is not  linear.  Also,  in this  table,  the  effect of a
variation in a particular  assumption on the fair value of the Retained Interest
is calculated  independent  from any change in another  assumption;  in reality,
changes in one factor may result in changes in another,  which might  magnify or
counteract the sensitivities.  See "Discussion of  Forward-Looking  Statements,"
and "Item 1, Note 2."

Item 4.  Controls and Procedures

Within the 90-day period prior to the filing of this report,  an evaluation  was
carried out under the  supervision and with the  participation  of the Company's
management,  including the Chief  Executive  Officer ("CEO)" and Chief Financial
Officer ("CFO"),  of the effectiveness of the Company's  disclosure controls and
procedures.  Based on that  evaluation,  the CEO and CFO have concluded that the
Company's  disclosure  controls  and  procedures  are  effective  to ensure that
information  required to be disclosed by the Company in reports that it files or
submits  under  the  Securities  Exchange  Act of 1934 is  recorded,  processed,
summarized  and reported  within the time periods  specified in  Securities  and
Exchange Commission rules and forms. Subsequent to the date of their evaluation,
there were no significant  changes in the Company's  internal financial controls
or in other  factors  that could  significantly  affect such  controls,  nor any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses in such controls.

Part II. Other Information

Item 1.  Legal Proceedings

Bankruptcy Proceeding

On October 31, 2002,  Union  Acceptance  Company filed a voluntary  petition for
reorganization  under  Chapter 11 of the United  States  Bankruptcy  Code in the
United  States   Bankruptcy   Court  for  the  Southern   District  of  Indiana,
Indianapolis   Division  ("Court").   The  proceeding  does  not  include  UAC's
subsidiaries. UAC continues to manage its business as a debtor-in-possession. As
a  debtor-in-possession,  management is authorized to operate the business,  but
may not engage in transactions  outside the ordinary course of business  without
Court  approval.  Subsequent  to the  filing of the  Chapter 11  petitions,  UAC
obtained  several Court orders that  authorized  it to pay certain  pre-petition
liabilities  (such as employee wages and benefits) and take certain actions that
will preserve the going concern  value of the  business,  thereby  enhancing the
prospects of reorganization.

In connection  with the renewal of one of the Company's  subsidiary's  warehouse
credit facilities in late August, 2002, MBIA Insurance  Corporation,  the surety
which provides  credit  enhancement in respect of such  warehouse,  required the
Company to execute  servicing term  agreements  which provide that the Company's
term as servicer under its securitizations (on which such surety provides credit
enhancement)  continues for successive periods of 60 days, subject to renewal in
the  discretion of the surety.  The Company  disputes the effect and validity of
these agreements.  The Bankruptcy  proceeding  includes an adversary  proceeding
against MBIA Insurance Corporation to preserve the Company's servicing rights in
respect of its servicing  portfolio.  The Bankruptcy Court has entered an agreed
order  preserving the status quo until December 2, 2002. The Company is pursuing
this matter and is seeking to negotiate a resolution  with MBIA, but can provide
no assurance  as to the outcome of this matter.  A loss of the rights to service
its securitized  portfolio  could have a material  adverse effect on the Company
and could  materially  impair the value of its retained  interest in securitized
assets.

Wise et.al vs. Union Acceptance Corporation

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

Plaintiffs  filed a motion  for class  certification  in both  cases on July 15,
2002. On October 4, 2002,  the court denied class  certification  in both cases.
The Company denies the  allegations in both  complaints and has filed motions to
dismiss in both cases.  The Company  believes the  complaints  have no merit and
will vigorously defend these cases.




<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

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

     4.1  Amendment  Number  Eight to Amended and Restated  Security  Agreement,
          dated  as  of  August  23,  2002,   by  and  among  Union   Acceptance
          Corporation,  Union Acceptance Funding Corporation,  UAFC Corporation,
          Enterprise Funding Corporation, MBIA Insurance Corporation and Bank of
          America,  N.A.,  amending the Amended and Restated Security  Agreement
          dated as of May 12, 2000.

     10.1 Servicing Term Agreement,  dated as of September 6, 2002, by and among
          Union  Acceptance  Corporation,  BNY Midwest Trust  Company,  and MBIA
          Insurance  Corporation with respect to the UACSC 1998-A through 1999-A
          AUTO TRUSTS.

     10.2 Servicing Term Agreement,  dated as of September 6, 2002, by and among
          Union  Acceptance  Corporation,   Wachovia  Trust  Company,   National
          Association, BNY Midwest Trust Company, and MBIA Insurance Corporation
          with respect to the UACSC 1999-B through 2002-A AUTO TRUSTS.

     10.3 Servicing Term Agreement,  dated as of September 6, 2002, by and among
          Union  Acceptance  Corporation,   Wachovia  Trust  Company,   National
          Association,  BNY Midwest  Trust  Company,  Canadian  Imperial Bank of
          Commerce and MBIA Insurance Corporation with respect to the UACSC 1999
          Master Owner Trust.

(b) Reports on Form 8-K

     The Company filed no reports on Form 8-K during the quarter ended September
     30, 2002.

     The Company recently filed reports on Form 8-K as follows:

          1.   Form 8-K  filed  November  1,  2002,  reporting  the  Chapter  11
               bankruptcy filing of Union Acceptance Corporation.

          2.   Form 8-K filed November 8, 2002,  announcing  developments  since
               commencement of the bankruptcy proceeding.


<PAGE>
Signatures

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

                                    Union Acceptance Corporation


November 19, 2002 By:               /s/ Lee N. Ervin
                                    -----------------------------------
                                    Lee N. Ervin
                                    President and Chief Executive Officer


November 19, 2002 By:               /s/ Mark R. Turner
                                    -----------------------------------
                                    Mark R. Turner
                                    Treasurer, Chief Financial Officer
                                    and Executive Vice President



<PAGE>




I, Lee N. Ervin, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Union Acceptance
          Corporation;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the `Evaluation Date'); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.

November 19, 2002                     /s/ Lee N. Ervin
                                      -----------------------------------
                                      Lee N. Ervin
                                      President and Chief Executive Officer


<PAGE>




I, Mark R. Turner, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Union Acceptance
          Corporation

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the `Evaluation Date'); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.

November 19, 2002                /s/ Mark R. Turner
                                 -----------------------------------
                                 Mark R. Turner
                                 President and Chief Executive Officer



<PAGE>




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


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