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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-Q/A



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|  |  |                                                                                                                                          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|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

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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: 28050

Onyx Acceptance Corporation

(Exact name of Registrant as specified in its charter)


|                                |  |                       
|------------------------------- |  | ----------------------
|Delaware                        |  | 33-0577635            
|(State or other jurisdiction of |  | (I.R.S. Employer      
|incorporation or organization)  |  | Identification Number)

Onyx Acceptance Corporation
27051 Towne Centre Drive
Foothill Ranch, CA 92610
(949) 465-3900(Address and telephone number of principal executive offices)

Indicate by check mark whether the 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 such
filing requirements for the past
90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange
Act). Yes o No þ

As of November 14, 2002 there were 5,086,793 shares of registrants Common
Stock, par value $.01 per share outstanding.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                          |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF INCOME             
|                              |                                                                                               | CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY          
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K                                                     
|SIGNATURE                    
|EXHIBIT INDEX                
|EXHIBIT 31                   
|EXHIBIT 32                   



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ONYX ACCEPTANCE CORPORATION
QUARTERLY REPORT ON FORM 10-Q/A,
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

This amendment on Form 10-Q/A amends the Quarterly Report of Onyx Acceptance
Corporation (the Company) on Form 10-Q previously filed with the Securities
and Exchange Commission on November 14, 2002 for the quarter and
nine months ended September
30, 2002. This amendment is filed in connection with the restatement of our
results of operations for the year ended December 31, 2002 in our Annual Report
on Form 10-K/A for 2002. The circumstances necessitating the restatement and
their effects on the quarter and nine months ended September 30, 2002 are more fully described
in note 2 of the Notes to Condensed Consolidated Financial Statements.

|              |  |                                                                                       |    |                                                                                                                           |    |      |   | 
|------------- |  | ------------------------------------------------------------------------------------- | -- | ------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|              |  |                                                                                       |    |                                                                                                                           |    | Page
|              |  |                                                                                       |    |                                                                                                                           |    |     
|PART I        |  | Financial Information                                                                 |    |                                                                                                                           | 3  |     
|Item 1        |  | Financial Statements                                                                  |    |                                                                                                                           | 3  |     
|              |  |                                                                                       |    | Condensed Consolidated Statements of Financial Condition at
September 30, 2002 and December 31, 2001                      |    |      | 3 | 
|              |  |                                                                                       |    | Condensed Consolidated Statements of Income for the three
and nine months ended September 30, 2002 and September 30, 2001 |    |      | 4 | 
|              |  |                                                                                       |    | Consolidated Statement of Stockholders Equity at
September 30, 2002                                                      |    |      | 5 | 
|              |  |                                                                                       |    | Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2002 and September 30, 2001       |    |      | 6 | 
|              |  |                                                                                       |    | Notes to Condensed Consolidated Financial Statements                                                                      |    |      | 7 | 
|Item 2        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |                                                                                                                           | 11 |     
|Item 3        |  | Quantitative and Qualitative Disclosures about Market Risk                            |    |                                                                                                                           | 21 |     
|Item 4        |  | Controls and Procedures                                                               |    |                                                                                                                           | 22 |     
|PART
II       |  | Other Information                                                                     |    |                                                                                                                           | 22 |     
|Item 1        |  | Legal Proceedings                                                                     |    |                                                                                                                           | 22 |     
|Item 4        |  | Submission of Matters to a Vote of Security Holders                                   |    |                                                                                                                           | 22 |     
|Item 5        |  | Other Information                                                                     |    |                                                                                                                           | 22 |     
|Item 6        |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                                                           | 29 |     
|SIGNATURES    |  |                                                                                       | 30 |                                                                                                                          
|EXHIBIT INDEX |  |                                                                                       | 31 |                                                                                                                          

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |              |         |   |         | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------- | ---------------------------- | ------- | ---------------------- | ------- | ------------ | ------- | - | ------- | 
|                                                   |                                                                                                                                                         |                   |         |                              |         | September 30,          |         | December 31,
|                                                   |                                                                                                                                                         |                   |         |                              |         | 2002                   |         | 2001        
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   |                                                                                                                                                         |                   |         |                              |         | (Restated)*            |         |              |         |   |         | 
|                                                   |                                                                                                                                                         |                   |         |                              |         | (Dollars in thousands)
|                                                   |                                                                                                                                                         |                   |         |                              |         | (Unaudited)           
|ASSETS                                             |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|Cash and cash equivalents                          |                                                                                                                                                         | $                 | 104     |                              |         | $                      | 1,135   |             
|Restricted cash                                    |                                                                                                                                                         |                   | 4,785   |                              |         |                        |        |             
|Credit enhancement assets, at fair value           |                                                                                                                                                         |                   | 180,440 |                              |         |                        | 184,300 |             
|Contracts held for sale                            |                                                                                                                                                         |                   | 213,605 |                              |         |                        | 189,265 |             
|Contracts held for investment (net of allowance)   |                                                                                                                                                         |                   | 4,521   |                              |         |                        | 2,259   |             
|Other assets                                       |                                                                                                                                                         |                   | 9,241   |                              |         |                        | 9,326   |             
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   |                                                                                                                                                         | Total assets      |         | $                            | 412,696 |                        |         | $            | 386,285 |  
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|LIABILITIES                                        |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|Accounts payable                                   |                                                                                                                                                         | $                 | 33,117  |                              |         | $                      | 27,024  |             
|Debt:                                              |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   | Warehouse lines                                                                                                                                         |                   |         | 214,008                      |         |                        |         | 190,008      |        
|                                                   | Excess service lines                                                                                                                                    |                   |         | 52,359                       |         |                        |         | 68,355       |        
|                                                   | Subordinated debt/other                                                                                                                                 |                   |         | 21,471                       |         |                        |         | 16,232       |        
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   |                                                                                                                                                         | Total debt        |         |                              | 287,838 |                        |         |              | 274,595 |  
|Other liabilities                                  |                                                                                                                                                         |                   | 28,890  |                              |         |                        | 24,965  |             
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   |                                                                                                                                                         | Total liabilities |         |                              | 349,845 |                        |         |              | 326,584 |  
|EQUITY                                             |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|Common stock                                       |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   | Par value $.01 per share; authorized
15,000,000 shares; issued and outstanding
5,086,793 as of September 30, 2002 and 5,078,046
as of December 31, 2001 |                   | 51      |                              |         |                        | 51      |             
|Paid in capital                                    |                                                                                                                                                         |                   | 32,651  |                              |         |                        | 32,647  |             
|Retained earnings                                  |                                                                                                                                                         |                   | 27,069  |                              |         |                        | 25,960  |             
|Accumulated other comprehensive income, net of tax |                                                                                                                                                         |                   | 3,080   |                              |         |                        | 1,043   |             
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   |                                                                                                                                                         | Total equity      |         |                              | 62,851  |                        |         |              | 59,701  |  
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|                                                   |                                                                                                                                                         |                   |         | Total liabilities and equity |         | $                      | 412,696 |              |         | $ | 386,285 | 
|                                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             
|*Refer
to Note 2                                   |                                                                                                                                                         |                   |         |                              |         |                        |         |             

See the accompanying notes to the condensed consolidated financial statements.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |        | 
|------------------------------ | ----------------------------------- | - | ------------------------------------------------ | ------ | ----------------- | - | --------- | ------ | ----------- | - | --------- | ------ | - | - | --------- | ------ | 
|                               |                                     |   | Three Months Ended                               |        | Nine Months Ended
|                               |                                     |   | September 30,                                    |        | September 30,    
|                               |                                     |   |                                                  |        |                  
|                               |                                     |   | 2002                                             |        | 2001              |   | 2002      |        | 2001       
|                               |                                     |   |                                                  |        |                   |   |           |        |            
|                               |                                     |   | (Restated)*                                      |        |                   |   |           |        | (Restated)*
|                               |                                     |   | (Dollars in thousands, except per share amounts)
|Revenues:                      |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|                               | Interest income                     |   | $                                                | 10,145 |                   |   | $         | 7,779  |             |   | $         | 28,006 |   |   | $         | 19,776 | 
|                               | Interest expense                    |   |                                                  | 2,845  |                   |   |           | 2,849  |             |   |           | 9,003  |   |   |           | 10,776 | 
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Net Interest Income            |                                     |   | 7,300                                            |        |                   |   | 4,930     |        |             |   | 19,003    |        |   |   | 9,000     |       
|                               | Gain on sale of contracts, net      |   |                                                  | 3,255  |                   |   |           | 6,591  |             |   |           | 9,932  |   |   |           | 26,167 | 
|                               | Service fee income                  |   |                                                  | 12,842 |                   |   |           | 13,990 |             |   |           | 39,472 |   |   |           | 43,408 | 
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Total Revenues                 |                                     |   | 23,397                                           |        |                   |   | 25,511    |        |             |   | 68,407    |        |   |   | 78,575    |       
|Expenses:                      |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|                               | Provision for credit losses         |   |                                                  | 818    |                   |   |           | 502    |             |   |           | (461   | ) |   |           | 966    | 
|                               | Interest expense-other              |   |                                                  | 1,225  |                   |   |           | 812    |             |   |           | 3,154  |   |   |           | 3,032  | 
|Operating Expenses:            |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|                               | Salaries and benefits               |   |                                                  | 13,549 |                   |   |           | 13,228 |             |   |           | 40,998 |   |   |           | 39,895 | 
|                               | Systems and servicing               |   |                                                  | 777    |                   |   |           | 476    |             |   |           | 2,156  |   |   |           | 3,573  | 
|                               | Telephone and data lines            |   |                                                  | 1,056  |                   |   |           | 1,201  |             |   |           | 2,541  |   |   |           | 3,680  | 
|                               | Depreciation                        |   |                                                  | 806    |                   |   |           | 1,094  |             |   |           | 2,676  |   |   |           | 3,568  | 
|                               | General and administrative expenses |   |                                                  | 4,592  |                   |   |           | 5,957  |             |   |           | 15,449 |   |   |           | 16,989 | 
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Total Operating Expenses       |                                     |   | 20,780                                           |        |                   |   | 21,956    |        |             |   | 63,820    |        |   |   | 67,705    |       
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Total Expenses                 |                                     |   | 22,823                                           |        |                   |   | 23,270    |        |             |   | 66,513    |        |   |   | 71,703    |       
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Income before Income Taxes     |                                     |   | 574                                              |        |                   |   | 2,241     |        |             |   | 1,894     |        |   |   | 6,872     |       
|                               | Income Taxes                        |   |                                                  | 238    |                   |   |           | 899    |             |   |           | 785    |   |   |           | 2,821  | 
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Net Income                     |                                     | $ | 336                                              |        |                   | $ | 1,342     |        |             | $ | 1,109     |        |   | $ | 4,051     |       
|                               |                                     |   |                                                  |        |                   |   |           |        |             |   |           |        |   |   |           |       
|Net Income per share  Basic   |                                     | $ | 0.07                                             |        |                   | $ | 0.27      |        |             | $ | 0.22      |        |   | $ | 0.81      |       
|Net Income per share  Diluted |                                     | $ | 0.07                                             |        |                   | $ | 0.25      |        |             | $ | 0.21      |        |   | $ | 0.78      |       
|Basic Shares Outstanding       |                                     |   | 5,086,793                                        |        |                   |   | 5,047,292 |        |             |   | 5,084,914 |        |   |   | 5,008,767 |       
|Diluted Shares Outstanding     |                                     |   | 5,142,298                                        |        |                   |   | 5,354,351 |        |             |   | 5,194,178 |        |   |   | 5,214,455 |       
|
|                              

See the accompanying notes to the condensed consolidated financial statements.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

|                                                                   |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   |       |   |  |   |        |  
|------------------------------------------------------------------ | -------------------------- | ------ | ----- | ----- |  | ------- | -- | -------- |  | ---------- | ------ | ------ |  | - | ------ | ------------- |  | ----------------- | ----- | - |  | - | ------ | -
|                                                                   |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  | Accumulated Other |       |   |  |  
|                                                                   |                            |        |       |       |  |         |    |          |  | Additional |        |        |  |   |        | Comprehensive |  |                   |       |  
|                                                                   |                            |        |       |       |  | Common  |    | Paid-in  |  | Retained   |        | Income |  |   |        |              
|                                                                   |                            | Shares |       | Stock |  | Capital |    | Earnings |  | Net of Tax |        | Total 
|                                                                   |                            |        |       |       |  |         |    |          |  |            |        |       
|                                                                   | (In
thousands)
(Unaudited)
|Balance, December
31, 2001                                         |                            |        | 5,078 |       |  | $       | 51 |          |  | $          | 32,647 |        |  | $ | 25,960 |               |  | $                 | 1,043 |   |  | $ | 59,701 |  
|Stock issued for
options exercised                                 |                            |        | 9     |       |  |         |    |          |  |            | 4      |        |  |   |        |               |  |                   |       |   |  |   | 4      |  
|Comprehensive income:                                              |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   |       |   |  |   |        |  
|Unrealized gains in
securitized assets,
net of tax of $2.0
million |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   | 2,777 |   |  |   | 2,777  |  
|Unrealized loss on
hedging activities,
net of tax of $525
thousand |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   | (740  | ) |  |   | (740   | )
|Net income                                                         |                            |        |       |       |  |         |    |          |  |            |        |        |  |   | 1,109  |               |  |                   |       |   |  |   | 1,109  |  
|                                                                   |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   |       |   |  |   |        |  
|Total comprehensive
income                                         |                            |        |       |       |  |         |    |          |  |            |        |        |  |   | 1,109  |               |  |                   | 2,037 |   |  |   | 3,146  |  
|                                                                   |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   |       |   |  |   |        |  
|Balance, September
30, 2002 (Restated)*                            |                            |        | 5,087 |       |  | $       | 51 |          |  | $          | 32,651 |        |  | $ | 27,069 |               |  | $                 | 3,080 |   |  | $ | 62,851 |  
|                                                                   |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   |       |   |  |   |        |  
|*Refer
to Note 2                                                   |                            |        |       |       |  |         |    |          |  |            |        |        |  |   |        |               |  |                   |       |   |  |   |        |  

See the accompanying notes to the condensed consolidated financial statements.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                 |                                                       |   |                                 |          |      |   |        |          |  
|------------------------------------------------ | ----------------------------------------------------- | - | ------------------------------- | -------- | ---- | - | ------ | -------- | -
|                                                 |                                                       |   | Nine
Months Ended September 30,
|                                                 |                                                       |   |                                
|                                                 |                                                       |   | 2002                            |          | 2001
|                                                 |                                                       |   |                                 |          |     
|                                                 |                                                       |   | (Dollars in thousands)         
|                                                 |                                                       |   | (Unaudited)                    
|Operating Activities:                            |                                                       |   |                                 |          |      |   |        |         
|                                                 | Net cash used in operating activities                 |   | $                               | (9,067   | )    |   | $      | (44,552  | )
|Investing Activities:                            |                                                       |   |                                 |          |      |   |        |         
|                                                 | Cash used for purchases of property and equipment     |   |                                 | (998     | )    |   |        | (2,140   | )
|Financing Activities:                            |                                                       |   |                                 |          |      |   |        |         
|                                                 | Proceeds from exercise of employee options            |   |                                 | 4        |      |   |        | 47       |  
|                                                 | Payments on capital lease obligations                 |   |                                 | (331     | )    |   |        |         |  
|                                                 | Proceeds from lease refinance                         |   |                                 | 900      |      |   |        | 206      |  
|                                                 | Payments on residual lines of credit                  |   |                                 | (102,474 | )    |   |        | (13,884  | )
|                                                 | Proceeds from drawdown on residual lines of credit    |   |                                 | 86,480   |      |   |        | 32,600   |  
|                                                 | Paydown of warehouse lines related to securitizations |   |                                 | (900,223 | )    |   |        | (925,310 | )
|                                                 | Proceeds from warehouse lines                         |   |                                 | 924,223  |      |   |        | 958,305  |  
|                                                 | Proceeds from issuance of subordinated debt           |   |                                 | 8,120    |      |   |        |         |  
|                                                 | Principal payments on subordinated debt               |   |                                 | (2,880   | )    |   |        | (2,427   | )
|                                                 |                                                       |   |                                 |          |      |   |        |          |  
|Net cash provided by financing activities        |                                                       |   | 13,819                          |          |      |   | 49,537 |         
|                                                 |                                                       |   |                                 |          |      |   |        |          |  
|                                                 | Increase in cash and cash equivalents                 |   |                                 | 3,754    |      |   |        | 2,845    |  
|Cash and cash equivalents at beginning of period |                                                       |   | 1,135                           |          |      |   | 3,130  |         
|                                                 |                                                       |   |                                 |          |      |   |        |          |  
|Cash and cash equivalents at end of period       |                                                       | $ | 4,889                           |          |      | $ | 5,975  |         
|                                                 |                                                       |   |                                 |          |      |   |        |          |  

See the accompanying notes to the condensed consolidated financial statements.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Nature of Operations

Onyx is a specialized consumer finance company engaged in the purchase,
origination, securitization and servicing of Contracts originated by franchised
and select independent automobile dealerships in the United States. The Company
focuses its efforts on acquiring Contracts that are collateralized by late
model used and, to a lesser extent, new automobiles, that are entered into with
purchasers whom the Company believes have a favorable credit profile. Since
commencing the purchase of Contracts in February 1994, the Company has acquired
more than $8.3 billion in Contracts and currently has relationships with over
10,600 dealerships.

The Company generates revenues primarily through the purchase,
origination, warehousing, subsequent securitization and ongoing servicing of
Contracts. The Company earns net interest income on Contracts held during the
warehousing period. Upon the securitization and sale of Contracts, the Company
recognizes a gain on sale of Contracts, receives excess cash flows generated by
owner trusts, and earns fees from servicing the securitized Contracts.

Reclassification

Certain amounts in the prior quarter and year to date condensed
consolidated financial statements have been reclassified to conform to the
corresponding 2002 presentation.

Note 2  Restatement

The
Company revised the amount of loan premium amortization on Contracts
acquired in connection with clean up calls exercised on the
Companys securitization pools. The amount previously reported
by the Company understated the amount of premium amortization in the
quarter and nine months ending September 30, 2002 by
$153 thousand. In addition, the Company is recording
$370 thousand of impairment recorded on certain trusts,
previously recorded in the fourth quarter of 2002, due to an
erroneous calculation.

|                               |  |                                                  |        |                   |  |             |        |          |  |   |        |  |  |   |        | 
|------------------------------ |  | ------------------------------------------------ | ------ | ----------------- |  | ----------- | ------ | -------- |  | - | ------ |  |  | - | ------ | 
|                               |  | Three Months Ended                               |        | Nine Months Ended
|                               |  | September 30,                                    |        | September 30,    
|                               |  |                                                  |        |                  
|                               |  | 2002                                             |        | 2002              |  | 2002        |        | 2002    
|                               |  |                                                  |        |                   |  |             |        |         
|                               |  | As reported                                      |        | Restated          |  | As reported |        | Restated
|                               |  |                                                  |        |                   |  |             |        |         
|                               |  | (Dollars in thousands, except per share amounts)
|Interest income                |  | $                                                | 10,298 |                   |  | $           | 10,145 |          |  | $ | 28,159 |  |  | $ | 28,006 | 
|Net interest income            |  |                                                  | 7,453  |                   |  |             | 7,300  |          |  |   | 19,156 |  |  |   | 19,003 | 
|Gain on sale of contracts, net |  |                                                  | 3,625  |                   |  |             | 3,255  |          |  |   | 10,302 |  |  |   | 9,932  | 
|Total Revenues                 |  |                                                  | 23,920 |                   |  |             | 23,397 |          |  |   | 68,930 |  |  |   | 68,407 | 
|Income before Income Taxes     |  |                                                  | 1,097  |                   |  |             | 574    |          |  |   | 2,417  |  |  |   | 1,894  | 
|Income Taxes                   |  |                                                  | 455    |                   |  |             | 238    |          |  |   | 1,002  |  |  |   | 785    | 
|                               |  |                                                  |        |                   |  |             |        |          |  |   |        |  |  |   |        | 
|Net Income                     |  | $                                                | 642    |                   |  | $           | 336    |          |  | $ | 1,415  |  |  | $ | 1,109  | 
|                               |  |                                                  |        |                   |  |             |        |          |  |   |        |  |  |   |        | 
|Net Income per share  Basic   |  | $                                                | 0.13   |                   |  | $           | 0.07   |          |  | $ | 0.28   |  |  | $ | 0.22   | 
|Net Income per share  Diluted |  | $                                                | 0.12   |                   |  | $           | 0.07   |          |  | $ | 0.27   |  |  | $ | 0.21   | 

|                                         |  |                        |         |               |  |   |         | 
|---------------------------------------- |  | ---------------------- | ------- | ------------- |  | - | ------- | 
|                                         |  | As of                  |         | As of        
|                                         |  | September 30,          |         | September 30,
|                                         |  | 2002                   |         | 2002         
|                                         |  |                        |         |              
|                                         |  | As reported            |         | Restated     
|                                         |  |                        |         |              
|                                         |  | (Dollars in thousands)
|Credit enhancement assets, at fair value |  |                        | 180,870 |               |  |   | 180,440 | 
|Contracts held for sale                  |  |                        | 213,698 |               |  |   | 213,605 | 
|                                         |  |                        |         |               |  |   |         | 
|Total assets                             |  |                        | 413,219 |               |  |   | 412,696 | 
|                                         |  |                        |         |               |  |   |         | 
|Other liabilities                        |  |                        | 29,107  |               |  |   | 28,890  | 
|                                         |  |                        |         |               |  |   |         | 
|Total liabilities                        |  |                        | 350,062 |               |  |   | 349,845 | 
|Retained earnings                        |  |                        | 27,375  |               |  |   | 27,069  | 
|Total equity                             |  |                        | 63,157  |               |  |   | 62,851  | 
|                                         |  |                        |         |               |  |   |         | 
|Total liabilities and equity             |  | $                      | 413,219 |               |  | $ | 412,696 | 
|                                         |  |                        |         |               |  |   |         | 

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Note 3 Basis of Presentation

The condensed consolidated financial statements included herein are
unaudited and have been prepared by Onyx Acceptance Corporation (Onyx or the
Company) in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the regulations. In the opinion of
management, the financial statements reflect all adjustments (all of a normal
and recurring nature) which are necessary for a fair statement of the financial
position, results of operations and cash flows for the interim period.
Operating results for the three and nine months ended September 30, 2002 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. The condensed consolidated financial statements
should be read in conjunction with the audited financial statements and
footnotes thereto for the year ended December 31, 2001 included in the
Companys 2001 Annual Report on Form 10-K.

Use of Estimates

In conformity with generally accepted accounting principles, management
utilizes assumptions and estimates that affect the reported values of assets
and liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses for each reporting period. The more significant estimates made in the
preparation of the Companys condensed consolidated financial statements relate
to the credit enhancement assets and the gain on sale of motor vehicle retail
installment sales and loan contracts (Contracts). Such assumptions include,
but are not limited to, estimates of loan prepayments, defaults, recovery rates
and present value discount rates. The Company uses a combination of its own
historical experience and expectation of future performance to determine such
estimates. Actual results may differ from the Companys estimates due to
numerous factors both within and beyond the control of Company management.
Changes in these factors could require the Company to revise its assumptions
concerning the amount of voluntary prepayments, the frequency and/or severity
of defaults and the recovery rates associated with the disposition of
repossessed vehicles.

Note 4  Restricted Cash

Restricted cash represents amounts held in reserve accounts providing
credit enhancement on the Companys outstanding on balance sheet residual
securitization.

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Note 5  Contracts Held for Sale

Contracts held for sale are carried at the lower of cost or market value on an
aggregate basis. Contracts held for sale include Contracts reacquired upon the
exercise of clean up calls and available for sale as part of future
securitizations. At the time of such calls, any unamortized RISA balance is
reclassified from credit enhancements assets and accounted for as loan premium
on the reacquired loans. Loan premiums are amortized in a manner that results
in a constant effective yield over the remaining life of the loans. In
amortizing loan premium, the Company anticipates prepayments will occur at a
rate consistent with that utilized in valuing its residual interests
(approximately 1.75% per month) over the estimated remaining contractual life
of the loans at the date such loans are reacquired. If the Companys actual
prepayment experience differs materially from anticipated prepayment
experience, the Company will recalculate the effective yield to reflect actual
payments to date and anticipated future payments. The unamortized loan premium
is adjusted, through a charge or credit to interest income, to the amount that
would have existed had the new effective yield been applied since the
acquisition of the loans.

|                                  |  |                |         |              |  |   |         |  
|--------------------------------- |  | -------------- | ------- | ------------ |  | - | ------- | -
|                                  |  | September 30,  |         | December 31,
|                                  |  | 2002           |         | 2001        
|                                  |  |                |         |             
|                                  |  | (In thousands)
|Gross contracts held for sale (1) |  | $              | 218,314 |              |  | $ | 193,879 |  
|Less unearned interest            |  |                | (1,608  | )            |  |   | (2,164  | )
|                                  |  |                |         |              |  |   |         |  
|Contracts held for sale           |  |                | 216,706 |              |  |   | 191,715 |  
|Dealer participation (net)        |  |                | (3,101  | )            |  |   | (2,450  | )
|                                  |  |                |         |              |  |   |         |  
|Total                             |  | $              | 213,605 |              |  | $ | 189,265 |  
|                                  |  |                |         |              |  |   |         |  



---

|(1) |  | Gross Contracts held for sale
includes loan premiums of $0.2 million as of
September 30, 2002.
|--- |  | ----------------------------------------------------------------------------------------------

Note 6  Contracts Held for Investment

Contracts held for investment are net of a $1.9 million allowance for
probable losses for September 30, 2002 and a $1.3 million allowance for
December 31, 2001. Amounts held for investment include Contracts that do not
qualify for Contract securitizations as a result of delinquency status or
minimum balance.

Note 7  Credit Enhancement Assets

SFAS 140 requires that following a transfer of financial assets, an entity
is to recognize the assets it controls and the liabilities it has incurred, and
derecognize assets for which control has been surrendered and liabilities that
have been extinguished.

Credit enhancement assets consisted of the following:

|                 |  |                |         |              |  |   |         | 
|---------------- |  | -------------- | ------- | ------------ |  | - | ------- | 
|                 |  | September 30,  |         | December 31,
|                 |  | 2002           |         | 2001        
|                 |  |                |         |             
|                 |  | (In thousands)
|Trust receivable |  | $              | 3,500   |              |  | $ | 3,980   | 
|RISA             |  |                | 176,940 |              |  |   | 180,320 | 
|                 |  |                |         |              |  |   |         | 
|Total            |  | $              | 180,440 |              |  | $ | 184,300 | 
|                 |  |                |         |              |  |   |         | 

Trust receivables represents initial deposits in spread accounts.

Retained interest in securitized assets (RISA) is capitalized upon
securitization of Contracts, and represents the present value of the estimated
future earnings to be received by the Company from the excess spread created in
securitization transactions. Excess spread is calculated by taking the
difference between the weighted average coupon rate of the Contracts sold and
the weighted average security rate paid to the investors less contractually
specified servicing and guarantor fees and projected credit losses, after
giving effect to estimated prepayments.

Prepayment
and credit loss assumptions at the time of securitization are utilized to project future cash
flows upon securitization and are based on historical experience. In
calculating the gain on sale, the Company uses a 1.75% prepayment rate
for all outstanding securitizations resulting in an average Contract life range
of 1.6 to 1.7 years. Net credit loss assumptions at the time of securitization
ranged from 3.5% to 4.7% cumulative depending upon the credit statistics of the
underlying portfolio to be securitized. Credit losses are estimated using
cumulative loss frequency and severity estimates by management. All assumptions
are evaluated each quarter and adjusted, if appropriate, to reflect the actual
performance of the underlying Contracts. The fair value of the RISA at
quarter-end is calculated by discounting the excess spread at a rate management
believes to be representative of market at the time of securitization.
Historically,

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##### Table of Contents



this rate has equaled 3.5% over the weighted average security rate paid to
investors. As a result of recent market transactions during the first quarter
of 2002, Management revised the assumptions used in deriving an appropriate
discount rate. Management has developed a systematic methodology that is a
function of both market benchmark rates and the seasoning of a securitizations
cash flow. As of September 30, 2002, the discount rate used for valuing RISA
ranged from 8.8% to 11.3%, net loss assumptions ranged from 3.8% to 5.8%
cumulative and prepayment rate assumptions ranged from 1.65% to 1.85%. For the securitization executed during the third quarter of 2002,
Management applied a discount rate of 11.3% and a cumulative loss assumption of
3.8%.

Emerging Issues Task Force (EITF) 99-20, Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets established new income and impairment recognition standards
for interests in certain securitized assets. The Company adopted EITF 99-20
effective April 1, 2001. Under the provisions of EITF 99-20, the holder of
beneficial interests should recognize the excess of all estimated cash flows
attributable to the beneficial interest estimated at the acquisition date over
the initial investment (the accretable yield) as interest income over the life
of the beneficial interest using the effective yield method. If the estimated
cash flows change, then the holder of the beneficial interest should
recalculate the accretable yield and adjust the periodic accretion recognized
as income prospectively. If the fair value of a beneficial interest has
declined below its carrying amount, an other-than-temporary decline is
considered to exist if there has been a decline in the present value of
estimated future cash flows and the difference between the carrying value and
fair value of the beneficial interest is recorded as an impairment loss through
the income statement. During the quarter and nine-month period ended September
30, 2002, the Company recorded a $5.5 million and $9.9 million pre-tax
impairment charge on certain pre-2001 securitizations stemming from reduced
cash flows and higher loss and delinquency rates than initially projected at
the inception of the transactions. These impairment charges are reflected in
the gain on sale line item in the income statement.

Prior to the adoption of EITF 99-20, the balance of RISA was amortized
against actual excess spread income earned on a monthly basis over the expected
repayment life of the underlying Contracts. The adoption of EITF 99-20 resulted
in amounts previously recognized as service fee income being recognized as
interest income. In initially valuing the RISA, the Company reduces projected
cash flows for probable credit losses by establishing an off balance sheet
allowance for estimated credit losses over the life of the underlying
Contracts. The allowance is based upon historical experience and managements
estimate of future performance regarding credit losses. The amount is reviewed
periodically and adjustments are made if actual experience or other factors
indicate that future performance may differ from managements prior estimates.

The following table presents the estimated future undiscounted RISA
earnings to be received from securitizations. Estimated future undiscounted
RISA earnings are calculated by taking the difference between the coupon rate
of the Contracts sold and the weighted average security rate paid to the
investors, less the contractually specified servicing fee of 1.0% and financial
guaranty insurance fees, after giving effect to estimated prepayments and
assuming no losses. To arrive at the RISA, this amount is reduced by the off
balance sheet allowance established for potential future losses and by
discounting to present value.

|                                                              |  |                |           |              |  |   |           |  
|------------------------------------------------------------- |  | -------------- | --------- | ------------ |  | - | --------- | -
|                                                              |  | September 30,  |           | December 31,
|                                                              |  | 2002           |           | 2001        
|                                                              |  |                |           |             
|                                                              |  | (In thousands)
|Estimated net undiscounted RISA earnings                      |  | $              | 320,871   |              |  | $ | 324,162   |  
|Off balance sheet allowance for losses                        |  |                | (107,212  | )            |  |   | (110,347  | )
|Discount to present value                                     |  |                | (36,719   | )            |  |   | (33,495   | )
|                                                              |  |                |           |              |  |   |           |  
|Retained interest in securitized assets                       |  | $              | 176,940   |              |  | $ | 180,320   |  
|                                                              |  |                |           |              |  |   |           |  
|Outstanding balance of contracts sold
through securitizations |  | $              | 2,679,062 |              |  | $ | 2,635,042 |  

Note 8  Net Income Per Share

The following table sets forth the computation of basic and diluted net
income per share (EPS):

|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|--------------------------------------------- |  | ---------------------------------- | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                              |  | Three Months Ended                 |       | Nine Months Ended
|                                              |  | September 30,                      |       | September 30,    
|                                              |  |                                    |       |                  
|                                              |  | 2002                               |       | 2001              |  | 2002 |       | 2001
|                                              |  |                                    |       |                   |  |      |       |     
|                                              |  | (In thousands, except $ per share)
|Net Income                                    |  | $                                  | 336   |                   |  | $    | 1,342 |      |  | $ | 1,109 |  |  | $ | 4,051 | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Weighted average shares outstanding           |  |                                    | 5,087 |                   |  |      | 5,047 |      |  |   | 5,085 |  |  |   | 5,009 | 
|Net effect of dilutive stock options/warrants |  |                                    | 55    |                   |  |      | 307   |      |  |   | 109   |  |  |   | 205   | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Diluted weighted average shares outstanding   |  |                                    | 5,142 |                   |  |      | 5,354 |      |  |   | 5,194 |  |  |   | 5,214 | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Net income per share:                         |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Basic EPS                                     |  | $                                  | 0.07  |                   |  | $    | 0.27  |      |  | $ | 0.22  |  |  | $ | 0.81  | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Diluted EPS                                   |  | $                                  | 0.07  |                   |  | $    | 0.25  |      |  | $ | 0.21  |  |  | $ | 0.78  | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 

At September 30, 2002, there were 1.99 million options and 184 thousand
warrants outstanding.

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Note 9  Contingencies

The Company is party to various legal proceedings similar to actions
brought against other companies in the motor vehicle finance and other
industries, which may or may not be covered under insurance policies it holds.
The Company vigorously defends such proceedings; however, there is no assurance
as to the results. Based upon information presently available, the Company
believes that the final outcome of all such proceedings should not have a material adverse
effect upon the Companys results of operations, cash flows or financial
condition.

Note 10  Subsequent Events

In October of 2002, the Company securitized $450 million in Contracts.




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

The
Company revised the amount of loan premium amortization on Contracts
acquired in connection with clean up calls exercised on the
Companys securitization pools. The amount previously reported
by the Company understated the amount of premium amortization in the
quarter and nine months ending September 30, 2002 by
$153 thousand. In addition, the Company is recording
$370 thousand of impairment recorded on certain trusts,
previously recorded in the fourth quarter of 2002.

As
indicated in Note 2 to the Companys financial statements, all
such amounts contained in Managements Discussion and Analysis
of Financial Condition and Results of Operations
(MD&A) reflect the restatement. The Company has only
updated information in MD&A related to the restatement.

Overview

Onyx is a specialized consumer finance company engaged in the purchase,
origination, securitization and servicing of Contracts originated by franchised
and select independent automobile dealerships in the United States. The Company
focuses its efforts on acquiring Contracts that are collateralized by late
model used and, to a lesser extent, new automobiles, that are entered into with
purchasers whom the Company believes have a favorable credit profile. Since
commencing the purchase of Contracts in February 1994, the Company has acquired
more than $8.3 billion in Contracts and currently has relationships with over
10,600 dealerships. The Company has expanded its operations from a single
office in California to 18 Auto Finance Centers serving many regions of the
United States.

The Company generates revenues primarily through the purchase,
origination, warehousing, subsequent securitization and ongoing servicing of
Contracts. The Company earns net interest income on Contracts held during the
warehousing period. Net interest income is the difference between the income
earned on interest earning assets and the interest paid on interest bearing
liabilities. Upon the securitization and sale of Contracts, the Company
recognizes a gain on sale of Contracts, receives excess cash flows generated by
owner trusts, and earns fees from servicing the securitized Contracts.

Critical Accounting Policies

Critical accounting policies are an integral part of the compilation of
the Companys financial condition and results of operations. Critical
accounting policies require complicated and often intricate calculations and
judgments because they often rely on estimates based on continually changing
market conditions. The following is a summary of accounting policies we
consider critical.

Retained Interest in Securitized Assets (RISA)

RISA represents the present value of the estimated future earnings to be
received by the Company from the excess spread created in securitization
transactions. Excess spread is calculated by taking the difference between the
weighted average coupon rate of the Contracts sold and the weighted average
security rate paid to the investors less contractually specified servicing and
guarantor fees and projected credit losses, after giving effect to estimated
prepayments. The estimates that Management makes during the execution of the
securitization relate to the expected prepayment rate of the Contracts in the
transaction, the discount rate to be applied to the cash flows and the amount
of cumulative losses that will be experienced by the Contracts that are sold in
the transaction. As these estimates are made at the inception of the
transaction, they will have a degree of uncertainty as the transaction ages. A
major variable to these estimates relates to the general state of the economy
at any given time and its effect on the performance of the Contracts in the
transaction. During 1999, the Emerging Issues Task Force (EITF) issued EITF
99-20, Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets. EITF 99-20 established
income and impairment recognition standards for interests in certain
securitized assets. Under the provisions of EITF 99-20, the holder of
beneficial interests should recognize the excess of all estimated cash flows
attributable to the beneficial interest estimated at the

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acquisition date over the initial investment (the accretable yield) as
interest income over the life of the beneficial interest using the effective
yield method.

RISA is classified in a manner similar to available for sale assets and as
such is marked to market each quarter. Market value changes are calculated by
discounting the estimated cash flows using a current market discount rate. Each
quarter Management reviews its estimates of the cash flows and adjusts any that
are inconsistent with its current estimates. If the effect of the new estimates
reduces the present value of the cash flows and if the fair market value has
declined below the carrying amount of the transaction, Management will record
an impairment loss on the transaction. If the new estimated present value has
declined but the carrying amount remains below the fair value, any change in
the market value of the RISA is reported as a separate component of
shareholders equity on the consolidated statements of financial condition as
accumulated other comprehensive income (loss), net of applicable taxes.

Hedging Activities

The Contracts originated and held by us earn interest at a fixed rate and,
accordingly, we have exposure to changes in interest rates during the warehouse
period. We therefore employ a hedging strategy that is intended to minimize the
risk of interest rate fluctuations. Such transactions involve the execution of
forward interest rate swaps and/or the use of a pre-funding structure for
securitizations. Management monitors the hedging activities on a frequent basis
to ensure that the value of hedges, their correlation to the Contracts being
hedged and the amounts being hedged continue to provide effective protection
against interest rate risk. Our hedging strategy requires estimates of monthly
Contract acquisition volume and timing of securitizations. The amount and
timing of hedging transactions are determined by senior management, and are
based upon the amount of Contracts purchased and the interest rate environment.

The Company uses forward interest rate swaps to hedge the variability in
the forecasted future net cash flows it will receive from the RISA attributable
to the risk of changing interest rates. The Companys interest rate swap
agreements involve arrangements to pay a fixed interest rate and receive a
floating interest rate, at specified intervals, calculated on agreed-upon
amortizing notional amounts. The debt and amounts that the Company hedges are
determined based on prevailing market conditions and the current shape of the
yield curve. Interest rate swap agreements are executed as an integral part of
specific securitization transactions. Interest rate swap agreements are unwound
upon securitization, whereby the gain or loss on the hedge is recorded to
income and the associated component of the gain or loss previously recorded in
other comprehensive income is reversed.

Derivative instruments used by Onyx involve, to varying degrees, elements
of credit risk in the event a counterparty should default and market risk as
the instruments are subject to rate and price fluctuations. Credit risk is
managed through the use of credit standard guidelines, counterparty
diversification, monitoring of counterparty financial condition and
International Swap Dealers Association master netting agreements in place with
all derivative counterparties.

All derivatives are recognized on the balance sheet at their fair value.
On the date that the Company enters into a derivative contract, it designates
the derivative as a hedge of a forecasted transaction of the variability of
cash flows that are to be received or paid in connection with the
securitization (a cash flow hedge). Changes in the fair value of a derivative
that are highly effective and previously designated to qualify as a cash flow
hedge to the extent that the hedge is effective, are recorded in other
comprehensive income until earnings are affected by the variability of cash
flows of the hedged transaction (e.g., until periodic settlements of a variable
asset or liability are recorded in earnings). Any hedge ineffectiveness (which
represents the amount by which the changes in the fair value of the derivative
exceed the variability in the cash flows of the forecasted transaction) is
recorded in current-period earnings.

Results of Operations

Net
Interest Income

Net interest income consists primarily of 1) the difference between the
finance revenue earned on Contracts held on balance sheet during the
warehousing period and the interest costs associated with the Companys
borrowings to purchase such Contracts; and 2) the difference between income
accreted on RISA and the interest costs associated with residual line
borrowings secured by RISA.

12



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##### Table of Contents



Net interest income increased to $7.3 million for the quarter ended
September 30, 2002, from $4.9 million for the same period in 2001. For the
nine-month period, net interest income increased to $19.0 million, compared to
$9.0 million for the same period in 2001. The increases were principally due to
an increase in interest income generated from the Companys RISA and a decrease
in interest expense on the Companys commercial paper line.

The increase in net interest income was also due to an increase in yields
realized under the provisions of Emerging Issues Task Force (EITF) 99-20,
which requires amounts previously recognized as excess service fee income to be
recognized as interest income. For the quarter ended September 30, 2002 total
income recognized under EITF 99-20 was approximately $5.4 million, versus
approximately $4.0 million for the same period in 2001. For the nine months
ended September 30, 2002, income recognized under EITF 99-20 was $13.6 million,
compared to $5.9 million for the same period in 2001. There was no EITF 99-20
income recognized in the first quarter of 2001, as the provisions did not
become effective until April 1, 2001. Interest expense associated with
borrowings under residual lines secured by RISA totaled approximately $1.8
million for the quarter, compared to $0.9 million for the quarter ended
September 30, 2001. For the nine-month period ended September 30, 2002,
interest expense under the residual lines was $5.5 million, compared to $1.7
million for the same period in 2001. The Company classifies this interest
expense as a component of net interest income to better match RISA revenues
with RISA-secured expenses.

Total commercial paper interest expense for the quarter was $1.0 million,
compared to $1.9 million for the same period in 2001. For the nine-month
periods ended September 30, 2002 and 2001, interest expense on the Companys
commercial paper line was $3.5 million and $9.0 million respectively. The
weighted average interest rate paid on the Companys commercial paper line for
the quarter was approximately 1.8%, compared to 3.7% for the same period in
2001. For the nine months ended September 30, 2002, the weighted average rate
remained at approximately 1.8%, compared to 4.7% for the same period in 2001.
Finance revenue earned on Contracts held on for sale and investment was $4.5
million and $3.8 million for the quarters ended September 30, 2002 and 2001,
respectively. For the nine months ended September 30, 2002 and 2001, finance
revenue was $12.3 million and $13.8 million, respectively. The average balance
of Contracts held on balance sheet was $158.0 million and $109.1 million for
the quarters ended September 30, 2002 and 2001, respectively. For the
nine-month period ended September 30, 2002 and 2001, the average balance of
Contracts held on balance sheet were $147.4 million and $164.0 million,
respectively.

The following table illustrates the components of net interest income:

|                    |                              |                        |       |                            |        |                           |       |       |       |      |        |        |        |   |       |        |        | 
|------------------- | ---------------------------- | ---------------------- | ----- | -------------------------- | ------ | ------------------------- | ----- | ----- | ----- | ---- | ------ | ------ | ------ | - | ----- | ------ | ------ | 
|                    |                              |                        |       | For the
Three Months Ended |        | For the
Nine Months Ended
|                    |                              |                        |       | September 30,              |        | September 30,            
|                    |                              |                        |       |                            |        |                          
|                    |                              |                        |       | 2002                       |        | 2001                      |       | 2002  |       | 2001
|                    |                              |                        |       |                            |        |                           |       |       |       |     
|Interest Income     |                              |                        |       |                            |        |                           |       |       |       |      |        |        |        |   |       |       
|                    | Interest Income  Contracts  |                        | $     | 4,304                      |        |                           | $     | 3,763 |       |      | $      | 12,311 |        |   | $     | 13,813 |       
|                    | Interest Income  RISA/Other |                        |       | 5,841                      |        |                           |       | 4,016 |       |      |        | 15,695 |        |   |       | 5,963  |       
|                    |                              |                        |       |                            |        |                           |       |       |       |      |        |        |        |   |       |        |       
|                    |                              | Total interest income  |       |                            | 10,145 |                           |       |       | 7,779 |      |        |        | 28,006 |   |       |        | 19,776 | 
|Interest Expense    |                              |                        |       |                            |        |                           |       |       |       |      |        |        |        |   |       |       
|                    | Commercial paper             |                        |       | 1,077                      |        |                           |       | 1,943 |       |      |        | 3,453  |        |   |       | 9,027  |       
|                    | Residual lines               |                        |       | 1,768                      |        |                           |       | 906   |       |      |        | 5,550  |        |   |       | 1,749  |       
|                    |                              |                        |       |                            |        |                           |       |       |       |      |        |        |        |   |       |        |       
|                    |                              | Total interest expense |       |                            | 2,845  |                           |       |       | 2,849 |      |        |        | 9,003  |   |       |        | 10,776 | 
|Net interest income |                              | $                      | 7,300 |                            |        | $                         | 4,930 |       |       | $    | 19,003 |        |        | $ | 9,000 |       
|                    |                              |                        |       |                            |        |                           |       |       |       |      |        |        |        |   |       |        |       

Gain
on Sale of Contracts

The Company computes a gain on sale with respect to Contracts securitized
based on the present value of the estimated future excess cash flows to be
received from such Contracts using a market discount rate. Gain on sale is
recorded as a credit enhancement asset on the statement of financial condition.
The gain recorded in the statement of income is adjusted for prepaid dealer
participation, issuance costs and the gain or loss on the termination of the
cash flow hedge. The gain on the sale of Contracts is affected by the amount of
Contracts securitized and the net interest rate spread on those Contracts.

The Company completed one securitization qualifying for sale treatment
totaling $450.0 million during the quarter ended September 30, 2002, resulting
in a gain of $8.8 million, or 2.0% of the dollar amount of Contracts
securitized, compared to a securitization of $400.0 million in the third
quarter of 2001, resulting in a gain of $6.6 million or 1.6% of the dollar
amount
securitized. For the nine-month period ended September 30, 2002, the Company
securitized a total of $1.2 billion, and recorded a combined gain of $19.0
million, or 1.6% of the amount securitized, compared to $1.2 billion
securitized in 2001 and a gain of $26.2

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million or 2.2% of the amount securitized. During the second quarter of 2002,
the Company elected to refinance its residual cash flow securitization, which
was originally executed during the first quarter of 2000, and recorded a gain
of approximately $0.8 million.

The increase in the gain as a percentage of the Contracts securitized for
the third quarter of 2002 was principally due to a wider net interest rate
spread realized on the third quarter securitization. The weighted average net
interest rate spread for the securitization executed during the third quarter
of 2002 was 1.89%, compared to 1.57% for the same period in 2001. The net
interest rate spread is the difference between the weighted average Contract
rate of the securitized assets, and the weighted average investor rate
inclusive of all costs related to the securitization transaction and net of
projected credit losses. The increase in spread was principally due to a
reduction in the loss assumption for the third quarter securitization compared
to the securitization executed during the third quarter of 2001. Management
believes the reduction in the loss assumption is warranted, given the
performance of securitizations executed after 2000, which have outperformed
Managements original credit assumptions. Interest rate spread is also affected
by product mix, general market conditions and overall market interest rates.
The risks inherent in interest rate fluctuations are partially reduced through
hedging activities. For the nine-month period ended September 30, 2002, the
weighted average net interest rate spread decreased to 1.62%, compared to 1.98%
for the same period in 2001.

During the quarter and nine-month period ended September 30, 2002, the
Company recorded a $5.5 million and $9.9 million pre-tax impairment charge,
respectively, on its RISA asset. While the Company has experienced a
significant reduction in its overall delinquency rates since December 31, 2001,
certain pre-2001 securitizations experienced higher losses and delinquency
rates than initially projected at the inception of the transactions, which have
been impacted by the slow-down in the economy and the lower credit quality of
the borrower. The impairment charges have been recorded to reduce the gain on
sale recorded in the three and nine-month periods ended September 30, 2002.

Service
Fee Income

Contractual servicing fee income is earned at a rate of 1.0% per annum on
the outstanding principal balance of Contracts securitized. Servicing fee
income is related to the size of the serviced portfolio and also includes
investment interest, late fees, extension fees, document fees and other fees
charged to customer accounts.

Servicing fee income was $12.8 million and $39.5 million for the quarter
and nine-month period ended September 30, 2002, compared to $14.0 million and
$43.4 million for the same periods in 2001. Included in the first three months
of 2001, was approximately $1.1 million of excess service fee income recorded
prior to the adoption of EITF 99-20. Excluding the effects of EITF 99-20,
service fee income for the nine-month period of 2001 would have been
approximately $40.8 million. The reduction in service fee income was
principally due to a reduction in investment income received on trust cash
accounts during the current periods reported.

Provision
for Credit Losses

The Provision for credit losses represents estimated net credit losses
incurred on Contracts held on balance sheet. The provision for credit losses
was $0.8 million and $(0.5) million for the three and nine-month period ended
September 30, 2002, respectively, compared to $0.5 million and $1.0 million for
the same periods in 2001. The provision for credit losses for the nine-month
period ended September 30, 2002 reflects a sales tax refund applied during the
second quarter of 2002 in the amount of approximately $2.0 million. The refund
has been treated as a recovery as it relates to pro-rata sales taxes paid by
the Company in financing the purchases of vehicles for which the related
Contracts have been previously charged-off.

Other
Interest Expense

Other interest expense was $1.2 million for the period ending September
30, 2002, compared to $0.8 million for the same period in 2001. For the
nine-month period, other interest expense was $3.2 million, compared to $3.0
million for the same period in 2001. Other interest expense includes interest
and amortized fees on the Companys subordinated debt, capital lease
obligations and hedging activities under the guidelines of FAS 133. For the
first quarter of 2001, the Company also included interest of approximately $0.9
million from its residual lines of credit. For 2002, the Company has classified
interest expense from its residual lines of credit under net interest income as
a means to match income generated under the provisions of EITF 99-20. The
increase in interest expense for the third quarter and nine-month period ended
September 30, 2002 was principally due to FAS 133 hedge ineffectiveness.
Charges related to the guidelines of FAS 133 were $0.3 million and $0.8 million
for the quarter and nine-month period ended September 30, 2002, compared to
$0.2 million and $0.3 million for the same periods in 2001, respectively. The
increases were

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principally due to increases in the ineffective portion of the unrealized loss
on cash flow hedges due to more rapid interest rate declines throughout 2002
versus 2001 and the change in value of the forward premium between the swap
execution date and the financial reporting date.

Operating
Expenses

The Company has made a significant effort to control operating expenses
through renegotiation of existing service contracts beginning in 2000, and has
effectively reduced its operating expenses as a percent of the serviced
portfolio as a result of these efforts. Total operating expenses as a percent
of the average serviced portfolio decreased to 2.96% for the nine months ended
September 30, 2002, compared to 3.22% for the nine months ended September 30,
2001. Total operating expenses for the quarter ended September 30, 2002
decreased to $20.8 million, compared to $22.0 million for the same period in
2001. For the nine-month period ended September 30, 2002, total operating
expenses decreased by 5.7%, or $3.9 million versus the same period in 2001.
Significant decreases in operating expense categories for the nine-month period
were realized in systems and servicing expense, telephone and utilities expense
and legal and professional expense. The combined reduction of the three expense
categories versus 2001 was approximately $4.0 million.

The Company incurred salary and benefit expenses of $13.5 million for the
quarter ended September 30, 2002, compared to $13.2 million for the same period
in 2001. For the nine-month period ended September 30, 2002, total salary and
benefit expense was $41.0 million, compared to $39.9 million for the same
period in 2001. The increase for the three and nine-month period is principally
due to normal merit increases and higher health care costs in connection with
the Companys benefit plans. Increases in salary and benefit expenses were
partially offset by decreases in charges in connection with the services of
temporary staff agencies. These charges are included as a component of total
salaries and benefits displayed in the income statement. During 2001, the
Company relied on the services of temporary staff to maintain its collection
and data entry departments. Through the process of renegotiation and the
establishment of a national service contract, the Company effectively reduced
the costs related to these services during 2002, and expects that future
expenses will decline further. During the third quarter of 2002, the Company
has also initiated an automated process of receiving borrower credit
applications electronically, which will further reduce staffing requirements in
the Companys data entry department. Total fees for temporary services for the
three and nine-month period ended September 30, 2002 were $0.4 million and $1.8
million, compared to $0.9 million and $3.2 million for the same periods in
2001.

System and servicing expense increased to $0.8 million for the quarter
ended September 30, 2002 from $0.5 million for the quarter ended September 30,
2001. The increase is principally due to charges in connection with billing and
correspondence fees from the Companys outside service provider. During the
quarter, the Company elected to transfer a significant portion of its customer
correspondence to its outside service provider as a means to increase
efficiency and consistency. For the nine-month period ended September 30, 2002,
system and servicing charges decreased by $1.4 million. During the first half
of 2001, the Company used the loan accounting and collection system of an
external service provider. The charges associated with this provider were
directly correlated to the number of Contracts serviced by the Company. As of
July 1, 2001, the Company successfully converted to an in-house system and
shortly thereafter terminated its agreement with the external provider.

Telephone and data line expenses decreased to $1.1 million and $2.5
million for the three and nine-month period ended September 30, 2002, compared
to $1.2 million and $3.7 million for the same periods in 2001. The significant
decrease for the nine-month period was principally due to renegotiated
contracts with the Companys data and voice carriers during the year. Assuming
no additional reduction in both local and long distance rates, the Company
expects these charges to increase relative to the growth of the serviced
portfolio.

Depreciation expense decreased to $0.8 million and $2.7 million for the
three and nine-month period ended September 30, 2002, compared to $1.1 million
and $3.6 million for the same periods in 2001. Most system upgrades and
leasehold improvements associated with the Companys relocation to Foothill
Ranch during 1999, and have been fully depreciated. Other operating expenses
decreased by $1.4 million for the quarter and $1.5 million for the nine-month
period ended September 30, 2002, compared to the same periods in 2001. Other
operating expenses include professional fees, marketing, supplies, facility
related charges, collection expenses, insurance fees and credit bureau fees.
Significant reductions were realized in professional related fees during the
quarter and nine-month period. Professional fees decreased by $0.3 million and
$1.4 million for the quarter and nine-month period ended September 30, 2002,
compared to the same periods in 2001. The decrease is principally due to the
general improvement of the serviced portfolio.

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##### Table of Contents



Income
Taxes

The Company files federal and certain state tax returns as a consolidated
group. Tax liabilities from the consolidated returns are allocated in
accordance with a tax sharing agreement based on the relative income or loss of
each entity on a stand-alone basis. The effective tax rate for the quarter
ended September 30, 2002 was 41.5%. For the quarter ended September 30, 2001,
the effective tax rate was 40.1%.

Financial Condition

Contracts
Held for Sale

Contracts held for sale totaled $213.6 million at September 30, 2002,
compared to $189.3 million at December 31, 2001. The balance in the held for
sale portfolio is largely dependent upon the timing of the origination and
securitization of Contracts. The Company completed a securitization transaction
of $450.0 million during the third quarter of 2002. The Company plans to
continue to securitize Contracts on a regular basis.

The following table illustrates the changes in the Companys Contract
acquisition volume, securitization activity and servicing portfolio during the
past five fiscal quarters:

Selected Quarterly Financial Information

|                                     |  |                        |           |          |  |          |           |          |  |           |           |  |  |   |           |  |  |   |           | 
|------------------------------------ |  | ---------------------- | --------- | -------- |  | -------- | --------- | -------- |  | --------- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                     |  | For the Quarters Ended
|                                     |  |                       
|                                     |  | Sept. 30,              |           | June 30, |  | Mar. 31, |           | Dec. 31, |  | Sept. 30,
|                                     |  | 2002                   |           | 2002     |  | 2002     |           | 2001     |  | 2001     
|                                     |  |                        |           |          |  |          |           |          |  |          
|                                     |  | (Restated)             |           |          |  |          |           |          |  |           |           |  |  |   |           |  |  |  
|                                     |  |                        |           |          |  |          |           |          |  |           |           |  |  |   |           |  |  |  
|                                     |  | (DOLLARS IN THOUSANDS)
|Contracts purchased during period    |  | $                      | 403,199   |          |  | $        | 442,919   |          |  | $         | 378,180   |  |  | $ | 365,270   |  |  | $ | 430,940   | 
|Average monthly volume during period |  |                        | 134,399   |          |  |          | 147,640   |          |  |           | 126,060   |  |  |   | 121,757   |  |  |   | 143,646   | 
|Gain on sale of Contracts, net (1)   |  |                        | 3,255     |          |  |          | 2,382     |          |  |           | 4,295     |  |  |   | 4,598     |  |  |   | 6,591     | 
|Contracts securitized during period  |  |                        | 450,000   |          |  |          | 400,000   |          |  |           | 375,000   |  |  |   | 400,000   |  |  |   | 400,000   | 
|Servicing portfolio at period end    |  |                        | 2,902,674 |          |  |          | 2,895,511 |          |  |           | 2,848,022 |  |  |   | 2,864,338 |  |  |   | 2,876,986 | 

(1)  Gain on sale of Contracts includes the gains recorded in connection with
the net interest margin securitization executed during the second quarter of
2002, and impairment charges.

Contracts Held for Investment

Contracts held for investment are net of a $1.9 million allowance for
future losses for September 30, 2002 and a $1.3 million allowance for December
31, 2001. Amounts held for investment include Contracts that do not qualify for
Contract securitizations as a result of delinquency status or minimum balance.

Asset Quality

The Company monitors and attempts to minimize delinquencies and losses
through timely collections and the use of predictive dialing and other systems.
Annualized net charge-offs as a percentage of the average serviced portfolio
were 2.53% and 2.88% for the quarter and nine-month period ended September 30,
2002, compared to 2.64% and 2.66% for the same periods in 2001. At September
30, 2002, thirty plus day delinquencies represented 2.26% of the amount of
Contracts in its serviced portfolio compared to 4.01% at December 31, 2001. The
reduction in delinquency and charge-offs for the quarter is principally due to
the Companys efforts to improve borrower credit statistics, and, to a lesser
extent, to seasonal fluctuations. The increase in charge-offs for the
nine-month period of 2002 is principally due to higher delinquency rates
experienced during the fourth quarter of 2001. Off balance sheet reserves at
September 30, 2002 were 4.0%, compared to 4.2% at December 31, 2001. Off
balance sheet reserves are those reserves established and maintained on
Contracts sold to the owner trusts in connection with securitizations.

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##### Table of Contents



Delinquency Experience of Serviced Portfolio

|                                                       |              |       |           |                        |        |                   |         |        |       |     |           |        |         |  |         |       |        | 
|------------------------------------------------------ | ------------ | ----- | --------- | ---------------------- | ------ | ----------------- | ------- | ------ | ----- | --- | --------- | ------ | ------- |  | ------- | ----- | ------ | 
|                                                       |              |       |           | September 30, 2002     |        | December 31, 2001
|                                                       |              |       |           |                        |        |                  
|                                                       |              |       |           | Amount                 |        | No.               |         | Amount |       | No.
|                                                       |              |       |           |                        |        |                   |         |        |       |    
|                                                       |              |       |           | (Dollars in thousands)
|Serviced portfolio                                     |              | $     | 2,902,674 |                        |        |                   | 291,908 |        |       | $   | 2,864,338 |        |         |  | 289,426 |      
|Delinquencies(1)(2)                                    |              |       |           |                        |        |                   |         |        |       |     |           |        |         |  |         |      
|                                                       | 30 - 59 days |       | $         | 46,528                 |        |                   |         | 6,022  |       |     | $         | 78,056 |         |  |         | 8,918 |       
|                                                       | 60 - 89 days |       |           | 10,545                 |        |                   |         | 1,447  |       |     |           | 20,859 |         |  |         | 2,456 |       
|                                                       | 90+ days     |       |           | 8,549                  |        |                   |         | 1,406  |       |     |           | 15,887 |         |  |         | 2,023 |       
|                                                       |              |       |           |                        |        |                   |         |        |       |     |           |        |         |  |         |      
|                                                       |              | Total |           | $                      | 65,622 |                   |         |        | 8,875 |     |           | $      | 114,802 |  |         |       | 13,397 | 
|                                                       |              |       |           |                        |        |                   |         |        |       |     |           |        |         |  |         |      
|Total delinquencies as a percent of Serviced portfolio |              |       | 2.26      | %                      |        |                   | 3.04    | %      |       |     | 4.01      | %      |         |  | 4.63    | %    



---

|(1) |  | Delinquencies include principal amounts only, net of repossessed
inventory and accounts in bankruptcy. Delinquent thirty-plus day
repossessed inventory as a percent of the serviced portfolio was 0.53% and
0.77% at September 30, 2002 and December 31, 2001, respectively.
Delinquent thirty-plus day Contracts in bankruptcy as a percent of the
serviced portfolio were 1.04% and 1.09% at September 30, 2002 and December
31, 2001, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The period of delinquency is based on the number of days payments are
contractually past due.                                                                                                                                                                                                                                                                                                                                                          

Loan Loss Experience of Servicing Portfolio

|                                                                       |  |                            |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|---------------------------------------------------------------------- |  | -------------------------- | --------- | ------------------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                       |  | For the Three Months Ended |           | For the Nine Months Ended
|                                                                       |  | September 30,              |           | September 30,            
|                                                                       |  |                            |           |                          
|                                                                       |  | 2002                       |           | 2001                      |  | 2002 |           | 2001
|                                                                       |  |                            |           |                           |  |      |           |     
|                                                                       |  | (Dollars in thousands)    
|Period end Contracts outstanding                                       |  | $                          | 2,902,674 |                           |  | $    | 2,876,986 |      |  | $ | 2,902,674 |   |  | $ | 2,876,986 |  
|Average servicing portfolio(1)                                         |  | $                          | 2,902,140 |                           |  | $    | 2,850,260 |      |  | $ | 2,877,018 |   |  | $ | 2,801,049 |  
|Number of gross charge-offs                                            |  |                            | 3,201     |                           |  |      | 3,197     |      |  |   | 10,039    |   |  |   | 9,813     |  
|Gross charge-offs                                                      |  | $                          | 21,620    |                           |  | $    | 22,100    |      |  | $ | 76,499    |   |  | $ | 65,329    |  
|Net charge-offs(2)                                                     |  | $                          | 18,343    |                           |  | $    | 18,835    |      |  | $ | 62,223    |   |  | $ | 55,950    |  
|Annualized net charge-offs as a
percent of average Servicing
portfolio |  |                            | 2.53      | %                         |  |      | 2.64      | %    |  |   | 2.88      | % |  |   | 2.66      | %



---

|(1) |  | Average is based on daily balances.                                                        
|--- |  | -------------------------------------------------------------------------------------------
|   
|(2) |  | Net charge-offs are gross charge-offs minus recoveries on Contracts
previously charged off.

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##### Table of Contents



The following table illustrates the monthly cumulative loss performance of
each of the securitized pools outstanding for the period from the date of
securitization through September 30, 2002:

|      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   | 
|----- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - | 
|MONTH |  | 98-B |      | 98-C |  | 99-A |      | 99-B |  | 99-C |      | 99-D |  | 00-A |      | 00-B |  | 00-C |      | 00-D |  | 01-A |      | 01-B |  | 01-C |      | 01-D |  | 02-A |      | 02-B |  | 02-C
|      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |     
|1     |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|2     |  |      | 0.00 | %    |  |      | 0.02 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.01 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|3     |  |      | 0.02 | %    |  |      | 0.02 | %    |  |      | 0.02 | %    |  |      | 0.03 | %    |  |      | 0.03 | %    |  |      | 0.01 | %    |  |      | 0.02 | %    |  |      | 0.02 | %    |  |      | 0.01 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.01 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.01 | % |  |  | 0.00 | % |  |  | 0.00 | %
|4     |  |      | 0.08 | %    |  |      | 0.04 | %    |  |      | 0.05 | %    |  |      | 0.07 | %    |  |      | 0.06 | %    |  |      | 0.04 | %    |  |      | 0.04 | %    |  |      | 0.04 | %    |  |      | 0.03 | % |  |  | 0.02 | % |  |  | 0.02 | % |  |  | 0.03 | % |  |  | 0.02 | % |  |  | 0.02 | % |  |  | 0.01 | % |  |  | 0.01 | % |  |  |      |  
|5     |  |      | 0.19 | %    |  |      | 0.15 | %    |  |      | 0.11 | %    |  |      | 0.14 | %    |  |      | 0.16 | %    |  |      | 0.09 | %    |  |      | 0.11 | %    |  |      | 0.10 | %    |  |      | 0.06 | % |  |  | 0.07 | % |  |  | 0.07 | % |  |  | 0.10 | % |  |  | 0.05 | % |  |  | 0.04 | % |  |  | 0.02 | % |  |  | 0.04 | % |  |  |      |  
|6     |  |      | 0.33 | %    |  |      | 0.27 | %    |  |      | 0.21 | %    |  |      | 0.27 | %    |  |      | 0.28 | %    |  |      | 0.15 | %    |  |      | 0.18 | %    |  |      | 0.17 | %    |  |      | 0.11 | % |  |  | 0.15 | % |  |  | 0.12 | % |  |  | 0.18 | % |  |  | 0.11 | % |  |  | 0.08 | % |  |  | 0.07 | % |  |  | 0.10 | % |  |  |      |  
|7     |  |      | 0.45 | %    |  |      | 0.46 | %    |  |      | 0.35 | %    |  |      | 0.43 | %    |  |      | 0.47 | %    |  |      | 0.24 | %    |  |      | 0.37 | %    |  |      | 0.30 | %    |  |      | 0.26 | % |  |  | 0.26 | % |  |  | 0.20 | % |  |  | 0.30 | % |  |  | 0.18 | % |  |  | 0.14 | % |  |  | 0.12 | % |  |  |      |   |  |  |      |  
|8     |  |      | 0.61 | %    |  |      | 0.57 | %    |  |      | 0.49 | %    |  |      | 0.60 | %    |  |      | 0.64 | %    |  |      | 0.43 | %    |  |      | 0.63 | %    |  |      | 0.44 | %    |  |      | 0.41 | % |  |  | 0.39 | % |  |  | 0.31 | % |  |  | 0.39 | % |  |  | 0.29 | % |  |  | 0.22 | % |  |  | 0.19 | % |  |  |      |   |  |  |      |  
|9     |  |      | 0.82 | %    |  |      | 0.74 | %    |  |      | 0.63 | %    |  |      | 0.85 | %    |  |      | 0.83 | %    |  |      | 0.59 | %    |  |      | 0.87 | %    |  |      | 0.67 | %    |  |      | 0.65 | % |  |  | 0.50 | % |  |  | 0.47 | % |  |  | 0.50 | % |  |  | 0.38 | % |  |  | 0.32 | % |  |  | 0.26 | % |  |  |      |   |  |  |      |  
|10    |  |      | 0.95 | %    |  |      | 0.94 | %    |  |      | 0.81 | %    |  |      | 1.07 | %    |  |      | 1.09 | %    |  |      | 0.76 | %    |  |      | 1.05 | %    |  |      | 0.90 | %    |  |      | 0.85 | % |  |  | 0.65 | % |  |  | 0.60 | % |  |  | 0.65 | % |  |  | 0.48 | % |  |  | 0.44 | % |  |  |      |   |  |  |      |   |  |  |      |  
|11    |  |      | 1.10 | %    |  |      | 1.12 | %    |  |      | 1.04 | %    |  |      | 1.34 | %    |  |      | 1.31 | %    |  |      | 0.99 | %    |  |      | 1.27 | %    |  |      | 1.11 | %    |  |      | 1.08 | % |  |  | 0.85 | % |  |  | 0.77 | % |  |  | 0.77 | % |  |  | 0.59 | % |  |  | 0.51 | % |  |  |      |   |  |  |      |   |  |  |      |  
|12    |  |      | 1.20 | %    |  |      | 1.30 | %    |  |      | 1.29 | %    |  |      | 1.56 | %    |  |      | 1.47 | %    |  |      | 1.20 | %    |  |      | 1.59 | %    |  |      | 1.38 | %    |  |      | 1.29 | % |  |  | 1.03 | % |  |  | 0.95 | % |  |  | 0.89 | % |  |  | 0.70 | % |  |  | 0.59 | % |  |  |      |   |  |  |      |   |  |  |      |  
|13    |  |      | 1.36 | %    |  |      | 1.54 | %    |  |      | 1.49 | %    |  |      | 1.79 | %    |  |      | 1.62 | %    |  |      | 1.41 | %    |  |      | 1.82 | %    |  |      | 1.57 | %    |  |      | 1.42 | % |  |  | 1.25 | % |  |  | 1.14 | % |  |  | 1.04 | % |  |  | 0.78 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|14    |  |      | 1.48 | %    |  |      | 1.73 | %    |  |      | 1.72 | %    |  |      | 1.90 | %    |  |      | 1.77 | %    |  |      | 1.52 | %    |  |      | 2.03 | %    |  |      | 1.84 | %    |  |      | 1.65 | % |  |  | 1.41 | % |  |  | 1.31 | % |  |  | 1.19 | % |  |  | 0.89 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|15    |  |      | 1.64 | %    |  |      | 1.90 | %    |  |      | 1.90 | %    |  |      | 2.08 | %    |  |      | 2.00 | %    |  |      | 1.70 | %    |  |      | 2.25 | %    |  |      | 2.08 | %    |  |      | 1.93 | % |  |  | 1.62 | % |  |  | 1.47 | % |  |  | 1.33 | % |  |  | 1.00 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|16    |  |      | 1.89 | %    |  |      | 2.10 | %    |  |      | 2.10 | %    |  |      | 2.23 | %    |  |      | 2.08 | %    |  |      | 2.00 | %    |  |      | 2.48 | %    |  |      | 2.26 | %    |  |      | 2.16 | % |  |  | 1.86 | % |  |  | 1.64 | % |  |  | 1.43 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|17    |  |      | 2.05 | %    |  |      | 2.28 | %    |  |      | 2.26 | %    |  |      | 2.42 | %    |  |      | 2.29 | %    |  |      | 2.17 | %    |  |      | 2.64 | %    |  |      | 2.42 | %    |  |      | 2.42 | % |  |  | 2.04 | % |  |  | 1.78 | % |  |  | 1.55 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|18    |  |      | 2.22 | %    |  |      | 2.51 | %    |  |      | 2.46 | %    |  |      | 2.63 | %    |  |      | 2.48 | %    |  |      | 2.40 | %    |  |      | 2.80 | %    |  |      | 2.69 | %    |  |      | 2.65 | % |  |  | 2.20 | % |  |  | 1.96 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|19    |  |      | 2.37 | %    |  |      | 2.71 | %    |  |      | 2.59 | %    |  |      | 2.71 | %    |  |      | 2.61 | %    |  |      | 2.61 | %    |  |      | 2.98 | %    |  |      | 2.96 | %    |  |      | 2.97 | % |  |  | 2.41 | % |  |  | 2.10 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|20    |  |      | 2.50 | %    |  |      | 2.83 | %    |  |      | 2.71 | %    |  |      | 2.89 | %    |  |      | 2.73 | %    |  |      | 2.87 | %    |  |      | 3.25 | %    |  |      | 3.20 | %    |  |      | 3.25 | % |  |  | 2.60 | % |  |  | 2.25 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|21    |  |      | 2.67 | %    |  |      | 2.95 | %    |  |      | 2.83 | %    |  |      | 3.08 | %    |  |      | 2.92 | %    |  |      | 3.05 | %    |  |      | 3.52 | %    |  |      | 3.44 | %    |  |      | 3.48 | % |  |  | 2.75 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|22    |  |      | 2.79 | %    |  |      | 3.08 | %    |  |      | 2.88 | %    |  |      | 3.21 | %    |  |      | 3.07 | %    |  |      | 3.20 | %    |  |      | 3.69 | %    |  |      | 3.69 | %    |  |      | 3.70 | % |  |  | 2.92 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|23    |  |      | 2.92 | %    |  |      | 3.25 | %    |  |      | 3.03 | %    |  |      | 3.31 | %    |  |      | 3.22 | %    |  |      | 3.33 | %    |  |      | 3.91 | %    |  |      | 3.94 | %    |  |      | 3.95 | % |  |  | 3.03 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|24    |  |      | 3.06 | %    |  |      | 3.39 | %    |  |      | 3.21 | %    |  |      | 3.43 | %    |  |      | 3.32 | %    |  |      | 3.53 | %    |  |      | 4.12 | %    |  |      | 4.18 | %    |  |      | 4.18 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|25    |  |      | 3.14 | %    |  |      | 3.45 | %    |  |      | 3.28 | %    |  |      | 3.55 | %    |  |      | 3.43 | %    |  |      | 3.70 | %    |  |      | 4.32 | %    |  |      | 4.39 | %    |  |      | 4.37 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|26    |  |      | 3.23 | %    |  |      | 3.57 | %    |  |      | 3.34 | %    |  |      | 3.67 | %    |  |      | 3.65 | %    |  |      | 3.88 | %    |  |      | 4.52 | %    |  |      | 4.57 | %    |  |      | 4.54 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|27    |  |      | 3.28 | %    |  |      | 3.72 | %    |  |      | 3.47 | %    |  |      | 3.77 | %    |  |      | 3.79 | %    |  |      | 4.03 | %    |  |      | 4.71 | %    |  |      | 4.74 | %    |  |      | 4.74 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|28    |  |      | 3.35 | %    |  |      | 3.81 | %    |  |      | 3.61 | %    |  |      | 3.88 | %    |  |      | 3.90 | %    |  |      | 4.22 | %    |  |      | 4.87 | %    |  |      | 4.91 | %    |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|29    |  |      | 3.45 | %    |  |      | 3.91 | %    |  |      | 3.67 | %    |  |      | 4.01 | %    |  |      | 4.03 | %    |  |      | 4.42 | %    |  |      | 5.04 | %    |  |      | 5.07 | %    |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|30    |  |      | 3.50 | %    |  |      | 4.05 | %    |  |      | 3.78 | %    |  |      | 4.14 | %    |  |      | 4.19 | %    |  |      | 4.58 | %    |  |      | 5.23 | %    |  |      | 5.22 | %    |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|31    |  |      | 3.57 | %    |  |      | 4.13 | %    |  |      | 3.85 | %    |  |      | 4.25 | %    |  |      | 4.28 | %    |  |      | 4.71 | %    |  |      | 5.35 | %    |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|32    |  |      | 3.67 | %    |  |      | 4.21 | %    |  |      | 3.96 | %    |  |      | 4.37 | %    |  |      | 4.43 | %    |  |      | 4.84 | %    |  |      | 5.48 | %    |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|33    |  |      | 3.73 | %    |  |      | 4.27 | %    |  |      | 4.07 | %    |  |      | 4.49 | %    |  |      | 4.60 | %    |  |      | 4.98 | %    |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|34    |  |      | 3.81 | %    |  |      | 4.33 | %    |  |      | 4.18 | %    |  |      | 4.55 | %    |  |      | 4.71 | %    |  |      | 5.11 | %    |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|35    |  |      | 3.86 | %    |  |      | 4.42 | %    |  |      | 4.25 | %    |  |      | 4.66 | %    |  |      | 4.83 | %    |  |      | 5.21 | %    |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|36    |  |      | 3.91 | %    |  |      | 4.46 | %    |  |      | 4.32 | %    |  |      | 4.79 | %    |  |      | 4.95 | %    |  |      | 5.32 | %    |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|37    |  |      | 4.00 | %    |  |      | 4.55 | %    |  |      | 4.37 | %    |  |      | 4.86 | %    |  |      | 5.00 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|38    |  |      | 4.04 | %    |  |      | 4.63 | %    |  |      | 4.44 | %    |  |      | 4.94 | %    |  |      | 5.07 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|39    |  |      | 4.08 | %    |  |      | 4.73 | %    |  |      | 4.51 | %    |  |      | 5.00 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|40    |  |      | 4.13 | %    |  |      | 4.76 | %    |  |      | 4.56 | %    |  |      | 5.05 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|41    |  |      | 4.18 | %    |  |      | 4.80 | %    |  |      | 4.66 | %    |  |      | 5.12 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|42    |  |      | 4.21 | %    |  |      | 4.87 | %    |  |      | 4.69 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|43    |  |      | 4.23 | %    |  |      | 4.94 | %    |  |      | 4.72 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|44    |  |      | 4.25 | %    |  |      | 5.00 | %    |  |      | 4.77 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  

18



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##### Table of Contents



Liquidity and Capital
Resources

The Company requires substantial cash and capital resources to operate its
business. Its primary uses of cash include: (i) acquisition of Contracts; (ii)
payments of dealer participation; (iii) securitization costs; (iv) settlements
of hedging transactions; (v) operating expenses; and (vi) interest expense. The
capital resources available to the Company include: (i) interest income during
the warehousing period; (ii) servicing fees; (iii) releases from spread
accounts; (iv) settlements of hedging transactions; (v) sales of Contracts in
securitizations; and (vi) borrowings under its credit facilities. Management
believes that the resources available to the Company will provide the needed
capital to fund Contract purchases, investments in origination and servicing
capabilities, and ongoing operations.

The Companys primary source of funds from continuing operations is
securitization proceeds. The Company uses the cash generated from
securitizations to pay down outstanding commercial paper obligations. These
facilities are then used to fund the purchase of Contracts or to finance normal
operating expenses. The Company has historically operated on a negative cash
flow basis from operating activities. Cash used in operating activities was
$9.0 million for the nine months ended September 30, 2002, compared to $44.6
million during the same period in 2001. The change in cash used in operating
activities for the nine months ended September 30, 2002 versus 2001 is
principally due to the relative size of the securitizations executed in
comparison to the total volume of Contracts originated during the same time
period. For the nine-month period ended September 30, 2002, the Company
securitized approximately $1.23 billion in Contracts and originated
approximately $1.22 billion during the same period. During the nine months
ended September 30, 2001, the Company securitized $1.20 billion in Contracts
and originated approximately $1.24 billion in Contracts. During 2001, net yield
credit triggers on five of the Companys outstanding securitizations were hit,
restricting future cash releases from the corresponding spread accounts. As a
result, the minimum spread account balances were increased, and any subsequent
spread releases were first used to reduce the outstanding reinsurance balance.

The Company continued to focus its efforts on building and maintaining its
dealer relations through its existing branch locations and did not open any
branches during the quarter. Management is currently reviewing market
conditions in both Ohio and New York. Capital acquisitions of $998 thousand
during the nine months ending September of 2002 were due to the ongoing
maintenance and upgrade of the Companys servicing infrastructure, while
acquisitions during 2001 were principally due to the initial charges related to
the conversion and installation of the Companys in-house loan accounting and
collection system.

CP
Facility: As of September 30, 2002, the Company was party to a $355
million warehousing facility (the CP Facility), with Triple-A One Funding
Corporation (Triple-A). Onyx Acceptance Financial Corporation (Finco), a
special purpose subsidiary of
the Company, is the borrower under the CP Facility. The CP Facility is used to
fund the purchase or origination of Contracts. Triple-A is a rated commercial
paper asset-backed conduit sponsored by MBIA Insurance Corporation (MBIA).
MBIA provides credit enhancement for the facility by issuing a financial
guarantee insurance policy covering all principal and interest obligations owed
for the borrowings under the facility. The Company pledges its Contracts held
for sale to borrow from Triple-A. The CP Facility was renewed in November 2001
for a three-year term, subject to annual renewals by liquidity providers.

19



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##### Table of Contents



The
Residual Lines: The Company, through Onyx Acceptance Funding
Corporation (Fundco), currently has two residual financing facilities: a
$50.0 million line with Salomon Smith Barney Realty Corporation (SBRC) and a
$35.0 million facility with Credit Suisse First Boston (Europe) Limited, as
buyer (CSFB-Europe), and Credit Suisse First Boston Corporation, as agent
(CSFB). (The SBRC facility together with the CSFB-Europe facility are
sometimes referred to herein as the Residual Lines). The Residual Lines are
used by the Company to finance operating requirements. The lines utilize
collateral-based formulas that set borrowing availability to a percentage of
the value of excess cash flow to be received from certain securitizations. Each
loan under the SBRC line matures one year after the date of the loan; the
Company expects each loan to be renewed at term. The CSFB-Europe line was
renewed in October 2001 for a one-year term.

As an additional source of funds, the Company utilizes residual
securitizations to pay down its residual financing facilities to increase the
Companys liquidity. During the first quarter of 2000, the Company securitized
the residual cash flows from 15 of its then outstanding securitizations. The
proceeds of this transaction were used by the Company to pay down two residual
financing facilities and pay off another residual financing facility. The
Company refinanced this residual securitization in the amount of $21.0 million
during the second quarter of 2002. During the first quarter of 2002, the
Company completed its second residual interest securitization for the purpose
of providing additional borrowing capacity under its Residual Lines. This
transaction generated approximately $75.0 million in proceeds.

Subordinated Debt: As of September 30, 2002, the Company had outstanding
approximately $21.5 million of subordinated debt, $1.6 million of which is
being amortized through February 2003 with a stated interest rate of 9.5%.
$12.0 million of subordinated debt has a stated interest rate of 12.5% and a
maturity of June 2006. The remaining balance of $7.9 million was raised through
the Companys renewable unsecured subordinated note program launched during the
first quarter of 2002. The weighted average interest rate on the balance
outstanding as of September 30, 2002 was 8.94%. The renewable notes have
varying maturities ranging from three months to ten years.

The facilities and lines above contain affirmative, negative and financial
covenants typical of such credit facilities. The Company was in compliance with
these covenants as of September 30, 2002.

Securitizations

Off balance sheet arrangements are used in the ordinary course of
business. Generally, these transactions are structured as off balance sheet
sales of Contracts. One of the most common forms of off balance sheet
arrangement is Contract securitizations. Regular securitizations are an
integral part of the Companys business plan because they allow the Company to
increase its liquidity, provide for redeployment of its capital and reduce
risks associated with interest rate fluctuations. The Company has developed a
securitization program that involves selling interests in pools of its
Contracts to investors through the public issuance of AAA/Aaa rated
asset-backed securities. The Company completed three AAA/Aaa rated publicly
underwritten asset-backed securitizations during the first, second and third
quarters of 2002 in the amount of $375 million, $400 million and $450 million,
respectively. During the first quarter, the Company completed its second
residual securitization from the residual cash flows of nine outstanding
securitizations. The Company did not record a gain on the transaction, as it
was structured as a financing transaction rather than a sale. The transaction
was rated by Moodys Investor Service, Inc. as Ba2, with proceeds of
approximately $75.0 million. A spread account equal to one years interest was
structured into the transaction. The proceeds of the residual securitization
were used to pay down the Companys Residual Lines with affiliates of its
securitization underwriters. Additionally, the Company refinanced its residual
securitization from the first quarter of 2000 in the amount of $21.0 million
during the second quarter of 2002. The Company plans to continue to integrate
residual securitizations in its business plan as a regular source of liquidity.

The net proceeds of securitizations are used to pay down outstanding
indebtedness incurred under the Companys credit facilities to purchase
Contracts, thereby creating availability for the purchase of additional
Contracts. Through September 30, 2002, the Company has securitized $7.95
billion of its Contracts in 29 separate transactions. In each of its
securitizations, the Company sold its Contracts to a newly formed grantor or
owner trust, which issues certificates and/or notes in an amount equal to the
aggregate principal balance of the Contracts.

The Company arranges for credit enhancement to achieve an improved credit
rating on the asset-backed securities issued. This credit enhancement has taken
the form of a financial guaranty insurance policy issued by MBIA or a
predecessor of MBIA (the Financial Guarantee Insurance Policy), insuring the
payment of principal and interest due on the asset-backed securities.

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The Company receives servicing fees for its duties relating to the
accounting for and collection of the Contracts. In addition, the Company is
entitled to the future excess cash flows arising from the trusts. Generally,
the Company sells the Contracts at face value and without recourse, except that
certain representations and warranties with respect to the Contracts are
provided by the Company as the servicer and Finco as the seller to the trusts.

Gains on sale of Contracts arising from securitizations provide a
significant portion of the Companys revenues. Several factors affect the
Companys ability to complete securitizations of its Contracts, including
conditions in the securities markets generally, conditions in the asset-backed
securities market specifically, the credit quality of the Companys portfolio
of Contracts and the Companys ability to obtain credit enhancement.

Interest Rate Exposure and
Hedging

The Company is able through the use of varying maturities on advances from
the CP Facility to lock in rates during the warehousing period, when in
managements judgment it is appropriate, to limit interest rate exposure during
such warehousing period (See Risk Factors  Interest Rate Fluctuations).

The Company has the ability to move rates upward in response to rising
borrowing costs because the Company currently does not originate Contracts near
the maximum rates permitted by law. Further, the Company employs a hedging
strategy, which primarily consists of the execution of forward interest rate
swaps. These hedges are entered into by the Company in numbers and amounts
which generally correspond to the anticipated principal amount of the projected
next securitization. Gains and losses relative to these hedges are recognized
in full at the time of securitization as an adjustment to the gain on sale of
the Contracts. The Company has only used counterparties with investment grade
debt ratings from national rating agencies for its hedging transactions.

Management monitors the Companys hedging activities on a frequent basis
to ensure that the hedges, their correlation to the total consideration to be
received in the forecasted securitization and the amounts being hedged continue
to provide effective protection against interest rate risk. The Companys
hedging strategy requires estimates by management of monthly Contract
acquisition volume and timing of its securitizations. If such estimates are
materially inaccurate, then the Companys gain on sales of Contracts and
results of operations and cash flows could be adversely affected. The amount
and timing of hedging transactions are determined by senior management based
upon the amount of Contracts purchased and the interest rate environment.




Item 3. Quantitative and
Qualitative Disclosures About Market Risk

The Companys earnings are affected by changes in interest rates as a
result of its dependence upon the issuance of interest-bearing securities and
the incurrence of debt to fund its lending activities. Several factors can
influence the Companys ability to manage interest rate risk. First, Contracts
are purchased at fixed interest rates, while the amounts borrowed under the
warehouse credit facilities bear interest at variable rates that are subject to
frequent adjustment to reflect prevailing market interest rates. Second, the
interest rate demanded by investors in a securitization is a function of
prevailing market rates for comparable transactions and the general interest
rate environment. Because the Contracts originated by the Company have fixed
interest rates, the Company bears the risk of smaller gross interest rate
spreads in the event interest rates increase during the period between the date
Contracts are purchased and the pricing and completion of securitization
transactions.

The Company uses several strategies to minimize interest rate risk,
including the utilization of derivative financial instruments, the regular
securitization of Contracts and pre-funding of securitization transactions.
Pre-funding securitizations is the practice of issuing more asset-backed
securities than the amount of Contracts initially sold to the Trust. The
proceeds from the pre-funded portion are held in an escrow account until
additional Contracts are sold to the Trust in amounts up to the balance of the
pre-funded escrow account. In pre-funded securitizations, borrowing costs are
locked in with respect to the Contracts subsequently delivered to the Trust.
However, the Company incurs an expense in pre-funded securitizations equal to
the difference between the money market yields earned on the proceeds held in
escrow prior to the subsequent delivery of Contracts and the interest rate paid
on the asset-backed securities outstanding.

Derivative financial instruments are utilized to manage the gross interest
rate spread on the Companys securitization transactions. The Company sells
fixed rate Contracts to the trusts that, in turn, sell fixed rate securities to
investors. The fixed rates on securities issued by the trusts are indexed to
Swap rates on U.S. Treasury Notes with similar average maturities or various
London Interbank Offered Rates (LIBOR). The Company periodically executes the
sale of forward swap agreements to lock in the indexed rate for specific
anticipated securitization transactions. The Company utilizes these derivative
financial instruments to modify its net interest
sensitivity to levels deemed appropriate by management based on the
Companys risk tolerance. All transactions are entered into for purposes other
than trading, and are settled quarterly upon pricing of the securitization.

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Item 4. Controls and
Procedures

The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Companys Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms
and that such information is accumulated and communicated to the Companys
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation,
under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and the Companys Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of the end of the quarter
covered by this report. The Companys independent auditors have advised the
Company of a matter relating to the Companys internal control structure.

To value its Residual Interests in Securitized Assets (RISA), the Company
has developed cash flow models using Lotus 123 spreadsheets. The cash flow
estimates provided by these models support the Companys income recognition and
impairment calculations. The spreadsheets require updating or other factors
underlying the cash flow estimates. A separate model exists for each RISA and
each model must be manually updated each reporting period for the various
factors impacting cash flow estimates. The models are complex and require
manual intervention, both of which are factors that increase the propensity for
human error. During the second quarter of 2003, the Company identified
instances where errors were made in the estimated cash flows and therefore the
RISA valuation computations for the third and fourth quarters of 2002. In
addition, the Company revised the method for amortizing loan premium
amortization on Contracts acquired in connection with clean up calls exercised
on the Companys securitization pools. The manner in which the Company had
previously been amortizing loan premium understated the amount of amortization
during the quarter ended September 30, 2002.

The absence of adequate information systems and policies/procedures to
perform the analysis, valuation and record keeping associated with estimating
cash flows and calculating loan premium amortization may result in misstatement
of the financial statements and is considered a significant deficiency in the
Companys internal control structure.

In response to the weaknesses noted above, management now prepares a
detailed analysis of loan premium amortization and factors underlying any
significant changes in estimated cash flows for each trust during the current
quarter versus the previous quarters estimate to further double-check the
evaluation process.

Subject to and limited by the foregoing, the Companys Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures were effective at the reasonable assurance level.

Apart from the analysis of cash flows and loan premium amortization
described above, there has been no change in the Companys internal control
over financial reporting during the Companys most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings

As a consumer finance company, the Company is subject to various consumer
claims and litigation seeking damages and statutory penalties based upon, among
other things, disclosure inaccuracies and wrongful repossession, which could
take the form of a plaintiffs class action complaint. The Company, as the
assignee of finance Contracts originated by dealers, may also be named as a
co-defendant in lawsuits filed by consumers principally against dealers.
Finally, the Company also is subject to other litigation common to the motor
vehicle finance industry and businesses in general. The damages and penalties
claimed by consumers and others in these types of matters can be substantial.
The relief requested by the plaintiffs varies but includes requests for
compensatory, statutory and punitive damages.

Management believes that the Company has taken prudent steps to address
the litigation risks associated with the Companys business. However, there can
be no assurance that the Company will be able to successfully defend against
all such claims or that the determination of any such claim in a manner adverse
to the Company would not have a material adverse effect on the Companys
automobile finance business.




Item 4. Submission of Matters to
a Vote of Security Holders

No matters were submitted during the third quarter of the fiscal year
covered by this Quarterly Report on Form 10-Q to a vote of security holders,
through the solicitation of proxies or otherwise.




Item 5. Other Information

Forward Looking Statements

The preceding Managements Discussion and Analysis of the Companys
Financial Condition and Results of Operations contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, which provides a safe harbor for these types of statements. This
Quarterly Report on Form 10-Q contains forward-looking statements which reflect
the current views of Onyx Acceptance Corporation with respect to future events
and financial performance. These forward looking statements are subject to
certain risks and uncertainties, including those identified below which could
cause actual results to differ materially from historical results or those
anticipated. Forward-looking terminology can be identified by the use of terms
such as may, will, expect, anticipate, estimate, should or
continue or the negative thereof or other variations thereon or

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comparable terminology. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. Except
as required by law, Onyx Acceptance Corporation undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. The following factors among
others, could cause actual results to differ materially from historical results
or those anticipated: (1) the level of demand for auto contracts, which is
affected by such external factors as the level of interest rates, the strength
of the various segments of the economy, debt burden held by consumers and
demographics of the lending markets of Onyx Acceptance Corporation; (2)
continued dealer relationships; (3) fluctuations between consumer interest
rates and the cost of funds; (4) federal and state regulation of auto finance
operations; (5) competition within the consumer lending industry; (6) the
availability and cost of securitization transactions and (7) the availability
and cost of warehouse and residual financing.

RISK FACTORS

We Need Substantial Liquidity

We require a substantial amount of liquidity to operate our business.
Among other things, we use such liquidity to:



| |  |  | acquire Contracts;                                                  
| | - |  | --------------------------------------------------------------------
|
| |  |  | pay dealer participation;                                           
|
| |  |  | pay securitization costs and fund related accounts;                 
|
| |  |  | settle hedge transactions;                                          
|
| |  |  | satisfy working capital requirements and pay operating expenses; and
|
| |  |  | pay interest expense.                                               

A substantial portion of our revenues in any period is represented by gain
on sale of Contracts generated by a securitization in such period, but the cash
underlying such revenues is received over the life of the Contracts.

We have operated on a negative cash flow basis and expect to do so in the
future as long as the volume of Contract purchases continues to grow on an
annual basis. We have historically funded these negative operating cash flows
principally through borrowings from financial institutions, sales of equity
securities and sales of subordinated notes. We cannot assure you, however, that
(1) we will have access to the capital markets in the future for equity, debt
issuances or securitizations, or (2) financing through borrowings or other
means will be available on acceptable terms to satisfy our cash requirements.
If we are unable to access the capital markets or obtain acceptable financing,
our results of operations, financial condition and cash flows would be
materially and adversely affected. See Managements Discussion and Analysis of
Financial Condition and Results of Operations  Liquidity and Capital
Resources.

We Depend on Warehouse Financing

We depend on a warehouse facility with a financial institution to finance
the purchase or origination of Contracts pending securitization. See Business
Financing and Sale of Contracts. Our business strategy requires that such
financing continue to be available during the warehousing period.

Whether the CP Facility continues to be available to us depends on, among
other things, whether we maintain a target net yield for the Contracts financed
under the CP Facility and comply with certain financial covenants contained in
the sale and servicing agreement between us, as seller, and our wholly-owned
special purpose finance subsidiary, Finco, as purchaser. These financial
covenants include:



| |  |  | a minimum ratio of net worth plus subordinated debt to total assets;   
| | - |  | -----------------------------------------------------------------------
|
| |  |  | a maximum ratio of credit enhancement assets to tangible net worth; and
|
| |  |  | earnings before interest, depreciation and taxes coverage ratio.       

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We cannot assure you that our CP Facility will be available to us or that
it will be available on favorable terms. If we are unable to arrange new
warehousing credit facilities or extend our existing credit facility when it
expires, our results of operations, financial condition and cash flows could be
materially and adversely affected.

We Depend on Residual Financing

When we sell our Contracts in securitizations, we receive cash and a
residual interest in the securitized assets (RISA). The RISA represents the
future cash flows to be generated by the Contracts in excess of the interest
paid on the securities issued in the securitization and other costs of
servicing the Contracts and completing the securitization. (See Managements
Discussion and Analysis of Financial Condition and Results of Operations -
Securitizations). We typically use the RISA from each securitization as
collateral to borrow cash under our Residual Lines to finance our operations.
The amount of cash advanced by our lenders under our Residual Lines depends on
a collateral formula that is determined in large part by how well our
securitized Contracts perform. If our portfolio of securitized Contracts
experience higher delinquency and loss ratios than expected, then the amount of
money we can borrow under the Residual Lines would be reduced. The reduction in
availability under these Residual Lines could materially and adversely affect
our operations, financial condition and cash flows. Additionally, we are
subject, under the documentation governing the Residual Lines, to certain
financial covenants. During the third quarter of 2002, the Company recorded a
$5.5 million write-down of the Companys RISA asset stemming from higher than
expected losses and delinquency on several securitizations executed prior to
2001. The Company attributes a portion of the higher losses and delinquency
experienced to the general economic slow-down the nation is experiencing.

We Depend on Residual Securitizations

We depend on securitizing future cash flows generated by RISA to pay off
balances on our Residual Lines and increase liquidity. If our portfolio of
securitized Contracts experience higher delinquency and loss ratios than
expected, then the proceeds of a residual securitization could be significantly
reduced, and the resulting risk associated with the securities could command a
higher yield. The inability to successfully market these residual
securitizations could materially and adversely affect our operations, financial
condition and cash flows.

We Depend on Securitizations to Generate Revenue

We rely significantly upon securitizations to generate cash proceeds for
repayment of our warehouse and our residual credit facilities and to create
availability to purchase additional Contracts. Further, gain on sale of
Contracts generated by our securitizations represents a significant portion of
our revenues. Our ability to complete securitizations of our Contracts is
affected by the following factors, among other things:



| |  |  | conditions in the securities markets generally;               
| | - |  | --------------------------------------------------------------
|
| |  |  | conditions in the asset-backed securities market specifically;
|
| |  |  | the credit quality of our portfolio of Contracts; and         
|
| |  |  | our ability to obtain credit enhancement.                     

If we were unable to profitably securitize a sufficient number of our
Contracts in a particular financial reporting period, then our revenues for
such period could decline and could result in lower net income or a loss for
such period. In addition, unanticipated delays in closing a securitization
could also increase our interest rate risk by increasing the warehousing period
for our Contracts. See Managements Discussion and Analysis of Results of
Operations and Financial Condition  Liquidity and Capital Resources, and
Business Financing and Sale of Contracts.

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We Depend on Credit Enhancement

From inception through September 30, 2002, each of our securitizations has
utilized credit enhancement in the form of a financial guarantee insurance
policy in order to achieve AAA/Aaa ratings. This form of credit enhancement
reduces the cost of the securitizations relative to alternative forms of credit
enhancement currently available to us. We cannot assure you that:



| |  |  | we will be able to continue to obtain credit enhancement in any form from our current provider;                   
| | - |  | ------------------------------------------------------------------------------------------------------------------
|
| |  |  | we will be able to obtain credit enhancement from any other provider of credit enhancement on acceptable terms; or
|
| |  |  | future securitizations will be similarly rated.                                                                   

We also rely on a financial guarantee insurance policy to reduce our
borrowing cost under the CP Facility. If our current providers credit rating
is downgraded or if it withdraws our credit enhancement, we could be subject to
higher interest costs for our future securitizations and financing costs during
the warehousing period. Such events could have a material adverse effect on our
results of operations, financial condition and cash flows.

We Are Subject to Interest Rate Fluctuations

Our profitability is largely determined by the difference, or spread,
between the effective rate of interest received by us on the Contracts acquired
and the interest rates payable under our credit facilities during the
warehousing period and for securities issued in securitizations.

Several factors affect our ability to manage interest rate risk. First,
the Contracts are purchased or originated at fixed interest rates, while
amounts borrowed under our credit facilities bear interest at variable rates
that are subject to frequent adjustment to reflect prevailing rates for
short-term borrowings. Our policy is to increase the buy rates we issue to
dealerships or, for the Contracts we originate, to increase rates we make
available to consumers for Contracts in response to increases in our cost of
funds during the warehousing period. However, there is generally a time lag
before such increased borrowing costs can be offset by increases in the buy
rates for Contracts and, in certain instances, the rates charged by our
competitors may limit our ability to pass through our increased costs of
warehouse financing.

Second, the spread can be adversely affected after a Contract is purchased
or originated and while it is held during the warehousing period by increases
in the prevailing rates in the commercial paper markets. While the CP Facility
permits us to select maturities to coincide with the projected end of the
warehouse period, if we selected a shorter maturity or had a delay in
completing a securitization, we would face this risk.

Third, the interest rate demanded by investors in securitizations is a
function of prevailing market rates for comparable transactions and the general
interest rate environment. Because the Contracts purchased or originated by us
have fixed rates, we bear the risk of spreads narrowing because of
interest-rate increases during the period from the date the Contracts are
purchased until the pricing of our securitization of such Contracts. We employ
a hedging strategy that is intended to minimize this risk and which
historically has involved the execution of forward interest rate swaps or use
of a pre-funding structure for our securitizations. However, we cannot assure
you that this strategy will consistently or completely offset adverse
interest-rate movements during the warehousing period or that we will not
sustain losses on hedging transactions. Our hedging strategy requires estimates
by management of monthly Contract acquisition volume and timing of our
securitizations. If such estimates are significantly inaccurate, then our gains
on sales of Contracts, results of operations and cash flows could be materially
and adversely affected.

We also have exposure to interest rate fluctuations under the Residual
Lines. In periods of increasing interest rates, our cash flows, results of
operations and financial condition could be materially adversely affected.

In addition, we have some interest rate exposure to falling interest rates
to the extent that the interest rates charged on Contracts sold in a
securitization with a pre-funding structure decline below the rates prevailing
at the time that the securitization prices. Such a rate decline would reduce
the interest rate spread because the interest rate on the notes and/or the
certificates would remain fixed. This would negatively impact the gain on sale
of Contracts and our results of operations and cash flows.

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We Will Be Adversely Affected When Contracts are Prepaid or Defaulted

Our results of operations, financial condition, cash flows, and liquidity
depend, to a material extent, on the performance of Contracts purchased,
originated, warehoused, and securitized by us. A portion of the Contracts
acquired by us may default or prepay during the warehousing period. We bear the
risk of losses resulting from payment defaults during the warehousing period.
In the event of payment default, the collateral value of the financed vehicle
may not cover the outstanding Contract balance and costs of recovery. We
maintain an allowance for credit losses on Contracts held during the
warehousing period which reflects managements estimates of anticipated credit
losses during such period. If the allowance is inadequate, then we would
recognize as an expense the losses in excess of such allowance, and our results
of operations could be adversely affected. In addition, under the terms of the
CP Facility, we are not able to borrow against defaulted Contracts.

Our servicing income can also be adversely affected by prepayments of or
defaults under Contracts in the serviced portfolio. Our contractual servicing
revenue is based on a percentage of the outstanding principal balance of such
Contracts. Thus, if Contracts are prepaid or charged-off, then our servicing
revenue will decline to the extent of such prepaid or charged-off Contracts.

The gain on sale of Contracts recognized by us in each securitization and
the value of the retained interest in securitized assets (RISA) in each
transaction reflects managements estimate of future credit losses and
prepayments for the Contracts included in such securitization. If actual rates
of credit loss or prepayments, or both, on such Contracts exceed those
estimated, the value of the RISA would be impaired. We periodically review our
credit loss and prepayment assumptions relative to the performance of the
securitized Contracts and to market conditions. Our results of operations and
liquidity could be adversely affected if credit loss or prepayment levels on
securitized Contracts substantially exceed anticipated levels. Under certain
circumstances, we would be required to record an impairment charge through a
reduction to gain-on-sale. Further, any impairment of RISA could reduce the
amount available to us under our Residual Lines, thus possibly requiring us to
pay down amounts outstanding under these facilities or provide additional
collateral to cure any borrowing base deficiency.

Effects of Terrorist Attacks and Military Response

The long-term economic impact of the events of September 11, 2001 and the
United States continuing military response, remain uncertain, but could have a
material effect on general economic conditions, consumer confidence, and market
liquidity. No assurance can be given as to the effect of these events on
consumer confidence and the performance of the Contracts. Any adverse impact
resulting from these events could affect our results of operations, financial
condition and cash flows.

In addition, activation of a substantial number of U.S. military
reservists or members of the National Guard may significantly increase the
proportion of Contracts whose interest rates are reduced by the application of
the Soldiers and Sailors Civil Relief Act of 1940 (the Relief Act). The
Relief Act provides, generally, that an obligor who is covered by the Relief
Act may not be charged interest on the related Contract in excess of 6%
annually during the period of the obligors active duty.

We Will Be Adversely Affected If We Lose Servicing Rights

Our results of operations, financial condition and cash flows would be
materially and adversely affected if any of the following were to occur:



| |  |  | loss of the servicing rights under our sale and servicing agreement
for the CP Facility;                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | loss of the servicing rights under the applicable pooling and
servicing or sale and servicing agreement of a grantor trust or owner
trust, respectively; or

We are entitled to receive servicing income only while we act as servicer
under the applicable sale and servicing agreement or pooling and servicing
agreement. Under the CP Facility our right to act as servicer can be terminated
by our lender or financial insurer, upon the occurrence of certain events.

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Our Quarterly Earnings May Fluctuate

Our revenues have fluctuated in the past and are expected to fluctuate in
the future principally as a result of the following factors:



| |  |  | the timing and size of our securitizations;                                                                            
| | - |  | -----------------------------------------------------------------------------------------------------------------------
|
| |  |  | variations in the volume of our Contract acquisitions;                                                                 
|
| |  |  | the interest rate spread between our cost of funds and the average interest rate of purchased Contracts;               
|
| |  |  | the effectiveness of our hedging strategies;                                                                           
|
| |  |  | the investor rate for securitizations; and                                                                             
|
| |  |  | the marketability and execution of our residual interest securitizations.                                              
|
| |  |  | a trigger event that would block release of future excess cash flows from the owner trusts respective spread accounts.

Any significant decrease in our quarterly revenues could have a material
adverse effect on our results of operations, financial condition, cash flows
and stock price.

We Depend on Key Personnel

Our future operating results depend in significant part upon the continued
service of our key senior management personnel, none of whom is bound by an
employment agreement. Our future operating results also depend in part upon our
ability to attract and retain qualified management, technical, and sales and
support personnel for our operations. We cannot assure you that we will be
successful in attracting or retaining such personnel. The loss of any key
employee, the failure of any key employee to perform in his or her current
position or our inability to attract and retain skilled employees, as needed,
could materially and adversely affect our results of operations, financial
condition and cash flows.

Our Industry is Highly Competitive

Competition in the field of financing retail motor vehicle sales is
intense. The automobile finance market is highly fragmented and historically
has been serviced by a variety of financial entities including the captive
finance affiliates of major automotive manufacturers, as well as banks, savings
associations, independent finance companies, credit unions and leasing
companies. Several of these competitors have greater financial resources than
we do. Many of these competitors also have long-standing relationships with
automobile dealerships, and offer dealerships or their customers other forms of
financing or services not provided by us. Our ability to compete successfully
depends largely upon our relationships with dealerships and the willingness of
dealerships to offer those Contracts that meet our underwriting criteria to us
for purchase. We cannot assure you that we will be able to continue to compete
successfully in the markets we serve.

We May Be Harmed by Adverse Economic Conditions

We are a motor vehicle consumer auto finance company whose activities are
dependent upon the sale of motor vehicles. Our ability to continue to acquire
Contracts in the markets in which we operate and to expand into additional
markets is dependent upon the overall level of sales of new and used motor
vehicles in those markets. A prolonged downturn in the sale of new and used
motor vehicles, whether nationwide or in the California market, could have an
adverse impact upon us, our results of operations and our ability to implement
our business strategy.

The automobile industry generally is sensitive to adverse economic
conditions both nationwide and in California, where we have our largest
single-state exposure. Periods of rising interest rates, reduced economic
activity or higher rates of unemployment generally result in a reduction in the
rate of sales of motor vehicles and higher default rates on motor vehicle
contracts. We cannot assure you that such economic conditions will not occur,
or that such conditions will not result in severe reductions in our revenues or
the cash flows available to us to permit us to remain current on our credit
facilities.

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We Are Subject to System Risks

As of July 1, 2001, the Company converted from an external service
provider for its loan accounting and collections system to an in-house system.
If issues with the in-house system arise in the future, we may be unable to
acquire Contracts and service the outstanding portfolio. The failure of this
system could materially and adversely affect our results of operations,
financial condition and cash flows.

We Are Subject to Many Regulations

Our business is subject to numerous federal and state consumer protection
laws and regulations, which, among other things:



| |  |  | require us to obtain and maintain certain licenses and qualifications;    
| | - |  | --------------------------------------------------------------------------
|
| |  |  | limit the interest rates, fees and other charges we are allowed to charge;
|
| |  |  | limit or prescribe certain other terms of our Contracts;                  
|
| |  |  | require us to protect the privacy of consumer information;                
|
| |  |  | require specific disclosures; and                                         
|
| |  |  | define our rights to repossess and sell collateral.                       

We believe that we are in compliance, in all material respects, with all
such laws and regulations, and that such laws and regulations have had no
material adverse effect on our ability to operate our business. However, we
will be materially and adversely affected if we fail to comply with:



| |  |  | applicable laws and regulations;                                     
| | - |  | ---------------------------------------------------------------------
|
| |  |  | changes in existing laws or regulations;                             
|
| |  |  | changes in the interpretation of existing laws or regulations; or    
|
| |  |  | any additional laws or regulations that may be enacted in the future.

We Are Subject to Litigation Risks

We are party to various legal proceedings, similar to actions brought
against other companies in the motor vehicle finance industry and other
businesses. Companies in the motor vehicle finance industry have also been
named as defendants in an increasing number of class action lawsuits brought by
purchasers of motor vehicles and others claiming violation of various federal
and state consumer credit, as well as similar and other, laws and regulations.

While we intend to vigorously defend ourselves against such proceedings,
there is a chance that our results of operations, financial condition and cash
flows could be materially and adversely affected by unfavorable outcomes.

Item 2.Properties

The Company did not own any real property at September 30, 2002. The
Companys leases approximately 82,000 square feet of office space for its
headquarters located in Foothill Ranch, California. The Company also leases
office space for its Auto Finance Centers and its Hazelwood, Missouri service
center; the average size of an Auto Finance Center is generally four to five
thousand square feet. The Hazelwood service center is in approximately 20,000
square feet. One Auto Finance Center is located in the corporate headquarters
building.

28



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##### Table of Contents






Item 6. Exhibits and Reports of
Form 8-K



|(a) |  | Exhibits
|--- |  | --------

|        |  |                                                                                                                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                         
|Number  |  | Exhibit Title                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                         
|10.128  |  | Form of Sale and Servicing Agreement between Onyx Acceptance Owner
Trust 2002-C, Onyx Acceptance Financial Corporation, Onyx Acceptance
Corporation and JP Morgan Chase Bank, in connection with the Onyx
Acceptance Owner Trust 2002-C*
|        |  |                                                                                                                                                                                                                                         
|21.1    |  | Subsidiaries of the Registrant.**                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                         
|31      |  | Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                         
|32      |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                  



---

|* |  | Incorporated by reference from Onyx Acceptance Financial Corporations
Current Report on Form 8-K filed August 1, 2002 (File No. 333-28893).
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------



|** |  | Previously filed.
|-- |  | -----------------



|(b) |  | Reports on Form 8-K
|--- |  | -------------------
|   
|    |  | None.              

29



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##### Table of Contents






SIGNATURE

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.

|                         |  |                             |  |                                    
|------------------------ |  | --------------------------- |  | -----------------------------------
|                         |  | ONYX ACCEPTANCE CORPORATION
|                         |  |                             |  |                                    
|                         |  | By:                         |  | /s/ JOHN W. HALL                   
|                         |  |                             |  |                                    
|                         |  |                             |  | John W. Hall                       
|                         |  |                             |  | President, CEO
and                 
|Date: September 19, 2003 |  |                             |  | Principal
Executive Officer        
|                         |  |                             |  |                                    
|                         |  | By:                         |  | /s/ DON P. DUFFY                   
|                         |  |                             |  |                                    
|                         |  |                             |  | Don P. Duffy                       
|                         |  |                             |  | Executive Vice
President,          
|Date: September 19, 2003 |  |                             |  | CFO and Principal
Financial Officer

30



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                         
|Number  |  | Exhibit Title                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                         
|10.128  |  | Form of Sale and Servicing Agreement between Onyx Acceptance Owner
Trust 2002-C, Onyx Acceptance Financial Corporation, Onyx Acceptance
Corporation and JP Morgan Chase Bank, in connection with the Onyx
Acceptance Owner Trust 2002-C*
|        |  |                                                                                                                                                                                                                                         
|21.1    |  | Subsidiaries of the Registrant.**                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                         
|31      |  | Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                         
|32      |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                  



---

|* |  | Incorporated by reference from Onyx Acceptance Financial Corporations
Current Report on Form 8-K filed August 1, 2002 (File No. 333-28893).
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------



|** |  | Previously filed.
|-- |  | -----------------

31