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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



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FORM 10-Q



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|    |  |                                                                                       
|--- |  | --------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
|   
|    |  | FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001                                     

OR

|      |  |                                                                                        
|----- |  | ---------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES 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
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | 33-0577635
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

ONYX ACCEPTANCE CORPORATION
27051 TOWNE CENTRE DRIVE
FOOTHILL RANCH, CA 92610
(949) 465-3900
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)



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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    [X]         NO    [   ]

As of November 14, 2001, there were 5,078,046 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                           
|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 21.1                 



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ONYX ACCEPTANCE CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

|              |  |                                                                                                                           |    |      |    | 
|------------- |  | ------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|              |  |                                                                                                                           |    | PAGE
|              |  |                                                                                                                           |    |     
|PART I        |  | Financial Information                                                                                                     |    |      | 3  | 
|Item 1.       |  | Financial Statements                                                                                                      |    |      | 3  | 
|              |  | Condensed Consolidated Statements of Financial Condition at September 30,
2001 and December 31, 2000                      |    |      | 3  | 
|              |  | Condensed Consolidated Statements of Income for the three and nine months
ended September 30, 2001 and September 30, 2000 |    |      | 4  | 
|              |  | Consolidated Statement of Stockholders Equity at September 30, 2001                                                      |    |      | 5  | 
|              |  | Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2001 and September 30, 2000       |    |      | 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                                                                |    |      | 18 | 
|PART II       |  | Other Information                                                                                                         |    |      | 19 | 
|Item 1.       |  | Legal Proceedings                                                                                                         |    |      | 19 | 
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                                       |    |      | 20 | 
|Item 5.       |  | Other Information                                                                                                         |    |      | 20 | 
|Item 6.       |  | Exhibits and Reports on Form 8-K                                                                                          |    |      | 26 | 
|SIGNATURES    |  |                                                                                                                           | 27 |     
|EXHIBIT INDEX |  |                                                                                                                           | 28 |     

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |              |         |  |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------- | ------- | ------- | ---------------------- | ------- | ------------ | ------- |  |  | 
|ASSETS                                            
|                                                  
|                                                   |                                                                                                                                                         |                              |         |         |         | SEPTEMBER 30,          |         | DECEMBER 31,
|                                                   |                                                                                                                                                         |                              |         |         |         | 2001                   |         | 2000        
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             
|                                                   |                                                                                                                                                         |                              |         |         |         | (UNAUDITED)            |         | (AUDITED)   
|                                                   |                                                                                                                                                         |                              |         |         |         | (DOLLARS IN THOUSANDS)
|Cash and cash equivalents                          |                                                                                                                                                         | $                            | 5,975   |         |         | $                      | 3,130   |             
|Credit enhancement assets                          |                                                                                                                                                         |                              | 182,839 |         |         |                        | 146,013 |             
|Contracts held for sale (Net of allowance)         |                                                                                                                                                         |                              | 204,090 |         |         |                        | 170,755 |             
|Other assets                                       |                                                                                                                                                         |                              | 10,541  |         |         |                        | 11,482  |             
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             
|                                                   |                                                                                                                                                         | Total assets                 |         | $       | 403,445 |                        |         | $            | 331,380 | 
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             
|LIABILITIES                                       
|Accounts payable                                   |                                                                                                                                                         | $                            | 30,562  |         |         | $                      | 22,706  |             
|Debt                                               |                                                                                                                                                         |                              | 282,436 |         |         |                        | 233,152 |             
|Other liabilities                                  |                                                                                                                                                         |                              | 27,669  |         |         |                        | 19,929  |             
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             
|                                                   | Total liabilities                                                                                                                                       |                              |         | 340,667 |         |                        |         | 275,787      |        
|EQUITY                                            
|Common stock                                       |                                                                                                                                                         |                              |         |         |         |                        |         |             
|                                                   | Par value $.01 per share; authorized 15,000,000 shares; issued and
outstanding 5,078,046 as of September 30, 2001 and 4,989,504 as of
December 31, 2000 |                              |         | 51      |         |                        |         | 50           |        
|Paid in capital                                    |                                                                                                                                                         |                              | 32,647  |         |         |                        | 32,601  |             
|Retained earnings                                  |                                                                                                                                                         |                              | 25,601  |         |         |                        | 21,550  |             
|Accumulated other comprehensive income, net of tax |                                                                                                                                                         |                              | 4,479   |         |         |                        | 1,392   |             
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             
|                                                   |                                                                                                                                                         | Total equity                 |         |         | 62,778  |                        |         |              | 55,593  | 
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             
|                                                   |                                                                                                                                                         | Total liabilities and equity |         | $       | 403,445 |                        |         | $            | 331,380 | 
|                                                   |                                                                                                                                                         |                              |         |         |         |                        |         |             

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,    
|                               |                                     |   |                                                  |        |                  
|                               |                                     |   | 2001                                             |        | 2000              |   | 2001      |        | 2000
|                               |                                     |   |                                                  |        |                   |   |           |        |     
|                               |                                     |   | (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
|                               |                                     |   | (UNAUDITED)                                      |        | (UNAUDITED)      
|REVENUES:                      |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Interest income                |                                     | $ | 9,401                                            |        |                   | $ | 3,098     |        |      | $ | 25,007    |        |  | $ | 16,433    |       
|Interest expense               |                                     |   | 1,943                                            |        |                   |   | 2,814     |        |      |   | 9,027     |        |  |   | 11,100    |       
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Net interest income            |                                     |   | 7,458                                            |        |                   |   | 284       |        |      |   | 15,980    |        |  |   | 5,333     |       
|Gain on sale of contracts      |                                     |   | 6,591                                            |        |                   |   | 12,066    |        |      |   | 26,167    |        |  |   | 38,811    |       
|Service fee income             |                                     |   | 12,368                                           |        |                   |   | 13,853    |        |      |   | 38,177    |        |  |   | 32,811    |       
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Total Revenues                 |                                     |   | 26,417                                           |        |                   |   | 26,203    |        |      |   | 80,324    |        |  |   | 76,955    |       
|EXPENSES:                      |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|                               | Provision for credit losses         |   |                                                  | 502    |                   |   |           | (73    | )    |   |           | 966    |  |   |           | 645    | 
|                               | Interest
expense  other            |   |                                                  | 1,718  |                   |   |           | 1,473  |      |   |           | 4,781  |  |   |           | 3,985  | 
|OPERATING EXPENSES:            |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|                               | Salaries and benefits               |   |                                                  | 13,228 |                   |   |           | 11,299 |      |   |           | 39,895 |  |   |           | 35,370 | 
|                               | Systems and servicing               |   |                                                  | 476    |                   |   |           | 1,261  |      |   |           | 3,573  |  |   |           | 4,324  | 
|                               | Telephone and data lines            |   |                                                  | 1,201  |                   |   |           | 1,501  |      |   |           | 3,680  |  |   |           | 4,656  | 
|                               | Depreciation                        |   |                                                  | 1,094  |                   |   |           | 1,170  |      |   |           | 3,568  |  |   |           | 3,191  | 
|                               | General and administrative expenses |   |                                                  | 5,957  |                   |   |           | 6,648  |      |   |           | 16,989 |  |   |           | 16,326 | 
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Total Operating Expenses       |                                     |   | 21,956                                           |        |                   |   | 21,879    |        |      |   | 67,705    |        |  |   | 63,867    |       
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Total Expenses                 |                                     |   | 24,176                                           |        |                   |   | 23,279    |        |      |   | 73,452    |        |  |   | 68,497    |       
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|                               | Income before Income Taxes          |   |                                                  | 2,241  |                   |   |           | 2,924  |      |   |           | 6,872  |  |   |           | 8,458  | 
|                               | Income Taxes                        |   |                                                  | 899    |                   |   |           | 1,213  |      |   |           | 2,821  |  |   |           | 3,510  | 
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Net Income                     |                                     | $ | 1,342                                            |        |                   | $ | 1,711     |        |      | $ | 4,051     |        |  | $ | 4,948     |       
|                               |                                     |   |                                                  |        |                   |   |           |        |      |   |           |        |  |   |           |       
|Net Income per share  Basic   |                                     | $ | 0.27                                             |        |                   | $ | 0.32      |        |      | $ | 0.81      |        |  | $ | 0.85      |       
|Net Income per share  Diluted |                                     | $ | 0.25                                             |        |                   | $ | 0.32      |        |      | $ | 0.78      |        |  | $ | 0.82      |       
|Basic Shares Outstanding       |                                     |   | 5,047,292                                        |        |                   |   | 5,266,005 |        |      |   | 5,008,767 |        |  |   | 5,839,528 |       
|Diluted Shares Outstanding     |                                     |   | 5,354,351                                        |        |                   |   | 5,423,108 |        |      |   | 5,214,455 |        |  |   | 5,999,130 |       

See the accompanying notes to the condensed consolidated financial statements.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(IN THOUSANDS)
(UNAUDITED)

|                                                                         |  |        |       |       |  |         |    |          |       |            |        |              |       |   |        |               |       |             |       |  |  |   |        | 
|------------------------------------------------------------------------ |  | ------ | ----- | ----- |  | ------- | -- | -------- | ----- | ---------- | ------ | ------------ | ----- | - | ------ | ------------- | ----- | ----------- | ----- |  |  | - | ------ | 
|                                                                         |  |        |       |       |  |         |    |          |       |            |        |              |       |   |        |               |       | ACCUMULATED |       |  |  |  
|                                                                         |  |        |       |       |  |         |    |          |       | ADDITIONAL |        |              |       |   |        | COMPREHENSIVE |       |             |       | 
|                                                                         |  |        |       |       |  | COMMON  |    | PAID-IN  |       | RETAINED   |        | GAIN (LOSS), |       |   |        |              
|                                                                         |  | SHARES |       | STOCK |  | CAPITAL |    | EARNINGS |       | NET OF TAX |        | TOTAL       
|                                                                         |  |        |       |       |  |         |    |          |       |            |        |             
|BALANCE, DECEMBER 31, 2000                                               |  |        | 4,990 |       |  | $       | 50 |          |       | $          | 32,601 |              |       | $ | 21,550 |               |       | $           | 1,392 |  |  | $ | 55,593 | 
|Stock issued from warrants/options
exercised                             |  |        | 88    |       |  |         | 1  |          |       |            | 46     |              |       |   |        |               |       |             | 47    | 
|Comprehensive income:                                                    |  |        |       |       |  |         |    |          |       |            |        |              |       |   |        |               |       |             |       |  |  |   |        | 
|Unrealized gains in securitized
assets, net of tax of $2.9 million       |  |        |       |       |  |         |    |          |       |            | 4,126  |              |       |   | 4,126  |              
|Adoption of FAS 133, net of
tax of $596 thousand                         |  |        |       |       |  |         |    |          |       |            | (840   | )            |       |   | (840   | )            
|Loss on derivatives reclassified to
earnings net of tax of $596 thousand |  |        |       |       |  |         |    |          |       |            | 840    |              |       |   | 840    |              
|Unrealized loss on hedging
activities, net of tax of $696 thousand       |  |        |       |       |  |         |    |          |       |            | (1,039 | )            |       |   | (1,039 | )            
|Net income                                                               |  |        |       |       |  |         |    |          | 4,051 |            |        |              |       |   |        |               | 4,051 |            
|                                                                         |  |        |       |       |  |         |    |          |       |            |        |              |       |   |        |               |       |             |       |  |  |   |        | 
|Total comprehensive income                                               |  |        |       |       |  |         |    |          | 4,051 |            |        |              | 3,087 |   |        |               | 7,138 |            
|                                                                         |  |        |       |       |  |         |    |          |       |            |        |              |       |   |        |               |       |             |       |  |  |   |        | 
|BALANCE, SEPTEMBER 30, 2001                                              |  |        | 5,078 |       |  | $       | 51 |          |       | $          | 32,647 |              |       | $ | 25,601 |               |       | $           | 4,479 |  |  | $ | 62,778 | 
|                                                                         |  |        |       |       |  |         |    |          |       |            |        |              |       |   |        |               |       |             |       |  |  |   |        | 

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,         
|                                                    |                                                         |   |                       
|                                                    |                                                         |   | 2001                   |          | 2000
|                                                    |                                                         |   |                        |          |     
|                                                    |                                                         |   | (DOLLARS IN THOUSANDS)
|                                                    |                                                         |   | (UNAUDITED)           
|OPERATING ACTIVITIES:                               |                                                         |   |                        |          |      |   |         |           
|                                                    | Net cash (used in) provided by operating activities     |   | $                      | (44,552  | )    |   | $       | 82,928     |  
|INVESTING ACTIVITIES:                               |                                                         |   |                        |          |      |   |         |           
|                                                    | Purchases of property and equipment                     |   |                        | (2,140   | )    |   |         | (3,404     | )
|FINANCING ACTIVITIES:                               |                                                         |   |                        |          |      |   |         |           
|                                                    | Proceeds from exercise of warrants and employee options |   |                        | 47       |      |   |         | 6          |  
|                                                    | Repurchase of common stock                              |   |                        |         |      |   |         | (4,380     | )
|                                                    | Proceeds (payments) on capital lease obligations        |   |                        | 206      |      |   |         | (233       | )
|                                                    | Payments on residual lines of credit                    |   |                        | (13,884  | )    |   |         | (46,630    | )
|                                                    | Proceeds from drawdown on residual lines of credit      |   |                        | 32,600   |      |   |         | 29,000     |  
|                                                    | Paydown of warehouse lines related to Securitizations   |   |                        | (925,310 | )    |   |         | (1,046,489 | )
|                                                    | Proceeds from warehouse lines                           |   |                        | 958,305  |      |   |         | 977,708    |  
|                                                    | Proceeds from issuance of subordinated debt             |   |                        |         |      |   |         | 11,518     |  
|                                                    | Principal payments on subordinated debt                 |   |                        | (2,427   | )    |   |         | (1,725     | )
|                                                    | Payments on other loans                                 |   |                        |         |      |   |         | (199       | )
|                                                    |                                                         |   |                        |          |      |   |         |           
|Net cash provided by (used in) financing activities |                                                         |   | 49,537                 |          |      |   | (81,424 | )         
|                                                    |                                                         |   |                        |          |      |   |         |           
|                                                    | Increase (decrease) in cash and cash equivalents        |   |                        | 2,845    |      |   |         | (1,900     | )
|Cash and cash equivalents at beginning of period    |                                                         |   | 3,130                  |          |      |   | 5,190   |           
|                                                    |                                                         |   |                        |          |      |   |         |           
|Cash and cash equivalents at end of period          |                                                         | $ | 5,975                  |          |      | $ | 3,290   |           
|                                                    |                                                         |   |                        |          |      |   |         |           

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

(UNAUDITED)

NOTE 1  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 (of a normal and
recurring nature), which are necessary to present fairly the financial
position, results of operations and cash flows for the interim period.
Operating results for the three and nine months ended September 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. The condensed consolidated financial statements
should be read in conjunction with the audited financial statements and
footnotes thereto for the year ended December 31, 2000 included in the
Companys 2000 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.

RECLASSIFICATION

Certain amounts in the prior quarter and year to date condensed
consolidated financial statements have been reclassified to conform to the
corresponding 2001 presentation.

NOTE 2  CONTRACTS HELD FOR SALE

Contracts held for sale consisted of the following:

|                              |  |                |         |              |  |   |         |  
|----------------------------- |  | -------------- | ------- | ------------ |  | - | ------- | -
|                              |  | SEPTEMBER 30,  |         | DECEMBER 31,
|                              |  | 2001           |         | 2000        
|                              |  |                |         |             
|                              |  | (IN THOUSANDS)
|Gross contracts held for sale |  | $              | 209,504 |              |  | $ | 177,086 |  
|Less unearned interest        |  |                | (1,979  | )            |  |   | (3,302  | )
|                              |  |                |         |              |  |   |         |  
|Contracts held for sale       |  |                | 207,525 |              |  |   | 173,784 |  
|Allowance for credit losses   |  |                | (1,341  | )            |  |   | (1,175  | )
|Dealer participation          |  |                | (2,094  | )            |  |   | (1,854  | )
|                              |  |                |         |              |  |   |         |  
|Total                         |  | $              | 204,090 |              |  | $ | 170,755 |  
|                              |  |                |         |              |  |   |         |  

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 3  CREDIT ENHANCEMENT ASSETS

Credit enhancement assets consisted of the following:

|                 |  |                |         |              |  |   |         | 
|---------------- |  | -------------- | ------- | ------------ |  | - | ------- | 
|                 |  | SEPTEMBER 30,  |         | DECEMBER 31,
|                 |  | 2001           |         | 2000        
|                 |  |                |         |             
|                 |  | (IN THOUSANDS)
|Trust receivable |  | $              | 7,693   |              |  | $ | 7,510   | 
|RISA             |  |                | 175,146 |              |  |   | 138,503 | 
|                 |  |                |         |              |  |   |         | 
|Total            |  | $              | 182,839 |              |  | $ | 146,013 | 
|                 |  |                |         |              |  |   |         | 

Retained interest in securitized assets (RISA) capitalized upon
securitization of Contracts represent 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 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 are utilized to project future
earnings and are based on historical experience. 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. Future earnings are
discounted at a rate management believes to be representative of market at the
time of securitization.

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 establishes
new 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 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 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.

Effective April 1, 2001, the Company adopted EITF 99-20. 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.

The following table presents the balances and activity for RISA:

|                                                           |  |                   |         |              |  |   |         |  
|---------------------------------------------------------- |  | ----------------- | ------- | ------------ |  | - | ------- | -
|                                                           |  | NINE MONTHS ENDED |         | YEAR ENDED  
|                                                           |  | SEPTEMBER 30,     |         | DECEMBER 31,
|                                                           |  | 2001              |         | 2000        
|                                                           |  |                   |         |             
|                                                           |  | (IN THOUSANDS)   
|Beginning Balance                                          |  | $                 | 138,503 |              |  | $ | 137,171 |  
|Additions                                                  |  |                   | 62,352  |              |  |   | 109,173 |  
|Amortization                                               |  |                   | (32,702 | )            |  |   | (61,229 | )
|Sale of RISA                                               |  |                   |         |              |  |   | (49,924 | )
|Change in unrealized gain on
securities available for sale |  |                   | 6,993   |              |  |   | 3,312   |  
|                                                           |  |                   |         |              |  |   |         |  
|Ending Balance                                             |  | $                 | 175,146 |              |  | $ | 138,503 |  
|                                                           |  |                   |         |              |  |   |         |  

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

In initially valuing the RISA, the Company establishes an off balance
sheet allowance for probable future credit losses. The allowance is based upon
historical experience and managements estimate of other factors that may
affect portfolio performance. 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 retained
interest earnings to be received from securitizations. Estimated future
undiscounted RISA earnings are calculated by taking the difference between the
weighted average annual percentage 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 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 probable
future losses and by discounting to present value at the current market
discount rates.

|                                                              |  |                |           |              |  |   |           |  
|------------------------------------------------------------- |  | -------------- | --------- | ------------ |  | - | --------- | -
|                                                              |  | SEPTEMBER,     |           | DECEMBER 31,
|                                                              |  | 2001           |           | 2000        
|                                                              |  |                |           |             
|                                                              |  | (IN THOUSANDS)
|Estimated net undiscounted RISA earnings                      |  | $              | 325,024   |              |  | $ | 286,125   |  
|Off balance sheet allowance for losses                        |  |                | (117,281  | )            |  |   | (116,086  | )
|Discount to present value                                     |  |                | (32,597   | )            |  |   | (31,536   | )
|                                                              |  |                |           |              |  |   |           |  
|Retained interest in securitized assets                       |  | $              | 175,146   |              |  | $ | 138,503   |  
|                                                              |  |                |           |              |  |   |           |  
|Outstanding balance of Contracts sold through Securitizations |  | $              | 2,654,213 |              |  | $ | 2,513,407 |  

NOTE 4  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,    
|                                              |  |                                    |       |                  
|                                              |  | 2001                               |       | 2000              |  | 2001 |       | 2000
|                                              |  |                                    |       |                   |  |      |       |     
|                                              |  | (IN THOUSANDS, EXCEPT $ PER SHARE)
|Net Income                                    |  | $                                  | 1,342 |                   |  | $    | 1,711 |      |  | $ | 4,051 |  |  | $ | 4,948 | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Weighted average shares outstanding           |  |                                    | 5,047 |                   |  |      | 5,266 |      |  |   | 5,009 |  |  |   | 5,840 | 
|Net effect of dilutive stock options/warrants |  |                                    | 307   |                   |  |      | 157   |      |  |   | 205   |  |  |   | 159   | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Diluted weighted average shares outstanding   |  |                                    | 5,354 |                   |  |      | 5,423 |      |  |   | 5,214 |  |  |   | 5,999 | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Net income per share:                         |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Basic EPS                                     |  | $                                  | 0.27  |                   |  | $    | 0.32  |      |  | $ | 0.81  |  |  | $ | 0.85  | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Diluted EPS                                   |  | $                                  | 0.25  |                   |  | $    | 0.32  |      |  | $ | 0.78  |  |  | $ | 0.82  | 
|                                              |  |                                    |       |                   |  |      |       |      |  |   |       |  |  |   |       | 

NOTE 5  ADOPTION OF SFAS NO. 133

Effective January 1, 2001 Onyx adopted the provisions of Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133), as amended. SFAS No. 133 requires
companies to record derivatives on the balance sheet as assets and liabilities,
measured at fair value. The accounting for the gain or loss due to changes in
fair value of the derivative instrument depends on whether the derivative
qualifies as a hedge. If the derivative instrument does not qualify as a hedge,
the gains or losses are reported in earnings when they occur. If the derivative
instrument qualifies as a hedge, the accounting varies based upon the type of
risk being hedged.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Adopting the provisions of SFAS No. 133 on January 1, 2001 resulted in a
one-time cumulative after-tax reduction in Accumulated Other Comprehensive
Income as of January 1, 2001, of $840,000, representing the fair value of the
derivatives net of tax.

All components of each derivatives gain or loss were included in the
assessment of hedge effectiveness. The Company has reclassified to earnings
$840,000 of its loss from adoption, which was recorded in Accumulated Other
Comprehensive Income when the forecasted transaction occurred during the first
quarter of 2001.

Cash Flow Hedges

Onyx maintains an overall risk management strategy that incorporates the
use of interest rate and derivative financial instruments to mitigate its
exposure to significant unplanned fluctuations in earnings caused by volatility
in interest rates. Derivative instruments that are used as part of the
Companys interest rate management strategy include forward interest rate
swaps. These instruments are designated as cash flow hedges. Onyx does not use
any of these instruments for trading or speculative purposes.

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.

Accounting for Derivatives and Hedging Activities

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 a recognized
asset or liability (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.

The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. This process includes
linking all derivatives that are designated as cash flow hedges or specific
firm commitments or forecasted transactions. The Company also formally assesses
(both at the hedges inception and on an ongoing basis) whether the derivatives
that are used in hedging transactions have been highly effective in offsetting
changes in the cash flows of hedged items and whether those derivatives may be
expected to remain highly effective in future periods. When it is determined
that a derivative is not, or has ceased to be, highly effective as a hedge, the
Company discontinues hedge accounting prospectively, as discussed below.

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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The Company will discontinue hedge accounting prospectively when (1) it
determines that the derivative is no longer highly effective in offsetting
changes in the cash flows of a hedged item such as firm commitments or
forecasted transactions; (2) it is no longer probable that the forecasted
transaction will occur; (3) the derivative expires or is sold, terminated, or
exercised; or (4) management determines that designating the derivative as a
hedging instrument is no longer appropriate.

NOTE 6  NEW PRONOUNCEMENTS

In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities  A Replacement of FAS 125. This Statement
replaces FAS 125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities. It revises the standards for accounting
for securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but it carries over most of FAS 125s provisions
without reconsideration. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. This Statement is effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring after March
31, 2001. Adoption of SFAS No. 140 did not have a material effect on the
Companys financial statements.

In July 2001, the Financial Accounting Standards Board issued Statements
on Financial Accounting Standards (SFAS) Nos. 141 (Business Combinations) and
142 (Goodwill and Other Intangible Assets). SFAS No. 141, among other things,
eliminates the use of the pooling of interests method of accounting for
business combinations. Under the provisions of SFAS No. 142 goodwill will no
longer be amortized, but will be subject to a periodic test for impairment
based upon fair values. SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001. SFAS No. 142 will be effective for the Company
beginning January 1, 2002. The adoption of these statements is not expected to
have a material effect on the Companys financial statements.

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets, and
supersedes FAS-121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. The statement also supersedes APB-30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. This Statement is effective for financial statements
issued for fiscal years beginning after December 15, 2001. At present, the
Company believes that FAS-144 will not have an effect on its consolidated
financial statements.

NOTE 7  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 are or 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 8  SUBSEQUENT EVENTS

During the fourth quarter of 2001, the Company securitized $400 million in
Contracts.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Onyx Acceptance Corporation (Onyx or the Company) is a specialized
consumer finance company engaged in the purchase, securitization and servicing
of Contracts originated by franchised and select independent automobile
dealerships. The Company focuses its efforts on acquiring Contracts
collateralized by late model used and, to a lesser extent, new motor vehicles,
entered into with purchasers whom the Company believes have an acceptable
credit profile.

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 future excess cash flows
generated by owner and grantor trusts, and earns fees from servicing the
securitized Contracts.

Prior to securitizing Contracts, the Company earns interest income on its
Contracts, pays interest on funds used to purchase the Contracts and absorbs
any credit losses. After securitization, the net earnings are recorded as
retained interest income, which is a component of interest income.

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RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income consists primarily of the difference between the
finance revenue earned on Contracts held on the balance sheet during the
warehousing period and the interest costs associated with the Companys
borrowings to purchase such Contracts.

Net interest income totaled approximately $7.5 million and $16.0 million
for the three and nine-month period ended September 30, 2001 compared to $284.0
thousand and $5.3 million for the same periods in 2000. The increase in net
interest income was primarily due to the adoption of Emerging Issues Task Force
(EITF) 99-20 and a reduction in interest expense related to the Companys
warehouse financing line of credit as a result of declining market interest
rates. EITF 99-20 requires that the Company recognize income from its retained
interest in securitized assets on a level yield accrual method over the
remaining estimated life of the corresponding asset. Prior to EITF 99-20, the
Company recognized income on its credit enhancement assets as a component of
service fee income.

GAIN ON SALE OF CONTRACTS

The Company recorded a gain on sale of Contracts of $6.6 million and $26.2
million for the three and nine-month periods ended September 30, 2001, compared
to $12.1 million and $38.8 million for the same periods in
2000. Over the past year, management has targeted higher
credit-worthy borrowers resulting in a reduction in the weighted
average net interest spread for securitizations executed during 2001.
However, in light of the general economic conditions the nation is
experiencing, management estimates that credit losses will occur at
rates similar to the Company's historical experience. These factors
are the principal reasons underlying the reduction in the gain on
sale of Contracts from 2000 to 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 sale. The net interest rate spread is
also affected by product mix, general market conditions and overall market
interest rates. For securitizations executed during the nine-month period in
2000, the weighted average net interest rate spread before issuance costs and
losses was 5.38%; this rate declined to 4.87% for the same period in 2001. In
addition, a reduction in Contracts securitized, from $1.32 billion during the
nine-month period in 2000, to $1.2 billion for the same period in 2001,
contributed to the decline in gain on sale of Contracts.

SERVICE FEE INCOME

Service fee income includes contractual servicing income and other fee
income. Contractual service fee income is earned at a rate of 1% per annum on
the outstanding balance of Contracts securitized. Other fee income consists
primarily of documentation fees, late charges and deferment fees and is
dependent on the number of Contracts originated and the size of the serviced
portfolio. Increased competition may also affect the amount of other fee income
that the Company may earn when originating or servicing Contracts.

Service fee income decreased to $12.4 million during the third quarter of
2001, versus $13.9 million for the same period in 2000. This decrease is
principally due to the adoption of EITF 99-20, which requires that the Company
recognize income from its retained interest in securitized assets on a level
yield accrual method over the remaining estimated life of the corresponding
asset. Prior to EITF 99-20, the Company recognized income on its credit
enhancement assets as a component of service fee income. Service fee income for
the nine-month period ending September 30, 2001 was $38.2 million compared to
$32.8 million for the same period in 2000. These increases are due to higher
amounts of service fees as a result of the growth of the average serviced
portfolio. The average serviced portfolio increased to $2.8 billion for the
nine months ended September 30, 2001, compared to $2.4 billion for the same
period in 2000. In addition, the adoption date of EITF 99-20, which was not
retroactive, was April 1, 2001, leaving the first quarter of service fee income
to be recorded under the previous accounting standards.

PROVISION FOR CREDIT LOSSES

The Company maintains an allowance for credit losses to cover anticipated
losses for Contracts held for sale. The allowance for credit losses is
increased by adjusting the provision for credit losses to cover additional
Contracts originated and increases in loss estimates and decreased by actual
losses on the Contracts held for sale or by the reduction of the amount of
Contracts held for sale. The level of the allowance is based principally on the
outstanding balance of Contracts held for sale and the historical loss trends
for the period of time the Contracts are held before being sold in a
securitization. When the Company sells Contracts in a securitization
transaction, it reduces its allowance for credit losses and factors probable
losses into its calculation of gain on sale. The Company believes that the
allowance for credit losses is currently adequate to absorb probable losses.
The provision for credit losses totaled $502 thousand and $966 thousand for the
three and nine-month periods ended September 30, 2001, compared to ($73)
thousand and

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$645 thousand for the same periods in 2000. The negative provision for the
third quarter of 2000 was caused by the reduction in Contracts held for sale.
The increase in provision for both the quarter and nine-month period ending
September 30, 2001 reflects a higher average Contract balance held for sale and
an increase in net losses versus the same periods in 2000. Contracts held for
sale decreased to $164.9 million as of September 30, 2000 from $236.6 million
as of June 30, 2000. Provision for credit losses consists of net credit losses
incurred during the warehousing period plus future provision for losses
reserved against the net changes in Contracts held for sale during the period.
Net credit losses were $306 thousand and $766 thousand during the three and
nine-month periods ended September 30, 2001, compared to $329 thousand and $1.0
million for the same periods in 2000. The reduction in credit losses reflects
managements decision to target higher credit-worthy borrowers beginning the
fourth quarter of 2000.

OPERATING EXPENSES

Total operating expenses were $22.0 million or 3.08% of the average
serviced portfolio for the three months ended September 30, 2001 compared to
$22.0 million or 3.45% of the average serviced portfolio for the same period in
2000. For the nine months ended September 30, 2001, total operating expenses
were $67.7 million or 3.22% of the average serviced portfolio, versus $63.9
million or 3.55% of the average serviced portfolio for the nine months ended
September 30, 2000. Operating expenses for the quarter remained stable as a
result of renegotiated service contracts with the Companys long distance
telephone carriers and the successful conversion of the Companys loan and
collection processes to an in-house system during the third quarter. The dollar
increase in total operating expenses for the nine-month period is primarily
attributable to an increase in the average serviced portfolio for the period.
The average serviced portfolio increased to $2.8 billion for the nine months
ended September 30, 2001 from $2.4 billion for the same period in 2000, an
increase of approximately 17%.

The Company incurred salary and benefit expenses of $13.2 million for the
three months ended September 30, 2001, compared to $11.3 million for the same
period in 2000. For the nine months ended September 30, 2001 total salary and
benefit expenses were $39.9 million versus $35.4 million for the same period in
2000. The dollar increase for both periods is attributable to the incremental
staffing requirements related to the growth of the serviced portfolio. Salary
and benefit expense as a percent of the average serviced portfolio were 1.9%
for both the three and nine-month periods ending September 30, 2001, compared
to 1.8% and 2.0% for the same periods in 2000, respectively.

System and servicing expenses declined to $476 thousand for the quarter
ended September 30, 2001, compared to $1.3 million for the same period in 2000.
For the nine months ended September 30, 2001, total system and servicing
expenses declined to $3.6 million, compared to $4.7 million for the same period
in 2000. These reductions reflect the renegotiation of several contracts with
the Companys major service providers and the successful conversion of the
Companys loan accounting and collection processes to an in-house system.

Telephone and data line charges declined to $1.2 million from $1.5 million
for the third quarter of 2001 and 2000 respectively. For the nine months ended
September 30, 2001, total telephone and data line charges were $3.7 million,
versus $4.7 million for the same period in 2000. Although these charges
generally increase with the growth of the serviced portfolio, the reduction
between 2001 and 2000 was primarily due to renegotiated contracts for long
distance rates with certain carriers. Assuming no additional reduction in long
distance rates, the Company expects these charges to increase with the
continued growth of the serviced portfolio.

Depreciation expense remained relatively stable at $1.1 million and $3.6
million for the three and nine-month periods ending September 30, 2001,
compared to $1.2 million and $3.2 million for the same periods in 2000. General
and administrative expenses decreased slightly to $6.0 million for the three
months ended September 30, 2001, compared to $6.6 million for the same period
in 2000. For the nine months ended September 30, 2001 and 2000, general and
administrative expenses were $17.0 million and $16.3 million, respectively.
Higher expenses are primarily due to the growth of the average serviced
portfolio.

INCOME TAXES

The combined
effective tax rates for the Company's federal and state returns filed for
the nine-month periods ending September, 2001 and September 2000 were 40.1% and 41.5%, respectively.

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FINANCIAL CONDITION

CONTRACTS HELD FOR SALE

Contracts held for sale totaled $207.5 million at September 30, 2001,
compared to $173.8 million at December 31, 2000. The balance in the held for
sale portfolio is largely dependent upon the timing of the origination and
securitization of Contracts. The Company completed securitization transactions
of $400.0 million during the first, second and third quarters of 2001. 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,              |           | DEC. 31, |  | MAR. 31, |           | JUNE 30, |  | SEPT. 30,
|                                     |  | 2000                   |           | 2000     |  | 2001     |           | 2001     |  | 2001     
|                                     |  |                        |           |          |  |          |           |          |  |          
|                                     |  | (DOLLARS IN THOUSANDS)
|Contracts purchased during period    |  | $                      | 367,636   |          |  | $        | 401,181   |          |  | $         | 430,524   |  |  | $ | 379,595   |  |  | $ | 430,940   | 
|Average monthly volume during period |  |                        | 122,545   |          |  |          | 133,727   |          |  |           | 143,508   |  |  |   | 126,531   |  |  |   | 143,646   | 
|Gain on sale of Contracts            |  |                        | 12,066    |          |  |          | 6,217     |          |  |           | 9,319     |  |  |   | 10,257    |  |  |   | 6,591     | 
|Contracts securitized during period  |  |                        | 440,000   |          |  |          | 400,000   |          |  |           | 400,000   |  |  |   | 400,000   |  |  |   | 400,000   | 
|Servicing portfolio at period end    |  |                        | 2,584,152 |          |  |          | 2,690,606 |          |  |           | 2,784,411 |  |  |   | 2,807,181 |  |  |   | 2,876,986 | 

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ASSET QUALITY

The Company monitors and attempts to minimize delinquencies and losses
through timely collections and the use of predictive dialing and other systems.
At September 30, 2001, sixty plus day delinquencies represented 1.11% of the
amount of Contracts in its serviced portfolio compared to 1.48% at December 31,
2000. Annualized net charge-offs as a percentage of the average
serviced
portfolio were 2.64% for the quarter ended September 30, 2001, compared to
2.20% for the same period in 2000.

Off balance sheet reserves at September 30, 2001 were 4.4%, compared to
4.6% at December 31, 2000. Off balance sheet reserves are those reserves
established and maintained on Contracts sold to the grantor and owner trusts in
connection with securitizations.

DELINQUENCY EXPERIENCE OF SERVICED PORTFOLIO

|                                                       |              |       |           |                        |        |                   |         |        |       |     |           |        |        |  |         |       |       | 
|------------------------------------------------------ | ------------ | ----- | --------- | ---------------------- | ------ | ----------------- | ------- | ------ | ----- | --- | --------- | ------ | ------ |  | ------- | ----- | ----- | 
|                                                       |              |       |           | SEPTEMBER 30, 2001     |        | DECEMBER 31, 2000
|                                                       |              |       |           |                        |        |                  
|                                                       |              |       |           | AMOUNT                 |        | NO.               |         | AMOUNT |       | NO.
|                                                       |              |       |           |                        |        |                   |         |        |       |    
|                                                       |              |       |           | (DOLLARS IN THOUSANDS)
|Serviced portfolio                                     |              | $     | 2,876,986 |                        |        |                   | 288,822 |        |       | $   | 2,690,606 |        |        |  | 269,372 |      
|Delinquencies(1)(2)                                    |              |       |           |                        |        |                   |         |        |       |     |           |        |        |  |         |      
|                                                       | 60
 89 days |       | $         | 17,730                 |        |                   |         | 2,062  |       |     | $         | 23,085 |        |  |         | 2,285 |      
|                                                       | 90+ days     |       |           | 14,168                 |        |                   |         | 1,624  |       |     |           | 16,748 |        |  |         | 1,749 |      
|                                                       |              |       |           |                        |        |                   |         |        |       |     |           |        |        |  |         |      
|                                                       |              | Total |           | $                      | 31,898 |                   |         |        | 3,686 |     |           | $      | 39,833 |  |         |       | 4,034 | 
|                                                       |              |       |           |                        |        |                   |         |        |       |     |           |        |        |  |         |      
|Total delinquencies as a percent of Serviced portfolio |              |       | 1.11      | %                      |        |                   | 1.28    | %      |       |     | 1.48      | %      |        |  | 1.50    | %    



---

|(1) |  | Delinquencies include principal amounts only, net of repossessed
inventory and accounts in bankruptcy. Delinquent sixty plus day
repossessed inventory as a percent of the serviced portfolio was 0.63% and
0.80% at September 30, 2001 and December 31, 2000, respectively.
Delinquent sixty plus day Contracts in bankruptcy as a percent of the
serviced portfolio were 0.77% and 0.41% at September 30, 2001 and December
31, 2000, 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,            
|                                                                      |  |                            |           |                          
|                                                                      |  | 2001                       |           | 2000                      |  | 2001 |           | 2000
|                                                                      |  |                            |           |                           |  |      |           |     
|                                                                      |  | (DOLLARS IN THOUSANDS)    
|Period end Contracts outstanding                                      |  | $                          | 2,876,986 |                           |  | $    | 2,584,152 |      |  | $ | 2,876,986 |   |  | $ | 2,584,152 |  
|Average servicing portfolio(1)                                        |  | $                          | 2,850,260 |                           |  | $    | 2,539,409 |      |  | $ | 2,801,049 |   |  | $ | 2,397,770 |  
|Number of gross charge-offs                                           |  |                            | 3,197     |                           |  |      | 2,543     |      |  |   | 9,813     |   |  |   | 7,455     |  
|Gross charge-offs                                                     |  | $                          | 22,100    |                           |  | $    | 16,259    |      |  | $ | 65,329    |   |  | $ | 47,209    |  
|Net charge-offs(2)                                                    |  | $                          | 18,835    |                           |  | $    | 13,992    |      |  | $ | 55,950    |   |  | $ | 40,483    |  
|Annualized net charge-offs as a percent
of average Serviced portfolio |  |                            | 2.64      | %                         |  |      | 2.20      | %    |  |   | 2.66      | % |  |   | 2.25      | %



---

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

15



---



##### 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, 2001:



|      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   | 
|----- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - | 
|MONTH |  | 97-2 |      | 97-3 |  | 97-4 |      | 98-1 |  | 98-A |      | 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
|      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |     
|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 | % |  |  | 0.00 | %
|2     |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.00 | %    |  |      | 0.01 | %    |  |      | 0.01 | %    |  |      | 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 | %
|3     |  |      | 0.02 | %    |  |      | 0.02 | %    |  |      | 0.01 | %    |  |      | 0.02 | %    |  |      | 0.03 | %    |  |      | 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 | %
|4     |  |      | 0.07 | %    |  |      | 0.09 | %    |  |      | 0.04 | %    |  |      | 0.08 | %    |  |      | 0.07 | %    |  |      | 0.08 | %    |  |      | 0.04 | %    |  |      | 0.05 | %    |  |      | 0.07 | %    |  |  | 0.06 | % |  |  | 0.04 | % |  |  | 0.04 | % |  |  | 0.04 | % |  |  | 0.03 | % |  |  | 0.02 | % |  |  | 0.02 | % |  |  | 0.03 | % |  |  |      |  
|5     |  |      | 0.22 | %    |  |      | 0.13 | %    |  |      | 0.11 | %    |  |      | 0.14 | %    |  |      | 0.14 | %    |  |      | 0.19 | %    |  |      | 0.15 | %    |  |      | 0.11 | %    |  |      | 0.14 | %    |  |  | 0.16 | % |  |  | 0.09 | % |  |  | 0.11 | % |  |  | 0.10 | % |  |  | 0.06 | % |  |  | 0.07 | % |  |  | 0.07 | % |  |  | 0.10 | % |  |  |      |  
|6     |  |      | 0.32 | %    |  |      | 0.24 | %    |  |      | 0.20 | %    |  |      | 0.24 | %    |  |      | 0.23 | %    |  |      | 0.33 | %    |  |      | 0.27 | %    |  |      | 0.21 | %    |  |      | 0.27 | %    |  |  | 0.28 | % |  |  | 0.15 | % |  |  | 0.18 | % |  |  | 0.17 | % |  |  | 0.11 | % |  |  | 0.15 | % |  |  | 0.12 | % |  |  |      |   |  |  |      |  
|7     |  |      | 0.59 | %    |  |      | 0.36 | %    |  |      | 0.28 | %    |  |      | 0.40 | %    |  |      | 0.37 | %    |  |      | 0.45 | %    |  |      | 0.46 | %    |  |      | 0.35 | %    |  |      | 0.43 | %    |  |  | 0.47 | % |  |  | 0.24 | % |  |  | 0.37 | % |  |  | 0.30 | % |  |  | 0.26 | % |  |  | 0.26 | % |  |  | 0.20 | % |  |  |      |   |  |  |      |  
|8     |  |      | 0.80 | %    |  |      | 0.47 | %    |  |      | 0.43 | %    |  |      | 0.53 | %    |  |      | 0.42 | %    |  |      | 0.61 | %    |  |      | 0.57 | %    |  |      | 0.49 | %    |  |      | 0.60 | %    |  |  | 0.64 | % |  |  | 0.43 | % |  |  | 0.63 | % |  |  | 0.44 | % |  |  | 0.41 | % |  |  | 0.39 | % |  |  | 0.31 | % |  |  |      |   |  |  |      |  
|9     |  |      | 0.91 | %    |  |      | 0.62 | %    |  |      | 0.55 | %    |  |      | 0.68 | %    |  |      | 0.51 | %    |  |      | 0.82 | %    |  |      | 0.74 | %    |  |      | 0.63 | %    |  |      | 0.85 | %    |  |  | 0.83 | % |  |  | 0.59 | % |  |  | 0.87 | % |  |  | 0.67 | % |  |  | 0.65 | % |  |  | 0.50 | % |  |  |      |   |  |  |      |   |  |  |      |  
|10    |  |      | 1.07 | %    |  |      | 0.73 | %    |  |      | 0.72 | %    |  |      | 0.85 | %    |  |      | 0.70 | %    |  |      | 0.95 | %    |  |      | 0.94 | %    |  |      | 0.81 | %    |  |      | 1.07 | %    |  |  | 1.09 | % |  |  | 0.76 | % |  |  | 1.05 | % |  |  | 0.90 | % |  |  | 0.85 | % |  |  | 0.65 | % |  |  |      |   |  |  |      |   |  |  |      |  
|11    |  |      | 1.26 | %    |  |      | 0.81 | %    |  |      | 0.87 | %    |  |      | 1.04 | %    |  |      | 0.85 | %    |  |      | 1.10 | %    |  |      | 1.12 | %    |  |      | 1.04 | %    |  |      | 1.34 | %    |  |  | 1.31 | % |  |  | 0.99 | % |  |  | 1.27 | % |  |  | 1.11 | % |  |  | 1.08 | % |  |  | 0.85 | % |  |  |      |   |  |  |      |   |  |  |      |  
|12    |  |      | 1.42 | %    |  |      | 0.94 | %    |  |      | 0.95 | %    |  |      | 1.20 | %    |  |      | 1.01 | %    |  |      | 1.20 | %    |  |      | 1.30 | %    |  |      | 1.29 | %    |  |      | 1.56 | %    |  |  | 1.47 | % |  |  | 1.20 | % |  |  | 1.59 | % |  |  | 1.38 | % |  |  | 1.29 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|13    |  |      | 1.58 | %    |  |      | 1.10 | %    |  |      | 1.08 | %    |  |      | 1.33 | %    |  |      | 1.17 | %    |  |      | 1.36 | %    |  |      | 1.54 | %    |  |      | 1.49 | %    |  |      | 1.79 | %    |  |  | 1.62 | % |  |  | 1.41 | % |  |  | 1.82 | % |  |  | 1.57 | % |  |  | 1.42 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|14    |  |      | 1.68 | %    |  |      | 1.23 | %    |  |      | 1.19 | %    |  |      | 1.46 | %    |  |      | 1.37 | %    |  |      | 1.48 | %    |  |      | 1.73 | %    |  |      | 1.72 | %    |  |      | 1.90 | %    |  |  | 1.77 | % |  |  | 1.52 | % |  |  | 2.03 | % |  |  | 1.84 | % |  |  | 1.65 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|15    |  |      | 1.80 | %    |  |      | 1.38 | %    |  |      | 1.36 | %    |  |      | 1.61 | %    |  |      | 1.48 | %    |  |      | 1.64 | %    |  |      | 1.90 | %    |  |      | 1.90 | %    |  |      | 2.08 | %    |  |  | 2.00 | % |  |  | 1.70 | % |  |  | 2.25 | % |  |  | 2.08 | % |  |  | 1.93 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|16    |  |      | 1.97 | %    |  |      | 1.58 | %    |  |      | 1.42 | %    |  |      | 1.71 | %    |  |      | 1.59 | %    |  |      | 1.89 | %    |  |      | 2.10 | %    |  |      | 2.10 | %    |  |      | 2.23 | %    |  |  | 2.08 | % |  |  | 2.00 | % |  |  | 2.48 | % |  |  | 2.26 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|17    |  |      | 2.10 | %    |  |      | 1.68 | %    |  |      | 1.52 | %    |  |      | 1.88 | %    |  |      | 1.76 | %    |  |      | 2.05 | %    |  |      | 2.28 | %    |  |      | 2.26 | %    |  |      | 2.42 | %    |  |  | 2.29 | % |  |  | 2.17 | % |  |  | 2.64 | % |  |  | 2.42 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|18    |  |      | 2.23 | %    |  |      | 1.77 | %    |  |      | 1.64 | %    |  |      | 2.01 | %    |  |      | 1.96 | %    |  |      | 2.22 | %    |  |      | 2.51 | %    |  |      | 2.46 | %    |  |      | 2.63 | %    |  |  | 2.48 | % |  |  | 2.40 | % |  |  | 2.80 | % |  |  | 2.69 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|19    |  |      | 2.35 | %    |  |      | 1.91 | %    |  |      | 1.75 | %    |  |      | 2.17 | %    |  |      | 2.07 | %    |  |      | 2.37 | %    |  |      | 2.71 | %    |  |      | 2.59 | %    |  |      | 2.71 | %    |  |  | 2.61 | % |  |  | 2.61 | % |  |  | 2.98 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|20    |  |      | 2.48 | %    |  |      | 2.04 | %    |  |      | 1.85 | %    |  |      | 2.25 | %    |  |      | 2.25 | %    |  |      | 2.50 | %    |  |      | 2.83 | %    |  |      | 2.71 | %    |  |      | 2.89 | %    |  |  | 2.73 | % |  |  | 2.87 | % |  |  | 3.25 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|21    |  |      | 2.59 | %    |  |      | 2.11 | %    |  |      | 1.97 | %    |  |      | 2.41 | %    |  |      | 2.37 | %    |  |      | 2.67 | %    |  |      | 2.95 | %    |  |      | 2.83 | %    |  |      | 3.08 | %    |  |  | 2.92 | % |  |  | 3.05 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|22    |  |      | 2.72 | %    |  |      | 2.20 | %    |  |      | 2.08 | %    |  |      | 2.52 | %    |  |      | 2.48 | %    |  |      | 2.79 | %    |  |      | 3.08 | %    |  |      | 2.88 | %    |  |      | 3.21 | %    |  |  | 3.07 | % |  |  | 3.20 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|23    |  |      | 2.81 | %    |  |      | 2.31 | %    |  |      | 2.12 | %    |  |      | 2.63 | %    |  |      | 2.65 | %    |  |      | 2.92 | %    |  |      | 3.25 | %    |  |      | 3.03 | %    |  |      | 3.31 | %    |  |  | 3.22 | % |  |  | 3.33 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|24    |  |      | 2.85 | %    |  |      | 2.41 | %    |  |      | 2.23 | %    |  |      | 2.75 | %    |  |      | 2.76 | %    |  |      | 3.06 | %    |  |      | 3.39 | %    |  |      | 3.21 | %    |  |      | 3.43 | %    |  |  | 3.32 | % |  |  | 3.53 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|25    |  |      | 2.93 | %    |  |      | 2.51 | %    |  |      | 2.36 | %    |  |      | 2.86 | %    |  |      | 2.81 | %    |  |      | 3.14 | %    |  |      | 3.45 | %    |  |      | 3.28 | %    |  |      | 3.55 | %    |  |  | 3.43 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|26    |  |      | 2.96 | %    |  |      | 2.59 | %    |  |      | 2.41 | %    |  |      | 2.98 | %    |  |      | 2.95 | %    |  |      | 3.23 | %    |  |      | 3.57 | %    |  |      | 3.34 | %    |  |      | 3.67 | %    |  |  | 3.65 | % |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|27    |  |      | 3.09 | %    |  |      | 2.71 | %    |  |      | 2.52 | %    |  |      | 3.06 | %    |  |      | 2.99 | %    |  |      | 3.28 | %    |  |      | 3.72 | %    |  |      | 3.47 | %    |  |      | 3.77 | %    |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|28    |  |      | 3.17 | %    |  |      | 2.79 | %    |  |      | 2.55 | %    |  |      | 3.15 | %    |  |      | 3.03 | %    |  |      | 3.35 | %    |  |      | 3.81 | %    |  |      | 3.61 | %    |  |      | 3.88 | %    |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|29    |  |      | 3.22 | %    |  |      | 2.92 | %    |  |      | 2.62 | %    |  |      | 3.19 | %    |  |      | 3.12 | %    |  |      | 3.45 | %    |  |      | 3.91 | %    |  |      | 3.67 | %    |  |      | 4.01 | %    |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|30    |  |      | 3.26 | %    |  |      | 2.94 | %    |  |      | 2.71 | %    |  |      | 3.26 | %    |  |      | 3.13 | %    |  |      | 3.50 | %    |  |      | 4.05 | %    |  |      | 3.78 | %    |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|31    |  |      | 3.33 | %    |  |      | 3.01 | %    |  |      | 2.77 | %    |  |      | 3.33 | %    |  |      | 3.18 | %    |  |      | 3.57 | %    |  |      | 4.13 | %    |  |      | 3.85 | %    |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|32    |  |      | 3.39 | %    |  |      | 3.04 | %    |  |      | 2.81 | %    |  |      | 3.40 | %    |  |      | 3.24 | %    |  |      | 3.67 | %    |  |      | 4.21 | %    |  |      | 3.96 | %    |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|33    |  |      | 3.48 | %    |  |      | 3.08 | %    |  |      | 2.85 | %    |  |      | 3.42 | %    |  |      | 3.26 | %    |  |      | 3.73 | %    |  |      | 4.27 | %    |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|34    |  |      | 3.51 | %    |  |      | 3.11 | %    |  |      | 2.88 | %    |  |      | 3.46 | %    |  |      | 3.28 | %    |  |      | 3.81 | %    |  |      | 4.33 | %    |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|35    |  |      | 3.54 | %    |  |      | 3.20 | %    |  |      | 2.93 | %    |  |      | 3.53 | %    |  |      | 3.36 | %    |  |      | 3.86 | %    |  |      | 4.42 | %    |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|36    |  |      | 3.55 | %    |  |      | 3.21 | %    |  |      | 2.91 | %    |  |      | 3.56 | %    |  |      | 3.39 | %    |  |      | 3.91 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|37    |  |      | 3.56 | %    |  |      | 3.23 | %    |  |      | 2.94 | %    |  |      | 3.59 | %    |  |      | 3.42 | %    |  |      | 4.00 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|38    |  |      | 3.56 | %    |  |      | 3.24 | %    |  |      | 2.98 | %    |  |      | 3.64 | %    |  |      | 3.45 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|39    |  |      | 3.58 | %    |  |      | 3.25 | %    |  |      | 3.00 | %    |  |      | 3.67 | %    |  |      | 3.48 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|40    |  |      | 3.58 | %    |  |      | 3.27 | %    |  |      | 3.01 | %    |  |      | 3.68 | %    |  |      | 3.56 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|41    |  |      | 3.58 | %    |  |      | 3.32 | %    |  |      | 3.03 | %    |  |      | 3.71 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|42    |  |      | 3.59 | %    |  |      | 3.34 | %    |  |      | 3.04 | %    |  |      | 3.73 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|43    |  |      | 3.60 | %    |  |      | 3.36 | %    |  |      | 3.07 | %    |  |      | 3.77 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|44    |  |      | 3.61 | %    |  |      | 3.40 | %    |  |      | 3.09 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|45    |  |      | 3.61 | %    |  |      | 3.39 | %    |  |      | 3.09 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  
|46    |  |      | 3.62 | %    |  |      | 3.38 | %    |  |      | 3.11 | %    |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |   |  |  |      |  

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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 facility. Management
believes that the resources available to the Company are sufficient to provide the needed capital
to fund the anticipated expansion of the Company, Contract purchases, and
investments in origination and servicing capabilities.

Cash used in operating activities was $44.5 million for the nine months
ended September 30, 2001, compared to $82.9 million provided in the nine months
ended September 30, 2000. Cash provided by operating activities during 2000 was
primarily due to the securitization of the Companys residual cash flows from
15 of its then outstanding securitizations, resulting in a cash inflow of
approximately $49.0 million. A portion of the proceeds of this transaction was
used to pay down two of the Companys residual financing
facilities and to pay
off a third residual financing facility. Cash used in investing activities was
$2.1 million for the nine months ended September 30, 2001, compared to $3.4
million for the nine months ended September 30, 2000. The reduction in
investing activities is partially due to an increase in the Companys use of
capital lease lines for acquisitions of furniture and computer equipment in
2001. Cash provided by financing activities was $49.5 million for the nine
months ended September 30, 2001, compared to $81.4 million used during the nine
months ended September 30, 2000. The difference was primarily due to the
Company reducing its residual lines of credit during March 2000 in connection
with the residual securitization.

CP Facility: As of September 30, 2001, 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 Company is finalizing the renewal of the CP Facility. A $150
million commercial paper facility with a commercial paper asset-backed conduit
sponsored by The Chase Manhattan Bank
 expired in August 2001 and was
not renewed.

The Residual Lines: The Company, through 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) executed in October 2000. (The SBRC
facility together with the CSFB-Europe facility described above 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.

Subordinated Debt: As of September 30, 2001, the Company had outstanding
approximately $17.1 million of subordinated debt. $5.1 million of this amount
is being amortized through February 2003 with a stated interest rate of 9.5%.
The remaining balance has a stated interest rate of 12.5% and a maturity of
June 2006.

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, 2001.

Hedging and Interest Rate Risk Management. The Company employs a hedging
strategy that is intended to minimize the risk of interest rate fluctuations
and which historically has involved the execution of forward interest rate
swaps or use of a pre-funding structure for the Companys securitizations. The
Company is not required to maintain collateral on the outstanding hedging
program.

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

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AAA/Aaa rated asset-backed securities. The Company completed a AAA/Aaa
rated publicly underwritten asset-backed securitization in the amount of $400
million in the third quarter of 2001.

During the fourth quarter of 2001, the Company executed a securitization
totaling $400 million.

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, 2001, the Company has securitized $6.4 billion
of its Contracts in 25 separate transactions. In each of its securitizations,
the Company has 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.

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 Risk).

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 related
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

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Because the Companys funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of debt, fluctuations in
interest rates impact the Companys profitability. As a result, the Company
employs various hedging strategies to limit certain risks of interest rate
fluctuations. See Managements Discussion and Analysis  Hedging and Interest
Rate Risk Management and Risk Factors  We Are Subject to Interest Rate
Fluctuations.







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. The Company has been a defendant
in three consumer class action lawsuits. One such proceeding, served in 1999,
in which the Company was a defendant, had been brought as a class action and
was pending in the State of California. A class was certified in 2000; in the
matter, the plaintiffs raised issues regarding the payment of dealer
participation to dealers. The trial in this matter has been concluded and
judgment was entered in the Companys favor. Another such proceeding, served in
2000, in which the Company was a defendant, was brought as a putative class
action and was pending in the state of New Jersey. This case settled for a
nominal amount and was dismissed.

In another such consumer class action, filed and served in 1999, pending
in Orange County Superior Court in the state of California, and entitled Jason
Bollinger v. Onyx Acceptance Corporation (Action number 807831), the plaintiffs
alleged that the Company sent defective post-repossession notices to certain
California borrowers following the repossession or voluntary surrender of their
vehicles. The Company, without admitting liability, entered into a settlement
agreement with respect to this matter, and this agreement was approved by the
court in October 2000. Under the terms of the settlement, the Company refunded
certain amounts collected on deficiencies related to class members accounts
(in some instances, with interest) and paid a certain portion of the
plaintiffs counsel fees and other amounts. Pursuant to the settlement, the
monies from refund checks not cashed by the class members cannot be returned to
the Company. In accordance with the settlement, these amounts were paid as
follows: one-half to the plaintiffs counsel up to a negotiated cap, as an
additional attorneys fee award, and the remainder to a non-profit youth soccer
organization in Orange County, California where the Companys headquarters is
located. One of the children of Mr. Hall, the Companys President and Chief
Executive Officer, participates in this organization. Mr. Hall has also
volunteered in certain capacities in this organization.

On January 25, 2000, a putative class action complaint was filed against
the Company and certain of the Companys officers and directors alleging
violations of Section 10(b) and 20(a) of the Securities and Exchange Act of
1934 arising from the Companys use of the cash-in method of measuring and
accounting for credit enhancement assets in the financial statements. The
matter is entitled D. Colin v. Onyx Acceptance Corporation, et al. in the U.S.
District Court for the Central District of California (Case number SACV 00-0087
(GLT)(EEx)). The Company believes that its previous use of the cash-in method
of measuring and accounting for credit enhancement assets was consistent with
then current generally accepted accounting principles and accounting practices
of other finance companies. As required by the Financial Accounting Standards
Boards Special Report, A Guide to Implementation of Statement 125 on
Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities, Second Edition, dated December 1998 and related statements
made by the staff of the Securities and Exchange Commission, the Company
retroactively changed the method of measuring and accounting for credit
enhancement assets to the cash-out method and restated the Companys financial
statements for 1996, 1997 and the first three fiscal quarters of 1998. In
February 2001, an amended complaint was dismissed with prejudice by the court;
the plaintiff has appealed this dismissal.

Management believes that the Company has taken prudent steps to address
the litigation risks associated with the Companys business activities.
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.

In the opinion of management, the resolution of the proceedings described
in this section will not have a material adverse effect on the Companys
consolidated financial position, results of operations or liquidity.

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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 comparable
terminology. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. 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 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

You should carefully consider the following risks in your evaluation of us
and our Common Stock. The risks and uncertainties described below are not the
only ones facing our Company. Additional risks and uncertainties, including but
not limited to credit, economic, competitive, governmental and financial
factors affecting our operations, markets, financial products, and services and
other factors discussed in our filings with the Securities and Exchange
Commission, may also adversely impact and impair our business. If any of these
risks actually occur, our business, results of operations, cash flows or
financial condition would likely suffer. In such case, the trading price of our
common stock could decline, and you may lose all or part of the money you paid
to buy our common stock.

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 significant 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. 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

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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.

We Depend on Warehouse Financing.

We depend on warehousing facilities with financial institutions to finance
the purchase or origination of Contracts pending securitization. Our business
strategy requires that such financing continue to be available during the
warehouse 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 agreements 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; 
|
| |  |  | earnings before interest, depreciation and taxes coverage ratio; and
|
| |  |  | minimum cash on hand.                                               

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. We typically use the
RISA from each securitization as collateral to borrow cash 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
experienced higher delinquency and loss ratios than expected, then the amount
of money we could 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.

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.

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We Depend on Credit Enhancement.

From inception through September 30, 2001, each of our securitizations
(other than the residual securitization) 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 enhancements 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 of up to 270 days for commercial paper, 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 materially 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. The interest rates are based on 30 day LIBOR and reset each month. In
periods of increasing interest rates our cash flows, results of operations and
financial condition could be 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 gains on sale
of Contracts and our results of operations and cash flows.

22



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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 prepayment 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. If necessary, we
would write-down the value of the RISA through a reduction to servicing fee
income.

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 agreements
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
|
| |  |  | a trigger event that would block release of future excess cash flows
generated from the grantor trusts or owner trusts respective spread
accounts.       

We are entitled to receive servicing income only while we act as servicer
under the applicable sales and servicing agreements or pooling and servicing
agreements. 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.

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; and                                                        
|
| |  |  | the investor rate for securitizations.                                                                  

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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. Competition for such personnel is
intense. 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 markets, 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.

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
process 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 specific disclosures; and                                         

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| |  |  | 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 claiming violation of various federal and state
consumer credit and similar laws and regulations. We were a defendant in three
such consumer class action lawsuits. One such proceeding, served in 1999, in
which were a defendant, had been brought as a putative class action and was
pending in the State of California. A class was certified in 2000; in the
matter, the plaintiffs raised issues regarding the payment of dealer
participation to dealers. The trial in this matter has been concluded and
judgment was entered in the Companys favor. Another such proceeding, served
in 2000, in which we were a defendant, was brought as a putative class action
and was pending in the state of New Jersey. This case settled for a nominal
amount and was dismissed.

In another such consumer class action, filed and served in 1999, pending
in Orange County Superior Court in the state of California, and entitled Jason
Bollinger v. Onyx Acceptance Corporation (Action number 807831), the plaintiffs
alleged that we sent defective post-repossession notices to certain California
borrowers following the repossession or voluntary surrender of their vehicles.
Without admitting liability, we entered into a settlement agreement with
respect to this matter, and this agreement was approved by the court in October
2000. Under the terms of the settlement, we refunded certain amounts collected
on deficiencies related to class members accounts (in some instances, with
interest) and paid a certain portion of the plaintiffs counsel fees and other
amounts. Pursuant to the settlement, the monies from refund checks not cashed
by the class members cannot be returned to us. In accordance with the
settlement, these amounts were paid as follows: one-half to the plaintiffs
counsel up to a negotiated cap, as an additional attorneys fee award, and the
remainder to a non-profit youth soccer organization in Orange County,
California where the our headquarters is located. One of the children of Mr.
Hall, the Companys President and Chief Executive Officer, participates in this
organization. Mr. Hall has also volunteered in certain capacities in this
organization.

On January 25, 2000, a putative class action complaint was filed against
us and certain of our officers and directors alleging violations of Section
10(b) and 20(a) of the Securities and Exchange Act of 1934 arising from our use
of the cash-in method of measuring and accounting for credit enhancement assets
in the financial statements. The matter is entitled D. Colin v. Onyx Acceptance
Corporation, et al. in the U.S. District Court for the Central District of
California (Case number SACV 00-0087 (GLT)(EEx)). We believe that our previous
use of the cash-in method of measuring and accounting for credit enhancement
assets was consistent with then current generally accepted accounting
principles and accounting practices of other finance companies. As required by
the Financial Accounting Standards Boards Special Report, A Guide to
Implementation of Statement 125 on Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, Second Edition, dated
December 1998 and related statements made by the staff of the Securities and
Exchange Commission, we retroactively changed the method of measuring and
accounting for credit enhancement assets to the cash-out method and restated
our financial statements for 1996, 1997 and the first three fiscal quarters of
1998. In February 2001, an amended complaint was dismissed with prejudice by
the court; the plaintiff has appealed the dismissal.

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 6. EXHIBITS AND REPORTS OF FORM 8-K

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

|        |  |                                 |  |  |  | 
|------- |  | ------------------------------- |  |  |  | 
|EXHIBIT |  |                                 |  |  |  | 
|NUMBER  |  | EXHIBIT TITLE                   |  |  |  | 
|        |  |                                 |  |  |  | 
|21.1    |  | Subsidiaries of the Registrant.



| | (b) |  | REPORTS ON FORM 8-K
| | --- |  | -------------------

None.

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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 and
Principal Executive Officer               
|                       
|Date: November 14, 2001 |  |                             |                                                                       | 
|                       
|                        |  | By:                         | /s/   DON P. DUFFY                                                   
|                        |  |                             |                                                                      
|                        |  |                             | Don P. Duffy
Executive Vice President and
Principal Financial Officer
|                       
|Date: November 14, 2001 |  |                             |                                                                       | 

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EXHIBIT INDEX

|        |  |                                 |  |  |  | 
|------- |  | ------------------------------- |  |  |  | 
|EXHIBIT |  |                                 |  |  |  | 
|NUMBER  |  | EXHIBIT TITLE                   |  |  |  | 
|        |  |                                 |  |  |  | 
|21.1    |  | Subsidiaries of the Registrant.

28