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                                [LETTERHEAD]

                       Report of Independent Auditors

Arcadia Financial Ltd.
Board of Directors

We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Arcadia Financial Ltd. (the "Company") as of
December 31, 1997 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year ended December 31, 1997 and
have issued our report thereon dated January 21, 1998.

Our audit, referred to in the preceding paragraph, included procedures applied
to the documents and records relating to the servicing of automobile installment
contracts under certain pooling and servicing agreements, and sale and servicing
agreements, and procedures applied to the delinquency and loss statistics
relating to the Company's portfolio of automobile installment contracts. These
procedures were determined on the basis of our objective to issue an opinion on
the financial statements referred to above taken as a whole. Because the
procedures referred to in this paragraph and described below do not constitute
an audit of the documents and records relating to the servicing of automobile
installment contracts or the delinquency and loss statistics relating to the
Company's portfolio of automobile installment contracts, we do not express an
opinion on those documents, records or statistics.

The procedures we performed on these documents and records as part of our audit
of the financial statements of the Company were as follows:

-    DOCUMENTS AND RECORDS RELATING TO THE SERVICING OF AUTOMOBILE INSTALLMENT
     CONTRACTS UNDER POOLING AND SERVICING AGREEMENTS AND SALE AND SERVICING
     AGREEMENTS

     1.   Determined the reasonableness of the fluctuations of balances of
          automobile installment contracts for existing securitization trusts.

     2.   Obtained the Static Pool Analysis at year-end and traced 25 points
          from the static pool default curves to default schedules that comprise
          part of the Finance Income Receivable valuation.

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     3.   For a sample of 15 extensions granted during 1997, obtained an
          analysis of the subsequent performance of that loan, noting that
          subsequent payments were made per the automobile installment contract
          and noted whether any additional extensions granted were made in
          accordance with Company policy.

     4.   Obtained the reconciliation of automobile installment contracts
          suspense accounts for a five day period subsequent to December 31,
          1997 and observed that suspense items cleared in a timely manner.

     5.   Recalculated the yield earned on automobile installment contracts
          based on the average loans held for sale balance during 1997. Compared
          the recalculated yield to the Company's weighted average yield.

     6.   Determined the reasonableness of the annual service fee income by
          obtaining servicer certificates and recalculation.

-    DELINQUENCY AND LOSS STATISTICS RELATING TO THE COMPANY'S PORTFOLIO OF
     AUTOMOBILE INSTALLMENT CONTRACTS

     1.   Recalculated the realization percentage for a sample of 50 repossessed
          vehicles disposed of through both wholesale and retail channels.

     2.   Compared the current period's charge-offs, recoveries and allowance
          for credit losses (including the amount incorporated in the finance
          income receivable) as a percentage of automobile installment contracts
          serviced to the Company's historical experience.

     3.   Traced the recovery notes from the Detailed Sales Report for 1997 for
          one month to supporting detailed schedules of repossessed vehicle
          recovery amounts.

     4.   Compared the valuation of 10 repossessed automobiles based on the
          Company's repossessed asset condition report to published retail and
          wholesale values.

The results above provided satisfactory evidential matter for the purpose of our
audit of the financial statements, referred to in the introductory paragraph of
this letter, taken as a whole.

We also performed certain agreed-upon procedures applied to the documents and
records relating to the servicing of automobile installment contracts under
certain pooling and servicing agreements, and sale and servicing agreements, and
procedures applied to the delinquency and loss statistics relating to the
Company's portfolio of automobile installment contracts in connection with
agreed-upon procedures related to the securitization of automobile installment
contracts during 1997.

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The procedures we performed in connection with the issuance of the agreed-upon
procedures letters described in Attachment I were as follows:

-    DOCUMENTS AND RECORDS RELATING TO THE SERVICING OF AUTOMOBILE INSTALLMENT
     CONTRACTS UNDER POOLING AND SERVICING AGREEMENTS AND SALE AND SERVICING
     AGREEMENTS

     1.   During 1997, we utilized an audit software application to analyze the
          following characteristics of loans in the 1997-A, 1997-B, 1997-C and
          1997-D securitizations:

          a.   Recalculated the number of loans, total amount financed, aging of
               the automobile installment contracts and compared the number and
               amount of delinquent loans to the Company's delinquency reports.

          b.   Recalculated the weighted average interest rates on automobile
               contracts for each securitization pool.

          We refer to our letters issued in 1997, as detailed in Attachment I,
          that describes the additional procedures performed at that time.

     2.   Relating to automobile installment contracts included in Arcadia
          Automobile Receivables Trusts 1997-A, 1997-B, 1997-C, and 1997-D
          and/or serving as collateral for warehouse facilities during 1997, we:

          a.   Attempted to verbally confirm the original contract amount and
               monthly payment amount with the primary obligor for a sample of
               725 automobile installment loans. Following is a summary of the
               confirmation results:

               -    Confirmed without exception - 302 loans or 42%
               -    Confirmed vehicle purchase, unsure of original contract
                    amount or monthly payment amount - 39 loans or 5%
               -    Exception noted in original contract amount or monthly
                    payment amount - 7 loans or 1%
               -    Unable to contact borrower, confirmed propriety of phone
                    number through discussion with person answering telephone or
                    directory assistance - 179 loans or 25%
               -    Unable to contact borrower or confirm propriety of phone
                    number through directory assistance - 198 loans or 27%

          b.   For the automobile installment loans identified in 2.a. above,
               where we were unable to contact borrower or confirm the propriety
               of the phone number through directory assistance, we obtained the
               payment history from the Company and determined whether
               subsequent payments had been received. In some instances, the
               Company contacted the borrower directly. We noted that

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               payments had been subsequently received for all of the automobile
               installment contracts selected or the Company represented that
               they had contacted the borrower and confirmed payment had been
               sent.

     3.   For a sample of 40 automobile installment contracts, we obtained from
          the Company the payment history and compared the amount of the most
          recent payment to the corresponding amount in the Company's cash
          receipt records. Also, we recalculated the allocation of the payment
          to principal, interest, and other charges, if applicable. No
          exceptions were noted.

     4.   For the same sample of 725 automobile installment contracts included
          in Arcadia Automobile Receivables Trusts 1997-A, 1997-B, 1997-C, and
          1997-D, as referred to in 2.a. above, we obtained the loan files from
          the Company and noted documentation of approval, title and insurance.
          We noted seven automobile installment contracts where there was a
          discrepancy between the loan file documentation and per the Random
          Loan List not defined in this letter, 35 automobile installment
          contracts were not approved by the appropriate level of management
          based on the Company's approval matrix, five automobile installment
          contracts did not have a title or application for title listing the
          Company as the first lienholder, 32 automobile installment contracts
          did not have evidence of physical damage insurance listing the Company
          as loss payee and 12 automobile installment contracts where the
          description (new or used) of the financed vehicle contained in the
          signed note or information in the loan file did not agree with the
          description set forth in the lien recording instrument or with the
          automobile description code per the Random Loan List.

This report is intended solely for the use of specified users listed above and
should not be used by those who have not agreed to the procedures and taken
responsibility for the sufficiency of the procedures for their purposes.

                                           Very truly yours,

                                           /s/ Ernst & Young LLP

January 21, 1998

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                                    ATTACHMENT I

The following are the agreed-upon procedures letters issued in connection with
the securitization of automobile installment contracts by Arcadia during 1997:


SECURITIZATION       DATES OF LETTERS

  1997-A             March 13, 1997
                     March 20, 1997
                     April 8, 1997
                     April 18, 1997
  1997-B             June 11, 1997
                     June 19, 1997
                     July 8, 1997
                     July 16, 1997
                     September 10, 1997
                     September 18, 1997
  1997-C             October 8, 1997
                     October 22, 1997
  1997-D             December 4, 1997
                     December 16, 1997
                     January 9, 1998
                     January 29, 1998