GENERAL

We are a leading independent auto finance company specializing in purchasing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of used and new automobiles. We generate revenue and cash flows primarily through the purchase, retention, subsequent securitization and servicing of finance receivables. As used herein, "loans" include auto finance receivables originated by dealers and purchased by us. To fund the acquisition of receivables prior to securitization, we use available cash and borrowings under our credit facilities. We earn finance charge income on the finance receivables and pay interest expense on borrowings under our credit facilities.

Through wholly-owned subsidiaries, we periodically transferred receivables to securitization trusts ("Trusts") that issue asset-backed securities to investors. We retain an interest in these securitization transactions in the form of restricted cash accounts and overcollateralization, whereby more receivables are transferred to the Trusts than the amount of asset-backed securities issued by the Trusts, as well as the estimated future excess cash flows expected to be received by us over the life of the securitization. Excess cash flows result from the difference between the finance charges received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses.

Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements in order to attain specific credit ratings for the asset-backed securities issued by the Trusts. Once targeted credit enhancement requirements are reached and maintained, excess cash flows are distributed to us or, in a securitization utilizing a senior subordinated structure, may be used to accelerate the repayment of certain subordinated securities. In addition to excess cash flows, we receive monthly base servicing fees and we collect other fees, such as late charges, as servicer for securitization Trusts. For securitization transactions that involve the purchase of a financial guaranty insurance policy, credit enhancement requirements will increase if specified portfolio performance ratios are exceeded. Excess cash flows otherwise distributable to us from Trusts in which the portfolio performance ratios were exceeded and from other Trusts which may be subject to limited cross-collateralization provisions are accumulated in the Trusts until such higher levels of credit enhancement are reached and maintained. Senior subordinated securitizations typically do not utilize portfolio performance ratios.

We structure our securitization transactions as secured financings. Accordingly, following a securitization, the finance receivables and the related securitization notes payable remain on the consolidated balance sheets. We recognize finance charge and fee income on the receivables and interest expense on the securities issued in the securitization transaction and record a provision for loan losses to cover probable loan losses on the receivables.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2009 as compared to Three Months Ended September 30, 2008

Changes in Finance Receivables:

A summary of changes in our finance receivables is as follows (in thousands):



                                                  Three Months Ended
                                                    September 30,
                                                2009              2008
           Balance at beginning of period   $ 10,927,969      $ 14,981,412
           Loans purchased                       229,073           579,290
           Liquidations and other             (1,136,009 )      (1,497,857 )

           Balance at end of period         $ 10,021,033      $ 14,062,845

           Average finance receivables      $ 10,482,453      $ 14,544,922

The decrease in loans purchased during the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, was primarily due to the implementation of revised operating plans which included reduced loan origination targets. The decrease in liquidations and other resulted primarily from reduced average finance receivables.

The average new loan size decreased to $16,331 for the three months ended September 30, 2009, from $17,773 for the three months ended September 30, 2008. The average annual percentage rate for finance receivables purchased during the three months ended September 30, 2009, increased to 19.1% from 16.6% during the three months ended September 30, 2008.

Net Margin:

Net margin is the difference between finance charge and other income earned on our receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes.

Our net margin as reflected on the consolidated statements of operations is as follows (in thousands):

                                             Three Months Ended
                                               September 30,
                                                          2008 (a)
                                            2009         (Revised)
                 Finance charge income   $  389,796      $  533,973
                 Other income                23,488          31,076
                 Interest expense          (130,148 )      (200,654 )

                 Net margin              $  283,136      $  364,395

(a) Revised for the Financial Accounting Standards Board ("FASB") issuance of Financial Accounting Standards Staff Position ("FSP"), Accounting Principles Board ("APB") 14-1, Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion (Including Partial Cash Settlement) ("FSP APB 14-1") (Accounting Standards Codification "ASC" 470 20 65-1). See Note 1 - "Summary of Significant Accounting Policies - Adoption of New Accounting Standards" and Note 6 - "Senior Notes and Convertible Senior Notes" to the consolidated financial statements for additional information.

Net margin as a percentage of average finance receivables is as follows:

                                                                 Three Months Ended
                                                                    September 30,
                                                                              2008 (a)
                                                                2009          (Revised)
Finance charge income                                             14.7 %           14.5 %
Other income                                                       0.9              0.9
Interest expense                                                  (4.9 )           (5.5 )

Net margin as a percentage of average finance receivables         10.7 %            9.9 %

(a) Revised for FSP APB 14-1 (ASC 470 20 65-1), Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion (Including Partial Cash Settlement). See Note 1 - "Summary of Significant Accounting Policies - Adoption of New Accounting Standards" and Note 6 - "Senior Notes and Convertible Senior Notes" to the consolidated financial statements for additional information.

The increase in net margin as a percentage of average finance receivables for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, was mainly a result of a decrease in interest expense due to a lower amount of average debt outstanding compared to average finance receivables and lower base borrowing rates associated with advances under our credit facilities.

Revenue:

Finance charge income decreased by 27.0% to $389.8 million for the three months ended September 30, 2009, from $534.0 million for the three months

ended September 30, 2008, primarily due to the 27.9% decrease in average finance receivables. The effective yield on our finance receivables increased to 14.7% for the three months ended September 30, 2009, from 14.5% for the three months ended September 30, 2008. The effective yield represents finance charges and fees taken into earnings during the period as a percentage of average finance receivables and is lower than the contractual rates of our finance contracts due to finance receivables in nonaccrual status.

Other income consists of the following (in thousands):

                                                Three Months Ended
                                                  September 30,
                                                 2009         2008
                 Investment income            $       984   $  4,926
                 Leasing income                    11,458     11,945
                 Late fees and other income        11,046     14,205

                                              $    23,488   $ 31,076

Investment income decreased as a result of lower invested cash balances and lower investment rates.

Costs and Expenses:

Operating Expenses

Operating expenses decreased by 18.3% to $68.9 million for the three months ended September 30, 2009, from $84.3 million for the three months ended September 30, 2008, as a result of reduced loan origination levels and lower average finance receivables. Our operating expenses are predominately related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. Personnel costs represented 70.1% and 70.9% of total operating expenses for the three months ended September 30, 2009 and 2008, respectively.

Operating expenses as an annualized percentage of average finance receivables were 2.6% for the three months ended September 30, 2009 as compared to 2.3% for the three months ended September 30, 2008.

Provision for Loan losses

Provisions for loan losses are charged to operations to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables. The provision for loan losses recorded for the three months ended September 30, 2009 and 2008, reflects inherent losses on receivables originated during those quarters and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses decreased to $158.0 million for the three months ended September 30, 2009, from $274.9 million for the three months ended September 30, 2008, as a result of reduced loan

origination levels and a moderation in the rate of credit deterioration during the three months ended September 30, 2009. As an annualized percentage of average finance receivables, the provision for loan losses was 6.0% and 7.5% for the three months ended September 30, 2009 and 2008, respectively.

Interest Expense

Interest expense decreased to $130.1 million for the three months ended September 30, 2009, from $200.7 million for the three months ended September 30, 2008. Interest expense reflects the adoption of FSP APB 14-1 (ASC 470 20 65-1), which was applied retrospectively. We have separately accounted for the liability and equity components of our convertible senior notes retrospectively, which results in recognizing interest expense based on a borrowing rate at the time of issuance for similar unsecured senior debt without an equity conversion feature. Average debt outstanding was $9.2 billion and $13.5 billion for the three months ended September 30, 2009 and 2008, respectively. Our effective rate of interest on our debt decreased to 5.6% for the three months ended September 30, 2009, compared to 5.9% for the three months ended September 30, 2008, due to lower base borrowing rates associated with the advances under our credit facilities.

Taxes

Our effective income tax rate was 44.3% and (1.5%) for the three months ended September 30, 2009 and 2008, respectively. The September 30, 2009 effective tax rate was negatively impacted primarily by state income tax rates and adjustments to state deferred tax assets and liabilities.

Other Comprehensive Income:

Other comprehensive income consisted of the following (in thousands):



                                                       Three Months Ended
                                                         September 30,
                                                      2009           2008
         Unrealized gains on cash flow hedges       $   7,411      $   9,925
         Canadian currency translation adjustment       6,924         (1,285 )
         Income tax provision                          (5,176 )       (3,279 )

                                                    $   9,159      $   5,361

Cash Flow Hedges

Unrealized gains on cash flow hedges consisted of the following (in thousands):



                                                              Three Months Ended
                                                                September 30,
                                                             2009           2008
 Unrealized losses related to changes in fair value        $ (15,833 )    $ (10,225 )
 Reclassification of net unrealized losses into earnings      23,244         20,150

                                                           $   7,411      $   9,925

Unrealized gains related to changes in fair value for the three months ended September 30, 2009 and 2008, were due to changes in the fair value of interest rate swap agreements that were designated as cash flow hedges for accounting purposes. The fair value of the interest rate swap agreements fluctuate based upon changes in forward interest rate expectations.

Unrealized gains or losses on cash flow hedges of our floating rate debt are reclassified into earnings when interest rate fluctuations on securitization notes payable or other hedged items affect earnings.

Canadian Currency Translation Adjustment

Canadian currency translation adjustment gains of $6.9 million and losses of $1.3 million for the three months ended September 30, 2009 and 2008, respectively, were included in other comprehensive income. The translation adjustment is due to the change in the value of our Canadian dollar denominated assets related to the change in the U.S. dollar to Canadian dollar conversion rates during the three months ended September 30, 2009 and 2008.

CREDIT QUALITY

Generally, we provide financing in relatively high-risk markets, and, therefore, anticipate a corresponding high level of delinquencies and charge-offs.

The following tables present certain data related to the receivables portfolio (dollars in thousands):

                                                          September 30,          June 30,
                                                              2009                 2009
Principal amount of receivables, net of fees             $    10,021,033       $ 10,927,969

Nonaccretable acquisition fees                                    (9,264 )          (12,100 )
Allowance for loan losses                                       (816,694 )         (878,540 )


Receivables, net                                         $     9,195,075       $ 10,037,329


Number of outstanding contracts                                  849,465            895,708


Average carrying amount of outstanding contract (in
dollars)                                                 $        11,797       $     12,200


Allowance for loan losses and nonaccretable
acquisition fees as a percentage of receivables                      8.2 %              8.2 %

Delinquency

The following is a summary of finance receivables that are (i) more than 30 days
delinquent, but not yet in repossession, and (ii) in repossession, but not yet
charged off (dollars in thousands):



                                 September 30, 2009         September 30, 2008
                                  Amount      Percent        Amount      Percent
        Delinquent contracts:
        31 to 60 days           $   763,797       7.6 %    $ 1,047,718       7.4 %
        Greater-than-60 days        382,164       3.8          505,033       3.6

                                  1,145,961      11.4        1,552,751      11.0
        In repossession              64,876       0.7           74,325       0.5

                                $ 1,210,837      12.1 %    $ 1,627,076      11.5 %

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Delinquencies in our receivables portfolio may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Due to our target customer base, a relatively high percentage of accounts become delinquent at some point in the life of a loan and there is a high rate of account movement between current and delinquent status in the portfolio.

Delinquencies in finance receivables, as a percentage, were higher at September 30, 2009, as compared to September 30, 2008, as a result of an increase in the average age or seasoning of the portfolio.

Deferrals

In accordance with our policies and guidelines, we, at times, offer payment deferrals to consumers whereby the consumer is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferments that may be granted. Additionally, we generally limit the granting of deferments on new accounts until a requisite number of payments have been received. Due to the nature of our customer base and policies and guidelines of the deferral program, approximately 50% of accounts historically comprising the portfolio receive a deferral at some point in the life of the account.

An account for which all delinquent payments are deferred is classified as current at the time the deferment is granted and therefore is not included as a delinquent account. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account.

Contracts receiving a payment deferral as an average quarterly percentage of average finance receivables outstanding were 7.9% and 7.3% for the three months ended September 30, 2009 and 2008, respectively. Contracts receiving a payment deferral increased as weaker economic conditions resulted in more eligible consumers requesting and being granted deferments.

The following is a summary of deferrals as a percentage of receivables outstanding:

                                       September 30,      June 30,
                                           2009             2009
                Never deferred                  65.6 %        66.9 %

                Deferred:
                1-2 times                       26.2          26.0
                3-4 times                        8.1           7.0
                Greater than 4 times             0.1           0.1


                Total deferred                  34.4          33.1


                Total                          100.0 %       100.0 %

We evaluate the results of our deferment strategies based upon the amount of cash installments that are collected on accounts after they have been deferred versus the extent to which the collateral underlying the deferred accounts has depreciated over the same period of time. Based on this evaluation, we believe that payment deferrals granted according to our policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.

Changes in deferment levels do not have a direct impact on the ultimate amount of finance receivables charged off by us. However, the timing of a charge-off

may be affected if the previously deferred account ultimately results in a charge-off. To the extent that deferrals impact the ultimate timing of when an account is charged off, historical charge-off ratios and loss confirmation periods used in the determination of the adequacy of our allowance for loan losses are also impacted. Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the loan portfolio and therefore increase the allowance for loan losses and related provision for loan losses. Changes in these ratios and periods are considered in determining the appropriate level of allowance for loan losses and related provision for loan losses.

Charge-offs

The following table presents charge-off data with respect to our finance
receivables portfolio (dollars in thousands):



                                                                  Three Months Ended
                                                                     September 30,
                                                                 2009             2008
Repossession charge-offs                                      $  367,346       $  363,529
Less: Recoveries                                                (156,929 )       (151,323 )
Mandatory charge-offs (a)                                         12,216           53,653


Net charge-offs                                               $  222,633       $  265,859


Net charge-offs as an annualized percentage of average
receivables:                                                         8.4 %            7.3 %


Recoveries as a percentage of gross repossession
charge-offs:                                                        42.7 %           41.6 %

(a) Mandatory charge-offs includes accounts 120 days delinquent that are charged off in full with no recovery amounts realized at time of charge-off and the net write-down of finance receivables in repossession to the net realizable value of the repossessed vehicle when the repossessed vehicle is legally available for sale.

Net charge-offs as an annualized percentage of average finance receivables outstanding may vary from period to period based upon the average age or seasoning of the portfolio and economic factors. The increase in net charge-offs as an annualized percentage of average finance receivables for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, was a result of an increase in the average age or seasoning of the portfolio and weaker economic conditions.

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of cash are finance charge income, servicing fees, distributions from securitization Trusts, borrowings under credit facilities, transfers of finance receivables to Trusts in securitization transactions and

collections and recoveries on finance receivables. Our primary uses of cash are purchases of finance receivables, repayment of credit facilities and securitization notes payable, funding credit enhancement requirements for securitization transactions and credit facilities, repayment of senior notes and convertible senior notes, and operating expenses.

We used cash of $217.9 million and $586.6 million for the purchase of finance receivables during the three months ended September 30, 2009 and 2008, respectively. These purchases were funded initially utilizing cash and credit facilities and our strategy is to subsequently obtain long-term financing for finance receivables in securitization transactions.

Credit Facilities

In the normal course of business, in addition to using our available cash, we pledge receivables and borrow under our credit facilities to fund our operations and repay these borrowings as appropriate under our cash management strategy.

As of September 30, 2009, credit facilities consisted of the following (in millions):

                                                       Facility      Advances
        Facility Type                   Maturity (a)    Amount      Outstanding
        Master warehouse facility (b)   March 2010     $ 1,000.0
        Medium term note facility (c)   October 2009       750.0   $       750.0
        Prime/Near prime facility (d)                                      218.2
        Lease warehouse facility (e)                                        50.9


                                                       $ 1,750.0   $     1,019.1

(a) Because the facilities are non-recourse to us, the outstanding debt balance at maturity will generally be repaid over time based on the amortization of receivables pledged.

(b) The revolving period under this facility ends March 2010 and any outstanding balance will be repaid over time based on the amortization of the receivables pledged until April 2011 when any remaining amount will be due and payable.

(c) The revolving period under this facility ended subsequent to September 30, 2009, and the outstanding debt balance will be repaid over time based on the amortization of the receivables pledged until October 2016 when any remaining amount will be due and payable.

(d) The revolving period under this facility has ended and the outstanding debt balance will be repaid over time based on the amortization of the receivables pledged. On October 30, 2009, we priced a $227.5 million securitization transaction, AmeriCredit Prime Automobile Receivables Trust ("APART") 2009-1, and we anticipate using the proceeds from this securitization to repay borrowings and retire this facility.

(e) Subsequent to September 30, 2009, the facility was repaid in full.

We are required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under the facilities. Additionally, certain funding agreements contain various covenants requiring minimum financial ratios, . . .