Drivetime Automotive 10-Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________ 

FORM 10-Q

 __________________________________________________________________________________________________

(Mark One)

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

For the quarterly period ended September 30, 2012

or

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

For the transition period from            to

Commission File Numbers: 333-169730

____________________________________________________________ 

DriveTime Automotive Group, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE	86-0721358
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

DT Acceptance Corporation

(Exact name of registrant as specified in its charter)

ARIZONA	82-0587346
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

4020 East Indian School Road

Phoenix, Arizona 85018

(Address, including zip code, of principal executive offices)

(602) 852-6600

(Registrants’ telephone number, including area code)

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	x	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The total number of shares of common stock outstanding as of September 30, 2012, was 101.7696 for each of DriveTime Automotive Group, Inc. and DT Acceptance Corp.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Condensed Consolidated Balance Sheets as of September 30, 3012 and December 31, 2011 (unaudited)	1
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 (unaudited)	2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (unaudited)	3
Notes to Condensed Consolidated Financial Statements, September 30, 2012 (unaudited)	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II. OTHER INFORMATION	43
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3. Defaults Upon Senior Securities	43
Item 4. Mine Safety Disclosures	43
Item 5. Other Information	43
Item 6. Exhibits	44
SIGNATURES	47

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30, 2012			December 31, 2011
	(In thousands)
ASSETS
Cash and Cash Equivalents	$	24,802		$	25,930
Restricted Cash and Investments Held in Trust	108,715			99,716
Finance Receivables	1,676,374			1,495,340
Allowance for Credit Losses	(251,415		)	(221,533		)
Finance Receivables, net	1,424,959			1,273,807
Dealer Finance Receivables	23,656			24
Inventory	159,010			212,330
Property and Equipment, net	90,122			90,669
Other Assets	59,085			64,353
Total Assets	$	1,890,349		$	1,766,829
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	19,856		$	9,759
Accrued Expenses and Other Liabilities	101,612			77,043
Accrued Expenses—Related Party	1,011			798
Portfolio Term Financings	919,212			782,634
Portfolio Warehouse Facilities	58,700			141,392
Senior Secured Notes Payable	193,252			198,058
Senior Secured Notes Payable-Related Party	5,000			—
Other Secured Notes Payable	110,890			99,296
Total Liabilities	1,409,533			1,308,980
Shareholders’ Equity—DTAG:
Common Stock	—			—
Paid-in Capital	146,958			146,336
Retained Earnings	7,814			2,528
Total Shareholders’ Equity—DTAG	154,772			148,864
Noncontrolling Interest-DTAC	326,044			308,985
Total Equity	480,816			457,849
Total Liabilities & Shareholders’ Equity	$	1,890,349		$	1,766,829

See accompanying notes to Condensed Consolidated Financial Statements.

1

DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(In thousands)
Revenue:
Sales of Used Vehicles	$	226,866		$	213,766		$	750,125		$	682,247
Interest Income	77,334			72,246			223,492			212,028
Dealer Finance and Other Income	757			—			1,380			—
Total Revenue	304,957			286,012			974,997			894,275
Costs and Expenses:
Cost of Used Vehicles Sold	151,264			143,523			496,680			441,060
Provision for Credit Losses	70,110			61,951			181,840			154,977
Portfolio Debt Interest Expense	11,080			10,038			31,998			32,847
Non- Portfolio Debt Interest Expense	1,106			645			3,237			2,016
Senior Secured Debt Interest Expense	6,519			6,583			19,735			17,268
Senior Secured Debt Interest Expense—Related party	103			—			103			2,680
Selling and Marketing	7,336			5,742			23,116			19,132
General and Administrative	45,000			39,302			127,487			118,576
General and Administrative—Related party	2,581			1,493			8,193			8,358
Depreciation Expense	5,091			4,298			15,061			11,477
Total Costs and Expenses	300,190			273,575			907,450			808,391
Income Before Income Taxes	4,767			12,437			67,547			85,884
Income Tax Expense	371			61			1,030			910
Net Income	4,396			12,376			66,517			84,974
Net Loss Attributable to Noncontrolling Interest—DTAC	(52,631		)	(41,559		)	(128,091		)	(101,063		)
Net Income Attributable to DTAG	57,027			53,935			194,608			186,037
Net Income	$	4,396		$	12,376		$	66,517		$	84,974

See accompanying notes to Condensed Consolidated Financial Statements.

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DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash Flows from Operating Activities:
Net Income	$	66,517		$	84,974
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses	181,840			154,977
Depreciation Expense	15,061			11,477
Amortization of Debt Issuance Costs and Debt Premium and Discount	5,965			9,351
Non-Cash Compensation Expense—Related Party	1,239			2,324
(Gain) from Disposal of Property and Equipment	(138		)	(22		)
Originations of Finance Receivables	(749,268		)	(672,965		)
Collections and Recoveries on Finance Receivable Principal Balances	420,709			408,768
Change in Accrued Interest Receivable and Loan Origination Costs	(4,433		)	(1,841		)
Change in Inventory	53,237			(8,154		)
Change in Other Assets	2,599			(3,460		)
Increase in Accounts Payable, Accrued Expenses and Other Liabilities	34,576			33,614
Change in Accrued Expenses-Related Party	213			(1,477		)
Net Cash Provided By Operating Activities	28,117			17,566
Cash Flows from Investing Activities:
Origination of Dealer Finance Receivables	(25,602		)	—
Collections and Recoveries of Dealer Finance Receivables	1,970			—
Proceeds from Disposal of Property and Equipment	1,521			363
Purchase of Property and Equipment	(15,807		)	(33,864		)
Net Cash Used in Investing Activities	(37,918		)	(33,501		)
Cash Flows from Financing Activities:
(Increase) Decrease in Restricted Cash	(36		)	16,701
Deposits into Investments Held in Trust	(9,000		)	(8,699		)
Collections, Buybacks and Change in Investments Held in Trust	38			(17,018		)
Additions to Portfolio Term Financings	482,246			461,061
Repayment of Portfolio Term Financings	(345,481		)	(242,591		)
Additions to Portfolio Warehouse Facilities	548,300			692,800
Repayment of Portfolio Warehouse Facilities	(630,992		)	(834,600		)
Additions to Other Secured Notes Payable	42,969			—
Repayment of Other Secured Notes Payable	(31,375		)	(403		)
Payment of Debt Issuance Costs	(3,206		)	(5,871		)
Dividend Distributions	(44,790		)	(45,859		)
Net Cash Provided by Financing Activities	8,673			15,521
Net Decrease in Cash and Cash Equivalents	(1,128		)	(414		)
Cash and Cash Equivalents at Beginning of Period	25,930			23,677
Cash and Cash Equivalents at End of Period	$	24,802		$	23,263
Supplemental Statement of Cash Flows Information:
Interest Paid	$	48,621		$	46,274
Interest Paid—Related Party	$	—		$	2,680
Income Taxes Paid	$	1,209		$	1,234
Supplemental Statement of Non-Cash Investing and Financing Activities:
Disposal of Fully Depreciated Property & Equipment	$	2,710		$	1,441

See accompanying notes to Condensed Consolidated Financial Statements.

3

DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Unaudited Financial Statements

(1) Description of Business, Ownership Formation, Basis of Presentation, and Principles of Consolidation

Description of Business

DriveTime Automotive Group, Inc. (“DTAG”) (referred to herein as “we,” “our,” “the Company,” and “us”), through its subsidiaries, owns and operates used automobile dealerships in the United States focusing on the sale and financing of used vehicles to the subprime market. The subprime market is comprised of customers with modest incomes who have experienced credit difficulties or have very limited credit histories and our customers typically do not have access to obtain their own source of financing from third-party finance companies. Therefore, we provide financing for substantially all of the vehicles we sell. Since many of our customers may be unable to obtain financing to purchase a vehicle from another company, financing is an essential component of the services that we provide to our customers. We historically have not sold our loans to third parties. We fund this portfolio primarily through portfolio warehouse facilities, securitizations, and other portfolio term financings.

In December 2011, as a supplement to our core operations, we launched a new indirect lending line of business, GO Financial (“GO”). GO is a wholly-owned subsidiary of DT Acceptance Corporation (“DTAC”), DTAG's sister corporation. GO provides auto financing to third-party automobile dealerships collateralized by pools of subprime auto loans. GO focuses primarily on markets where we do not have existing DriveTime dealerships.

Entry into a Material Definitive Agreement

On September 11, 2012, DTAG and DTAC entered into definitive agreements to sell DriveTime in separate transactions.

Pursuant to the definitive agreements, DTAC agreed to sell its finance receivable portfolio, which consists of vehicle-related installment sales contracts, certificates representing its residual interests in securitizations of finance receivables, and certain other assets to Santander Consumer USA Inc. Immediately thereafter, a new entity owned by third-party investors would purchase all of the outstanding stock of DTAG and DTAC, effectively acquiring DTAG's used vehicle dealership operations, consisting of 93 owned and leased dealerships and 16 reconditioning and other facilities throughout the United States.

Also, in conjunction with the execution of the definitive agreements noted above, on September 24, 2012, DTAG issued an Offer to Purchase and Consent Solicitation (“Offer to Purchase”) with respect to the outstanding $200.0 million 12.625% Senior Secured Notes due 2017 issued by DTAG and DTAC. 

Since execution of definitive agreements, the purchasers have requested that DTAG and DTAC restructure the proposed transactions and DTAG and DTAC engaged in good faith discussions with the other parties regarding various potential alternatives. However, no agreements were reached and DTAG and DTAC have notified the buyers that they are terminating the agreements for the buyers' inability to consummate the transactions. As a result, we have written-off approximately $2.6 million of transaction-related costs. We also expect to terminate the offer to purchase on or before its expiration date (November 19, 2012). While it is conceivable the parties will continue discussions regarding alternative transactions, it is not anticipated that the transactions reflected in the current definitive agreements will proceed.

Ownership

As of September 30, 2012, and December 31, 2011, the shareholders of DTAG and DTAC were Ernest C. Garcia II (Chairman) and the Garcia Family Trusts (collectively, herein also referred to as “Principal Shareholder” or “Mr. Garcia”) owning 98.3% of each of DTAG and DTAC and Raymond C. Fidel (President and CEO) owning 1.7% of each of DTAG and DTAC. DTAG and DTAC are sister companies, generally with DTAG owning our sales operations and DTAC owning our financing operations.

Basis of Presentation

We have determined that DTAC is a variable interest entity (“VIE”) and that DTAG is the primary beneficiary of DTAC, therefore, the accounts of DTAG and DTAC are consolidated and intercompany transactions between DTAG and DTAC are eliminated in consolidation.

Total assets of DTAC consolidated into DTAG are comprised primarily of net finance receivables, cash and cash equivalents, restricted cash, investments held in trust, and deferred financing costs. Total liabilities consolidated into DTAG are comprised primarily of portfolio warehouse, portfolio term, and senior secured debt. Total revenue of DTAC consolidated into DTAG are comprised of interest and dealer finance income. DTAC expenses are comprised of provision for credit losses,

4

interest expense and general and administrative expenses. These amounts do not include intercompany revenues and costs between DTAG and DTAC which are eliminated in consolidation. For more information regarding DTAC assets, liabilities, revenue, and expenses consolidated into DTAG, see Note-13 Supplemental Consolidating Financial Information.

These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, such interim consolidated financial statements reflect all normal recurring adjustments considered necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes as of and for the year-ended December 31, 2011, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 30, 2012.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities. Certain accounting estimates involve significant judgments, assumptions, and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of income and expenses during the reporting period which management considers to be critical accounting estimates. The judgments, assumptions, and estimates used by management are based on historical experience, managements’ experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Significant items subject to estimates and assumptions include the allowance for credit losses, inventory valuation, fair value measurements, certain legal reserves, our reserve for sales returns and allowances, our recovery receivables, and our warranty accrual. Actual results could differ from these estimates.

Prior Year Reclassification

Certain prior period amounts have been reclassified to be consistent with current period financial statement presentation. For the year ended December 31, 2011, we reclassified a total of $83,000 from other assets to inventory.

(2) Restricted Cash and Investments Held in Trust

We maintain various cash accounts, which are pledged as collateral under our debt agreements. We are permitted to invest funds in these accounts in short-term liquid investments. The following is a summary of restricted cash and investments held in trust:

	As of September 30, 2012		As of December 31, 2011
	(In thousands)
Restricted cash	$	37,953	$	37,917
Investments Held in Trust	70,762		61,799
	$	108,715	$	99,716

(3) Finance Receivables

The following is a summary of finance receivables:

	As of September 30, 2012		As of December 31, 2011
	(In thousands)
Principal Balances	$	1,643,281	$	1,466,680
Accrued Interest	15,648		12,971
Loan Origination Costs	17,445		15,689
Finance Receivables	$	1,676,374	$	1,495,340

5

Our finance receivables are defined as one segment and class of loan, which is the sub-prime consumer auto loan. Therefore, the disaggregation of information into portfolio segment and classes for assets with different risk characteristics is limited, and the level of risks inherent in our financing receivables are managed as one homogeneous pool and further segmented with our proprietary credit scoring system as described below —Credit Quality Indicators. We have chosen our internal customer credit scoring model since it has a direct and prominent impact in managing our portfolio receivables and monitoring its performance.

Finance receivables pledged as collateral associated with liabilities in our warehouse facilities, asset backed securitizations, and PALP financings, are provided in Note 5—Debt Obligations. We do not place loans on nonaccrual status, nor do we classify loans as impaired, since accounts are charged-off when the loan becomes 91 -121 days contractually past due at month end under our charge-off policy. We do not have loans that meet the definition of troubled debt restructurings. During the three and nine months ended September 30, 2012 and the year ended December 31, 2011, we did not purchase or sell finance receivables.

Credit quality information for our finance receivables portfolio is provided as of the dates indicated below:

Age Analysis of Past Due Finance Receivables

	September 30, 2012				December 31, 2011				September 30, 2011
	Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal
	($ In thousands)
Days Delinquent:
Current	56.3	%	$	925,332	66.8	%	$	979,155	58.1	%	$	877,783
01-30 Days	31.1	%	511,389		22.0	%	322,670		32.5	%	491,015
31-60 Days	8.0	%	132,120		7.1	%	104,574		6.2	%	93,671
61-90 Days	4.2	%	68,196		3.8	%	55,881		3.2	%	48,346
91-120 Days	0.4	%	6,244		0.3	%	4,400		—	%	—
Total Past Due	43.7	%	$	717,949	33.2	%	$	487,525	41.9	%	$	633,032
Total Finance Receivables	100.0	%	$	1,643,281	100.0	%	$	1,466,680	100.0	%	$	1,510,815

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 may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Delinquencies are presented on a Sunday-to-Sunday basis, which reflects delinquencies as of the nearest Sunday to period end. Sunday is used to eliminate any impact of the day of the week on delinquencies since delinquencies tend to be higher mid-week.

Credit Quality Indicators

Our proprietary credit grading system segments our customers into eight distinct credit grades. These credit grades range from A+ to D-, with A+ being the lowest risk credit grade and a D- being the highest risk credit grade. Generally, the lower the risk grade, the lower the unit loss rate. A summary of our portfolio by our internally assigned credit risk ratings at September 30, 2012, and December 31, 2011, is as follows:

At September 30, 2012

Grade	Average FICO Score (1)	Percentage of Portfolio Loans	Total Loans	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	556	10.3%	14,876	10.4%	$	171,014
A	539	18.3%	26,496	18.5%	307,119
B	516	37.2%	54,032	38.3%	628,023
C	502	28.8%	41,784	28.2%	462,941
C-	488	4.0%	5,751	3.4%	55,197
D+/D/D-	474	1.4%	2,075	1.2%	18,987
		100.0%	145,014	100.0%	$	1,643,281

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At December 31, 2011

Grade	Average FICO Score (1)	Percentage of Portfolio Contracts	Total Contracts	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	557	10.4%	14,270	10.7%	$	156,935
A	538	18.2%	24,954	18.7%	274,269
B	516	36.8%	50,582	38.3%	561,738
C	500	28.2%	38,756	27.1%	397,470
C-	486	4.7%	6,400	3.8%	55,734
D+/D/D-	475	1.7%	2,331	1.4%	20,534
		100.0%	137,293	100.0%	$	1,466,680

^{(1)  Average FICO score is provided as an external metric of credit quality. FICO score is not utilized to determine internal credit grade.} 

Concentration of Credit Risk

As of September 30, 2012, and December 31, 2011, our portfolio concentration by state was as follows:

As of September 30, 2012					As of December 31, 2011
State	Percent of Portfolio		Loan Principal (In thousands)		State	Percent of Portfolio		Loan Principal (In thousands)
Texas	23.2	%	$	381,352	Texas	23.9	%	$	351,210
Florida	15.5	%	254,296		Florida	16.6	%	243,024
North Carolina	10.1	%	164,335		North Carolina	10.3	%	150,920
Georgia	7.6	%	125,451		Arizona	7.6	%	112,097
Arizona	7.1	%	115,552		Virginia	7.3	%	106,715
Virginia	6.7	%	110,282		Georgia	7.3	%	106,415
California	4.6	%	75,841		California	4.9	%	72,137
Tennessee	4.4	%	72,683		Nevada	4.6	%	67,631
Nevada	4.1	%	67,854		New Mexico	3.6	%	53,484
South Carolina	3.5	%	58,195		Tennessee	3.9	%	56,925
New Mexico	3.2	%	51,991		Colorado	2.8	%	40,558
Alabama	2.6	%	42,620		Alabama	1.7	%	25,455
Colorado	2.2	%	36,728		Oklahoma	1.9	%	28,229
Oklahoma	2.2	%	36,423		South Carolina	2.6	%	37,987
Indiana	1.3	%	20,904		Mississippi	0.4	%	5,844
Mississippi	0.9	%	14,900		Indiana	0.5	%	6,843
Ohio	0.7	%	12,049		Ohio	0.1	%	1,206
Arkansas	0.1	%	1,757		Arkansas	—	%	—
Missouri	—	%	68		Missouri	—	%	—
	100.0	%	$	1,643,281		100.0	%	$	1,466,680

Allowance for Credit Losses

The following table sets forth the rollforward of the allowance for credit losses for the periods indicated:

7

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	($ In thousands)
Allowance Activity:
Balance, beginning of period	$	244,811		$	222,750		$	221,533		$	208,000
Provision for credit losses	70,110			61,951			181,840			154,977
Net charge-offs	(63,506		)	(56,184		)	(151,958		)	(134,460		)
Balance, end of period	$	251,415		$	228,517		$	251,415		$	228,517
Allowance as a percent of average principal	15.2		%	15.1		%	15.2		%	15.1		%
Charge off Activity:
Principal balances	$	(102,060	)	$	(96,467	)	$	(257,986	)	$	(235,678	)
Recoveries, net	38,554			40,283			106,028			101,218
Net charge-offs	$	(63,506	)	$	(56,184	)	$	(151,958	)	$	(134,460	)

(4) Dealer Finance Receivables

Dealer Finance Receivables consist of the aggregate carrying value of amounts advanced to dealers (Dealer Advance) participating in our indirect lending program through our subsidiary, GO Financial. We account for Dealer Finance receivables in a manner consistent with loans acquired with deteriorated credit quality. Each individual dealership builds discrete pools of 80 loans and Dealer Advances are repaid by the dealerships, on a pool level, based on cash flows collected by GO from the pool of underlying customer loans. Each dealer pool is treated as a discrete unit of account, both during the open phase (prior to achieving 80 loans) and during the closed phase (at 80 loans) for purposes of recognizing revenue and evaluating impairment.

We recognize revenue for dealer finance receivables under the effective interest method, by applying a loss adjusted forecast of cash flows for each dealer pool. Open pools establish an effective yield at either their first fiscal quarter, or upon maturation of the pool. The effective yield established is held constant for an open pool until pool closure, unless circumstances warrant a yield adjustment or impairment assessment prior to pool closure. For each accounting period subsequent to pool closure, expected cash flows are re-estimated. Deterioration in expected cash flows, both in the open and closed pool stage, is reflected as a provision for loan loss and corresponding allowance, at the pool level. Any subsequent improvement in expected cash flows of the impaired pool(s) will first reverse any previous allowance for loan loss and prospectively reflected as an increase in the pool yield. For closed pools, if the re-estimation of expected cash flows results in a higher effective yield, an increase in the pool yield is reflected prospectively.

At September 30, 2012 and December 31, 2011 we have not recorded impairment on any pools.

The following is a summary of the activity in Dealer Finance Receivables:

	Three Months Ended			Nine Months Ended
	September 30, 2012			September 30, 2012
	(in thousands)
Balance beginning of period	$	11,633		$	24
Advances during the period	13,352			25,602
Revenue recognized, Net	681			1,214
Payments to reduce amount advanced	(2,010		)	(3,184		)
Balance end of period	$	23,656		$	23,656

Accretable yield represents the amount of revenue the Company expects over the remaining life of existing portfolios. Changes in accretable yield were as follows:

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	Three Months Ended			Nine Months Ended
	September 30, 2012			September 30, 2012
	(in thousands)
Balance Beginning of Period	$	2,592		$	—
Accretion (revenue recognized)	(681		)	(1,214		)
Additions	2,215			5,340
Reclassification from (to) nonaccretable yield	—			—
Ending Balance	$	4,126		$	4,126

Non-accretable yield represents the difference between the total contractual net cash flows of Dealer Finance Receivables and the expected cash flows. This difference is neither accreted into income nor recorded on our balance sheets since it represents the portion of cash flows not expected to be received.  Contractual net cash flows are comprised of the underlying contractual cash flows from consumer loans aggregated with the total accretable yield to be earned on Dealer Finance receivables over the life of the Dealer Pool.  Expected net cash flows represent the loss adjusted contractual cash flows, including earnings thereon.  Components of non-accretable yield are as follows:

	As of September 30,
	2012
	(in thousands)
Contractual net cash flows	$	30,465
Expected net cash flows	(27,681		)
Non-accretable yield	$	2,784

(5) Debt Obligations

Portfolio Term Financings

The following is a summary of portfolio term financings:

	As of September 30, 2012				As of December 31, 2011
	Balance		Receivables Collateral		Balance		Receivables Collateral
	( in thousands)
Securitization Debt
Asset Backed Security obligations issued pursuant to the Company’s securitizations	$	819,212	$	1,053,624	$	679,031	$	891,364
Portfolio Term Residual Financing:
Fixed rate financing facility secured by residual interests in finance receivables of certain warehouse facilities*	$	100,000	$	141,734	$	100,000	$	171,292
Pooled Auto Loan Program Financing
Fixed rate secured financing transactions for our finance receivable portfolio	$	—	$	—	$	3,603	$	5,100
Total Portfolio Term Financing	$	919,212	$	1,195,358	$	782,634	$	1,067,756

^{* See Note 11 Subsequent Events} 

Securitization debt

The following is a summary of securitization transactions with outstanding balances for each period presented:

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	As of September 30, 2012								As of December 31, 2011
Transaction	Debt Balance		Receivables Pledged		Cash Reserve		Interest Rate (1)		Debt Balance		Receivables Pledged		Cash Reserve		Interest Rate (1)
2009-1	$	23,551	$	32,741	$	1,500	5.3	%	$	54,451	$	78,264	$	1,500	5.3	%
2010-1	36,185		71,857		4,500		3.6	%	87,362		138,858		4,499		3.6	%
2011-1	73,952		102,820		4,200		3.0	%	125,711		177,253		4,200		3.0	%
2011-2	103,621		124,497		4,500		2.9	%	176,163		213,542		4,500		2.9	%
2011-3	156,341		189,432		4,500		3.9	%	235,344		283,447		4,500		3.9	%
2012-1	194,175		250,075		4,500		3.5	%	—		—		—
2012-2	231,387		282,202		4,500		2.9	%	—		—		—
	$	819,212	$	1,053,624	$	28,200			$	679,031	$	891,364	$	19,199

^{(1) These rates represent the original duration weighted average rates of the outstanding asset-backed securities.}  

In July 2012, we completed a securitization transaction (2012-2) by issuing asset-backed securities. All of the bonds were collateralized by finance receivables and were sold to third parties. The asset-backed securities were rated by Standard and Poors Rating Service (S&P) and DBRS Inc. (DBRS) with credit ratings from AAA to BBB and are structured in four tranches. For more information on this transaction, see the table above.

Asset-backed securities outstanding are secured by underlying pools of finance receivables (collateral) and investments held in trust (cash reserve). Credit enhancement for the asset-backed securities consists of a reserve account, over collateralization, and subordination of certain classes of notes in each trust to more senior classes of notes in such trust. Asset-backed securities outstanding have interest payable monthly at the fixed rates represented in the table above. The 2012-2, 2012-1, 2011-3, 2011-2, 2011-1 and 2010-1 securitizations were rated in tranches with credit ratings from AAA to BBB by S&P and DBRS, and the 2009-1 securitization was rated in tranches with credit ratings from AAA to A by DBRS.

Individual securitization trusts are not cross-collateralized or cross-defaulted. Additionally, we have the option to purchase the remaining loans in a trust when the remaining principal balances of the loans reach 10% of their original principal balance.

Portfolio term residual financing

The term residual facility with Santander Consumer USA Inc. (Santander) was secured primarily by residual interests in our warehouse facilities and securitization trusts, which were comprised of eligible loans, the dollar amounts of which are represented in the table above. Interest was fixed at 8.62%. At September 30, 2012, we were in compliance with all financial covenants of the facility. Subsequent to September 30, 2012, we paid off this facility in full. See Note 11- Subsequent Events.

Portfolio warehouse facilities

The following is a summary of portfolio warehouse facilities:

	As of September 30, 2012
	Amount Drawn		Facility Amount		Advance Rate		Collateral (1)	Interest Rate (2)		Expiration Date	Final Maturity
	($ in thousands)
Portfolio Warehouse Facilities
Deutsche Bank Warehouse Facility	$	22,300	$	150,000	58	%	88,917	2.47	%	12/31/2012	12/31/2013
Wells Fargo Warehouse Facility	20,500		150,000		58	%	128,806	2.47	%	12/31/2013	12/31/2014
RBS Warehouse Facility	15,900		125,000		53	%	96,452	1.65	%	3/14/2013	3/14/2014
Total Portfolio Warehouse Facilities	$	58,700	$	425,000

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	As of December 31, 2011
	Amount Drawn		Facility Amount		Advance Rate		Collateral (1)	Interest Rate (2)		Expiration Date	Final Maturity
	($ in thousands)
Portfolio Warehouse Facilities
Deutsche Bank Warehouse Facility	$	39,000	$	150,000	58	%	110,000	2.54	%	12/31/2012	12/31/2013
Wells Fargo Warehouse Facility	40,000		150,000		58	%	78,500	2.53	%	12/31/2013	12/31/2014
RBS Warehouse Facility	30,600		125,000		53	%	100,400	1.88	%	3/14/2013	3/14/2014
UBS Warehouse Facility	31,792		125,000		60	%	105,500	2.18	%	8/31/2012	8/31/2013
Total Portfolio Warehouse Facilities	$	141,392	$	550,000

^{(1)  Collateral represents underlying pools of finance receivables pledged to each facility.} 

^{(2)  Interest rate at period end equal to contractual benchmark plus index.} 

Deutsche Bank Warehouse Facility

We have a revolving warehouse facility with Deutsche Bank AG, New York Branch (Deutsche Bank). The amounts outstanding under the facility bear interest at LIBOR plus 2.25%. At September 30, 2012, we were in compliance with all financial covenants of this facility.

Wells Fargo Warehouse Facility

We have a revolving warehouse facility with Wells Fargo Bank, N.A. (Wells Fargo). The amounts outstanding under the facility bear interest at LIBOR plus 2.25%. At September 30, 2012, we were in compliance with all financial covenants of this facility.

RBS Warehouse Facility

We have a revolving warehouse facility with The Royal Bank of Scotland PLC (RBS). The amounts outstanding under the facility bear interest based on LIBOR plus 1.40% as of September 30, 2012 and lenders’ cost of funds thereunder plus 1.50% as of December 31, 2011. At September 30, 2012, we were in compliance with all financial covenants of this facility.

UBS Warehouse Facility

We had a revolving warehouse facility with UBS Real Estate Securities Inc. (UBS), which expired and we paid off in August 2012. Prior to expiration, amounts outstanding under the facility bore interest at LIBOR plus 1.90%.

Senior secured notes payable

In June 2010 we issued $200.0 million of 12.625% senior secured notes due 2017 (the “Senior Secured Notes”). The notes were issued with an original issuance price of 98.854%, resulting in an effective yield of 12.875%. Interest on the Senior Secured Notes is payable semi- annually in arrears on June 15th and December 15th of each year. As of September 30, 2012, we were in compliance with all financial covenants of the Senior Secured Notes.

Other secured notes payable

A summary of other secured notes payable follows:

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	As of September 30, 2012
	Balance		Max Facility Capacity			Advance Rate			Interest Rate (1)		Expiration Date
	($ in thousands)
Other Secured Notes Payable
Revolving Inventory Facility	$	84,320	$	130,000		85	%	(2)	3.71	%	11/30/2014
Mortgage Note Payable	12,508		n/a			n/a			5.87	%	3/31/2017
Real Estate Facility	12,196		25,000			70	%		4.22	%	10/24/2020
Equipment Note Payable	1,866		n/a			n/a			4.75	%	4/30/2013
Total Other Secured Notes Payable	$	110,890	$	155,000
	As of December 31, 2011
	Balance		Max Facility Capacity			Advance Rate			Interest Rate (1)		Expiration Date
	($ in thousands)
Other Secured Notes Payable
Revolving Inventory Facility	$	84,500	$	140,000	(3)	85	%	(2)	3.80	%	11/14
Mortgage Note Payable	12,661		n/a			n/a			5.87	%	03/17
Equipment Note Payable	2,135		n/a			n/a			4.75	%	04/13
Total Other Secured Notes Payable	$	99,296	$	140,000

^{(1)  Interest rate at period end equal to contractual benchmark plus index.} 

^{(2)  Advance rate is based on qualifying vehicle cost and is secured by our entire inventory.} 

^{(3)  Inclusive of a $10.0 million seasonal increase in the months of November through the end of January.}  

Revolving inventory facility

We have a revolving inventory line with Wells Fargo, Santander and Manheim Automotive Financial Services, Inc. The interest rate on the facility is based on the Daily One Month Libor rate plus 3.5%. At September 30, 2012, we were in compliance with all financial covenants of this facility.

Mortgage note payable

We have a mortgage note payable which is secured by our operations call center building in Mesa, Arizona (a commercial property). Terms of the note agreement provide for monthly principal and interest payments with a final balloon payment. At September 30, 2012, we were in compliance with all financial covenants of this loan.

Real Estate Facility

We have a seven year fully amortizing real estate facility with Wells Fargo. The amounts outstanding under the facility bear interest at LIBOR plus 4.0% as of September 30, 2012. At September 30, 2012, we were in compliance with all financial covenants of this facility, and the line was collateralized by nine properties.

Equipment note payable

We have an equipment note payable, which is secured by an aircraft and bears interest at the Prime rate plus 1.5%. Terms of the note agreement provide for monthly principal and interest payments with a final balloon payment. At September 30, 2012, we were in compliance with all financial covenants of this loan.

(6) Related Party Transactions

During the three and nine months ended September 30, 2012 and 2011, we recorded related party operating expenses as follows:

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	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
							(In thousands)
General and Administrative Expenses—Related Party
Property lease expense	$	1,144		$	(18	)	$	3,553		$	2,702
Restricted stock compensation expense	310			465			1,239			2,325
Aircraft operating and lease expense	1,091			1,020			3,173			2,953
Salaries and wages, general & administrative and other expenses	107			104			441			614
Reimbursement of certain general and administrative expenses	(71		)	(78		)	(213		)	(236		)
Total General and Administrative Expenses—Related Party	$	2,581		$	1,493		$	8,193		$	8,358

Relationship with Verde Investments, Inc.

Verde Investments, Inc. (Verde) is an Arizona corporation that is wholly-owned by Mr. Garcia. Verde engages in the acquisition, development, and long-term investment in real estate and other commercial assets. Mr. Garcia is the principal shareholder, president and director of Verde. Transactions between us and Verde are described below.

Property lease expense

Included in property lease expense are costs of leases to Verde and certain store closing costs associated with related party leases. For the three and nine months ended September 30, 2012 and 2011, we leased an average of 13 and 15 vehicle sales facilities, respectively, three reconditioning centers, one former loan servicing center (which is currently being subleased to third-party tenants), and our corporate office from Verde and another affiliate of Mr. Garcia (the Garcia Family Limited Liability Partnership, LLP). At September 30, 2012, three of these facilities are closed locations. For the three and nine months ended September 30, 2011, we also leased one vehicle sales facility and one reconditioning center, from a director of DTAC, Steven Johnson, who is also Mr. Garcia’s brother-in-law. For the three and nine months ended September 30, 2012 and 2011, we rented one vehicle sales facility from Stephen Fidel, the brother of Mr. Fidel, our President and CEO. At September 30, 2012, the maturity of all of these related party leases range from 2013 to 2023.

Restricted stock compensation expense

Restricted stock compensation expense represents stock compensation expense under a restricted stock agreement between DTAG, DTAC and Mr. Fidel.

Aircraft lease and operating expenses

We are party to a lease agreement for an aircraft with Verde under which we agreed to pay monthly lease payments of $150,000 plus taxes and are responsible for paying all operating costs and repairs and maintenance related to the aircraft. The lease expires in August 2015.

Salaries and wages, general and administrative and other expenses

Certain general and administrative expenses and salaries and wages of Verde and Verde employees who are enrolled in our health plan are reflected in our general and administrative expenses—related party.

Reimbursement of general and administrative expenses

For each of the periods presented, we received reimbursement of certain general and administrative expenses incurred by us on Verde’s behalf.

Interest Expense

During the three and nine months ended September 30, 2012, we recorded related party interest expense as follows:

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
	(In thousands)				(In thousands)
Senior Secured Notes Interest Expense—Related Party
Senior Secured Notes Payable—Verde	$	95	$	—	$	95	$	2,460
Senior Secured Notes Payable—CEO	8		—		8		220
Total Senior Secured Notes Interest Expense—Related Party	$	103	$	—	$	103	$	2,680

In August 2012, Verde purchased $5.0 million of the DriveTime 12.625% Senior Secured Notes on the open market, at a purchase price of $111 to par, plus accrued interest. Subsequent to this transaction, Mr. Fidel purchased $0.5 million of the notes purchased by Verde at an identical purchase price.

During the nine months endedSeptember 30, 2011, we recorded related party interest expense associated with our June 2010 issuance of $200.0 million of the DriveTime 12.625% Senior Secured Notes, an aggregate of $49.0 million of which were held by Verde and Mr. Fidel. In June 2011, Verde purchased Mr. Fidel’s portion of Senior Secured Notes, and Verde sold the Senior Secured Notes it held on the open market. As a result, at September 30, 2011, none of the Senior Secured Notes were held by a related party and interest expense during 2011 is related to the period they held the notes.

(7) Income Taxes

The consolidated financial statements consist of DTAG and DTAC, which are both S corporations. Since DTAC and DTAG are flow-through entities for federal income tax purposes, there is no federal income tax expense related to the income of DTAC and DTAG, other than for one of DTAG’s wholly-owned subsidiaries, which is a C corporation. The taxable income flows through to our shareholders who are responsible for paying the associated taxes. Although most states follow the federal recognition of S corporation status, some states do impose an entity level tax on that income; therefore, the tax expense is adjusted accordingly. Income tax liability was $0.3 million and $0.5 million as of September 30, 2012, and December 31, 2011, respectively.

(8) Shareholders’ Equity, Dividends & Stock Compensation

Since DTAG and DTAC are consolidated for financial reporting purposes, we are required to separately present the non-controlling equity interest of the VIE (DTAC) on the condensed consolidated balance sheets and condensed consolidated statements of operations for all periods presented. The non-controlling interest is DTAC’s GAAP equity and income for the periods presented and there are no third-party competing interests in DTAC. For the amounts of assets, liabilities, revenue, and income of DTAC consolidated into DTAG at September 30, 2012, see Note 13- Supplemental Consolidating Financial Information.

Certain of our debt facilities place restrictions on the amount of cash dividends we are permitted to pay to our shareholders. We are permitted to pay cash dividends limited to an amount not greater than the percentage of S corporation taxable income for such quarterly period equal to the highest combined federal, state, and/or local tax rate for individuals, plus 50% of the difference between pre-tax earnings less amounts paid for tax.

During the nine months endedSeptember 30, 2012 , we paid $44.8 million in dividends. We did not have any approved but unpaid dividends at September 30, 2012. However, we had approximately $6.4 million of dividends available to be distributed from third quarter 2012 earnings. See Note 11- Subsequent Events for further information.

For the nine months endedSeptember 30, 2012 and 2011, we recorded $1.2 million and $2.3 million, respectively, in restricted stock compensation expense associated with the December 2010 Restricted Stock Agreements between Mr. Fidel and each of DTAG and DTAC. The stock compensation recorded for these periods also credited our Paid-in Capital accounts for both companies during these periods.

(9) Commitments and Contingencies

Limited warranty

Our DriveCare^® limited warranty accrual is recorded as a component of accrued expenses and other liabilities on the accompanying consolidated balance sheets for each year presented. The limited warranty accrual includes our accrual for our

14

limited warranty, oil changes, roadside assistance and rental car assistance. The following table reflects activity in the warranty accrual for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(In thousands)
Warranty Accrual Activity
Balance, Beginning of Period	$	25,778		$	25,184		$	24,004		$	17,936
Warranty Expense	7,588			5,952			19,021			19,231
Warranty Claims Paid	(7,803		)	(4,116		)	(17,462		)	(10,147		)
Balance, End of Period	$	25,563		$	27,020		$	25,563		$	27,020

Operating leases

At September 30, 2012, we lease the majority of our dealership and reconditioning center locations. We also lease our corporate office in Phoenix, Arizona, and operations collections facilities in Dallas, Texas, Orlando, Florida, and Richmond, Virginia. As each lease matures, we evaluate the existing location to determine whether the dealership should be relocated to another site in the region closer in proximity to new car franchises and/or higher traffic retail areas. As of September 30, 2012, we had approximately $72.1 million in aggregate operating lease obligations.

Legal matters

We are involved in various claims and actions arising in the ordinary course of business. In the opinion of management, based on consultation with legal counsel, the ultimate disposition of these matters will not have a material adverse effect on us. We believe appropriate accruals have been made for the disposition of these matters. In accordance with ASC 450, Contingencies, we established an accrual for a liability when it is both probable that the liability has been incurred and the amount of the loss can be reasonably estimated. These accruals are reviewed monthly and adjusted to reflect the impact of negotiations, settlements and payments, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal expenses related to defense, negotiations, settlements, rulings, and advice of outside legal counsel are expensed as incurred.

On April 12, 2012, the Consumer Financial Protection Bureau (the “CFPB”) delivered a Civil Investigative Demand to DTAG requesting that DTAG produce certain documents and information and answer questions relating to certain components of the business of DTAG and its affiliates. The CFPB has not alleged a violation by DTAG of any law and DTAG is cooperating with the CFPB's requests for information. We are currently in the process of providing the documents and information requested by the CFPB.

Additionally, in the ordinary course of business, we are a defendant in various other types of legal proceedings. Although we cannot determine at this time the amount of the ultimate exposure from these lawsuits, if any, based on the advice of counsel, management does not expect the final outcome to have a material adverse effect on us.

(10) Fair Value of Financial Instruments

Fair values of financial instruments are based on estimates using quoted market prices, discounted cash flows, or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts that ultimately may be realized or paid at settlement or maturity of the financial instruments and those differences may be material. Accordingly, the aggregate fair value amounts presented do not represent our underlying institutional value.

Limitations

Fair value of financial instruments are based on relevant market information and information about the financial instrument; they are subjective in nature and involve uncertainties, matters of judgment and, therefore, cannot be determined with ultimate precision. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular instrument. Changes in assumptions could significantly affect these estimates. Because the fair value is estimated as of each balance sheet date presented, the amounts that will actually be realized or paid in settlement of the instruments could be significantly different.

The following is a summary of carrying value and fair value of our financial instruments for each period presented:

15

	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In thousands)
Finance Receivables, net (1)	$	1,407,515	$	1,504,544	$	1,258,118	$	1,339,049
Securitization Debt	819,212		836,860		679,031		675,231
Portfolio Term Residual Financing	100,000		100,000		100,000		100,000
Pooled Auto Loan Program Financings	—		—		3,603		3,700
Portfolio Warehouse Facilities	58,700		58,700		141,392		141,392
Senior Secured Notes Payable	198,252		237,902		198,058		210,932
Revolving Inventory Facility	84,320		84,320		84,500		84,500
Mortgage Note Payable	12,508		11,800		12,661		11,800
Equipment Note Payable	1,866		1,866		2,135		2,100
Real Estate Facility	12,196		12,196		—		—

^{(1)   Represents finance receivable principal balances, plus accrued interest, less the allowance for credit losses.} 

Valuation methodologies

Finance receivables

The fair value of finance receivables was estimated by discounting future cash flows expected to be collected using current rates at which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities. This discounted cash flow is estimated utilizing an internal valuation model, which uses a combination of market inputs (i.e. discount rates for similar and like transactions) and our own assumptions regarding credit losses, recoveries, and prepayment rates in our portfolio. We estimate the cash flow of the portfolio and the cash flow of our retained interests in securitization and PALP transactions in measuring total cash flow. These cash flows are developed on a leveraged basis since our finance receivable portfolio is financed by these debt instruments and are not separable transactions.

Securitization debt

At September 30, 2012 and December 31, 2011, the fair value of securitization debt was determined using a third-party quoted market price.

Portfolio term residual financing

This facility allowed for maximum borrowings under a term component of $100.0 million bearing a fixed rate of interest of 8.62%. This facility was amended in September 2011which gave us the ability to pre-pay the facility at any time without penalty; therefore, we believe the fair value of this debt approximates carrying value at September 30, 2012. Subsequent to September 30, 2012, we paid this facility in full.

Pooled auto loan program financings

The fair value of PALP debt at December 31, 2011, was based on third-party discounted cash flow using market interest rates for this debt.

Portfolio warehouse facilities

The portfolio warehouse facilities are short term in nature and the interest rates adjust in conjunction with the lender’s cost of funds or 30-day LIBOR. The Deutsche Bank Warehouse Facility was renewed in December 2011. The UBS Real Estate Securities Warehouse Facility was renewed in May 2011 and paid in full and terminated in August 2012. The Royal Bank of Scotland Warehouse Facility was renewed in March 2012. The Wells Fargo Warehouse Facility was newly executed in December 2011. Since these warehouse facilities were recently renewed or executed and contain a floating market rate of interest, we believe the fair value of these facilities approximate carrying value at September 30, 2012 and December 31, 2011.

Senior secured notes payable

The fair value of senior secured notes payable at September 30, 2012 was determined using the tender price we expect to pay in our Offer to Purchase the Senior Secured Notes, see Note 1, Description of Business for more information. The fair value of senior secured notes payable at December 31, 2011 was determined using third-party quoted market prices.

Revolving inventory facility

16

At September 30, 2012 and December 31, 2011, the fair value of the inventory facility was deemed to be the carrying value since this facility was executed in November 2011 and contains a floating market rate of interest.

Mortgage note payable

At September 30, 2012, and December 31, 2011, the fair value of this note was determined using third-party market prices for similar commercial real estate mortgages.

Equipment note payable

At September 30, 2012, and December 31, 2011, the fair value of the equipment note payable was determined to be approximately carrying value since the note is due in less than 12 months, and can be repaid without penalty.

Real estate facility

At September 30, 2012 and December 31, 2011, the fair value of the real estate facility was deemed to be the carrying value since this facility was executed in April 2012 and contains a floating market rate of interest.

(11) Subsequent Events

In October 2012, the board of directors approved, and the Company paid approximately $6.4 million of dividends to shareholders relating to third quarter 2012 earnings.

In October 2012 we paid $75.0 million of our $100.0 million term residual facility with Santander Consumer USA, Inc. Additionally, we have the right to a $25 million buyer break fee deposit on this facility; subsequent to the receipt of this deposit, the term residual facility will be paid in full.

(12) Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other accounting standards setting bodies, which we may adopt as of the specified date required by each standard. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption. We did not note any Accounting Standard Updates (ASUs) to amend the FASB Accounting Standards Codification in the third quarter of 2012, which would have an effect on the Company.

(13) Supplemental Consolidating Financial Information

In accordance with the indenture governing the 12.625% Senior Secured Notes due 2017 (see Note 5—Debt Obligations), certain wholly-owned U.S. subsidiaries of the Company have fully and unconditionally guaranteed the Senior Secured Notes on a joint and several basis. Pursuant to Regulation S-X, Rule 3-10(f), we are required to present condensed consolidating financial information for subsidiaries that have guaranteed the debt of a registrant issued in a public offering, where the guarantee is full and unconditional, joint and several, and where the voting interest of the subsidiary is 100% owned by the registrant.

The following tables present condensed consolidating balance sheets as of September 30, 2012, and December 31, 2011; and condensed consolidating statements of income and cash flows for the three and nine months ended September 30, 2012 and 2011 for (i) DTAG and DTAC, —the co-issuers of the Senior Secured Notes, (ii) the separate DTAG and DTAC guarantor subsidiaries on a combined basis, (iii) the separate DTAG and DTAC non-guarantor subsidiaries on a combined basis, (iv) elimination adjustments, and (v) total consolidated amounts. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because management believes that such information is not material to the senior note holders. Consolidating adjustments include elimination of investment in subsidiaries, elimination of intercompany accounts; elimination of intercompany sales between guarantor and non-guarantor subsidiaries; and elimination of equity in earnings (losses) of subsidiaries. The condensed consolidating financial information should be read in conjunction with the consolidated financial statements herein.

17

Included in the column for DTAG Guarantor Subsidiaries Combined are DriveTime Sales and Finance Company, LLC and DriveTime Car Sales Company, LLC. Included in the column for DTAC Guarantor Subsidiaries Combined are DT Credit Company, LLC, GFC Lending, LLC and DT Jet Leasing, LLC. Included in the column for DTAG Non-Guarantor Subsidiaries Combined are all other subsidiaries that are wholly-owned by DTAG and included in the column for DTAC Non-Guarantor Subsidiaries Combined are all other subsidiaries that are wholly-owned by DTAC, that are not guarantor subsidiaries. The column for the Issuers includes the accounts for DTAG and DTAC as issuers and as parent companies for each of its respective subsidiaries.

Consolidated amounts are immaterially different compared to the consolidated financial statements due to rounding.

18

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Balance Sheets

September 30, 2012

($ in thousands)

	DriveTime Automotive Group, Inc.											DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non-Guarantor Subsidiary		Parent Company		Eliminations			Consolidated		Guarantor Subsidiaries Combined		Non-Guarantor Subsidiaries Combined		Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
ASSETS
Cash and Cash Equivalents	$	5,518	$	235	$	6	$	—		$	5,759	$	67	$	286	$	18,690		$	—		$	19,043		$	—		$	24,802
Restricted Cash and Investments Held in Trust	—		—		—		—			—		29,126		79,589		—			—			108,715			—			108,715
Finance Receivables	—		—		—		—			—		—		—		1,676,374			—			1,676,374			—			1,676,374
Allowance for Credit Losses	—		—		—		—			—		—		—		(251,415		)	—			(251,415		)	—			(251,415		)
Finance Receivables, Net	—		—		—		—			—		—		—		1,424,959			—			1,424,959			—			1,424,959
Dealer Finance Receivables	—		—		—		—			—		23,656		—		—			—			23,656			—			23,656
Inventory	159,010		—		—		—			159,010		—		—		—			—			—			—			159,010
Property and Equipment, Net	66,025		—		—		—			66,025		5,959		15,344		2,794			—			24,097			—			90,122
Investments in Subsidiaries	—		—		487,535		(487,535		)	—		—		—		341,626			(341,626		)	—			—			—
Other Assets	1,026,482		26,010		379,999		(731,136		)	701,355		307,024		1,283,522		557,612			(1,627,185		)	520,973			(1,163,243		)	59,085
Total Assets	$	1,257,035	$	26,245	$	867,540	$	(1,218,671	)	$	932,149	$	365,832	$	1,378,741	$	2,345,681		$	(1,968,811	)	$	2,121,443		$	(1,163,243	)	$	1,890,349
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	19,856	$	—	$	—	$	—		$	19,856	$	—	$	—	$	—		$	—		$	—		$	—		$	19,856
Accrued Expenses and Other Liabilities	681,732		199		611,084		(731,136		)	561,879		350,992		5,763		1,953,921			(1,606,689		)	703,987			(1,163,243		)	102,623
Portfolio Term Financings	—		—		—		—			—		—		939,708		—			(20,496		)	919,212			—			919,212
Portfolio Warehouse Facilities	—		—		—		—			—		—		58,700		—			—			58,700			—			58,700
Senior Secured Notes Payable	—		—		99,126		—			99,126		—		—		99,126			—			99,126			—			198,252
Other Secured Notes Payable	84,320		12,196		—		—			96,516		1,866		12,508		—			—			14,374			—			110,890
Total Liabilities	785,908		12,395		710,210		(731,136		)	777,377		352,858		1,016,679		2,053,047			(1,627,185		)	1,795,399			(1,163,243		)	1,409,533
Shareholders’ Equity:
Total Shareholders’ Equity	471,127		13,850		157,330		(487,535		)	154,772		12,974		362,062		292,634			(341,626		)	326,044			—			480,816
Total Liabilities & Shareholders’ Equity	$	1,257,035	$	26,245	$	867,540	$	(1,218,671	)	$	932,149	$	365,832	$	1,378,741	$	2,345,681		$	(1,968,811	)	$	2,121,443		$	(1,163,243	)	$	1,890,349

19

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Balance Sheets

December 31, 2011

($ in thousands)

	DriveTime Automotive Group, Inc.											DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non- Guarantor Subsidiary		Parent Company		Eliminations			Consolidated		Guarantor Subsidiaries Combined		Non- Guarantor Subsidiaries Combined		Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
ASSETS
Cash and Cash Equivalents	$	2,869	$	595	$	5	$	—		$	3,469	$	52	$	396	$	22,013		$	—		$	22,461		$	—		$	25,930
Restricted Cash and Investments Held in Trust	—		—		—		—			—		22,517		77,199		—			—			99,716			—			99,716
Finance Receivables	—		—		—		—			—		—		—		1,495,340			—			1,495,340			—			1,495,340
Allowance for Credit Losses	—		—		—		—			—		—		—		(221,533		)	—			(221,533		)	—			(221,533		)
Finance Receivables, Net	—		—		—		—			—		—		—		1,273,807			—			1,273,807			—			1,273,807
Dealer Finance Receivables	—		—		—		—			—		24		—		—			—			24			—			24
Inventory	212,330		—		—		—			212,330		—		—		—			—			—			—			212,330
Property and Equipment, Net	67,579		—		—		—			67,579		4,085		16,029		2,976			—			23,090			—			90,669
Investments in Subsidiaries	—		—		613,599		(613,599		)	—		—		—		388,967			(388,967		)	—			—			—
Other Assets	1,316,338		12,840		242,936		(724,386		)	847,728		705,731		1,176,065		783,441			(1,891,941		)	773,296			(1,556,671		)	64,353
Total Assets	$	1,599,116	$	13,435	$	856,540	$	(1,337,985	)	$	1,131,106	$	732,409	$	1,269,689	$	2,471,204		$	(2,280,908	)	$	2,192,394		$	(1,556,671	)	$	1,766,829
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	9,759	$	—	$	—	$	—		$	9,759	$	—	$	—	$	—		$	—		$	—		$	—		$	9,759
Accrued Expenses and Other Liabilities	904,341		352		608,647		(724,386		)	788,954		647,665		6,148		2,063,190			(1,871,445		)	845,558			(1,556,671		)	77,841
Portfolio Term Financings	—		—		—		—			—		—		803,130		—			(20,496		)	782,634			—			782,634
Portfolio Warehouse Facilities	—		—		—		—			—		—		141,392		—			—			141,392			—			141,392
Senior Secured Notes Payable	—		—		99,029		—			99,029		—		—		99,029			—			99,029			—			198,058
Other Secured Notes Payable	84,500		—		—		—			84,500		2,135		12,661		—			—			14,796			—			99,296
Total Liabilities	998,600		352		707,676		(724,386		)	982,242		649,800		963,331		2,162,219			(1,891,941		)	1,883,409			(1,556,671		)	1,308,980
Shareholders’ Equity:
Total Shareholders’ Equity	600,516		13,083		148,864		(613,599		)	148,864		82,609		306,358		308,985			(388,967		)	308,985			—			457,849
Total Liabilities & Shareholders’ Equity	$	1,599,116	$	13,435	$	856,540	$	(1,337,985	)	$	1,131,106	$	732,409	$	1,269,689	$	2,471,204		$	(2,280,908	)	$	2,192,394		$	(1,556,671	)	$	1,766,829

20

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Statements of Operations

Three Months Ended September 30, 2012

($ in thousands)

	DriveTime Automotive Group, Inc.												DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non-Guarantor Subsidiary			Parent Company		Eliminations			Consolidated		Guarantor Subsidiaries Combined		Non-Guarantor Subsidiaries Combined		Parent Company		Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
Revenue:
Sales of Used Vehicles	$	226,866	$	—		$	—	$	—		$	226,866	$	—	$	—	$	—	$	—		$	—		$	—		$	226,866
Interest Income	—		—			—		—			—		—		69,390		77,638		(69,694		)	77,334			—			77,334
Dealer Finance and Other Income	—		—			—		—			—		757		—		—		—			757			—			757
Other Revenue	11,189		—			10,132		—			21,321		16,902		—		665		(16,883		)	684			(22,005		)	—
Equity in Income of Subsidiaries	—		—			110,096		(110,096		)	—		—		—		55,527		(55,527		)	—			—			—
Total Revenue	238,055		—			120,228		(110,096		)	248,187		17,659		69,390		133,830		(142,104		)	78,775			(22,005		)	304,957
Costs and Expenses:
Cost of Used Vehicles Sold	151,264		—			—		—			151,264		—		—		—		—			—			—			151,264
Provision for Credit Losses	—		—			—		—			—		—		—		70,110		—			70,110			—			70,110
Portfolio Debt Interest Expense	—		—			—		—			—		—		11,080		—		—			11,080			—			11,080
Non-Portfolio Debt Interest Expense	712		149			18		—			879		23		495		11,067		(303		)	11,282			(11,055		)	1,106
Senior Secured Notes Interest Expense	—		—			3,311		—			3,311		—		—		3,311		—			3,311			—			6,622
Selling and Marketing	7,315		—			—		—			7,315		21		—		—		—			21			—			7,336
General and Administrative	23,436		(1,328		)	1,831		—			23,939		14,345		14,098		23,032		(16,883		)	34,592			(10,950		)	47,581
Depreciation Expense	4,235		—			—		—			4,235		411		132		313		—			856			—			5,091
Total Costs and Expenses	186,962		(1,179		)	5,160		—			190,943		14,800		25,805		107,833		(17,186		)	131,252			(22,005		)	300,190
Income before Income Taxes	51,093		1,179			115,068		(110,096		)	57,244		2,859		43,585		25,997		(124,918		)	(52,477		)	—			4,767
Income Tax Expense (Benefit)	—		179			38		—			217		—		—		154		—			154			—			371
Net Income	$	51,093	$	1,000		$	115,030	$	(110,096	)	$	57,027	$	2,859	$	43,585	$	25,843	$	(124,918	)	$	(52,631	)	$	—		$	4,396

21

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Statements of Operations

Three Months Ended September 30, 2011

($ in thousands)

	DriveTime Automotive Group, Inc.														DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non- Guarantor Subsidiary			Parent Company			Eliminations			Consolidated			Guarantor Subsidiaries Combined		Non- Guarantor Subsidiaries Combined		Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
Revenue:
Sales of Used Vehicles	$	213,766	$	—		$	—		$	—		$	213,766		$	—	$	—	$	—		$	—		$	—		$	—		$	213,766
Interest Income	—		—			—			—			—			—		63,603		72,550			(63,907		)	72,246			—			72,246
Other Revenue	12,790		—			5,744			—			18,534			19,925		—		925			(19,925		)	925			(19,459		)	—
Equity in Income of Subsidiaries	—		—			51,831			(51,831		)	—			—		—		46,481			(46,481		)	—			—			—
Total Revenue	226,556		—			57,575			(51,831		)	232,300			19,925		63,603		119,956			(130,313		)	73,171			(19,459		)	286,012
Costs and Expenses:
Cost of Used Vehicles Sold	143,523		—			—			—			143,523			—		—		—			—			—			—			143,523
Provision for Credit Losses	—		—			—			—			—			—		—		61,951			—			61,951			—			61,951
Portfolio Debt Interest Expense	—		—			—			—			—			—		10,038		—			—			10,038			—			10,038
Non-Portfolio Debt Interest Expense	508		—			(112		)	—			396			27		498		70,331			(63,907		)	6,949			(6,700		)	645
Senior Secured Notes Interest Expense	—		—			3,292			—			3,292			—		—		3,291			—			3,291			—			6,583
Selling and Marketing	5,740		—			—			—			5,740			—		—		2			—			2			—			5,742
General and Administrative	21,333		(58		)	629			—			21,904			14,511		11,645		25,419			(19,925		)	31,650			(12,759		)	40,795
Depreciation Expense	3,661		—			—			—			3,661			179		149		309			—			637			—			4,298
Total Costs and Expenses	174,765		(58		)	3,809			—			178,516			14,717		22,330		161,303			(83,832		)	114,518			(19,459		)	273,575
Income before Income Taxes	51,791		58			53,766			(51,831		)	53,784			5,208		41,273		(41,347		)	(46,481		)	(41,347		)	—			12,437
Income Tax Expense (Benefit)	—		18			(169		)	—			(151		)	—		—		212			—			212			—			61
Net Income	$	51,791	$	40		$	53,935		$	(51,831	)	$	53,935		$	5,208	$	41,273	$	(41,559	)	$	(46,481	)	$	(41,559	)	$	—		$	12,376

22

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Statements of Operations

Nine Months Ended September 30, 2012

($ in thousands)

	DriveTime Automotive Group, Inc.												DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non-Guarantor Subsidiary			Parent Company		Eliminations			Consolidated		Guarantor Subsidiaries Combined		Non-Guarantor Subsidiaries Combined		Parent Company		Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
Revenue:
Sales of Used Vehicles	$	750,125	$	—		$	—	$	—		$	750,125	$	—	$	—	$	—	$	—		$	—		$	—		$	750,125
Interest Income	—		—			—		—			—		—		199,148		224,402		(200,058		)	223,492			—			223,492
Dealer Finance and Other Income	—		—			—		—			—		1,380		—		—		—			1,380			—			1,380
Other Revenue	33,892		—			26,978		—			60,870		47,253		—		1,971		(47,193		)	2,031			(62,901		)	—
Equity in Income of Subsidiaries	—		—			186,606		(186,606		)	—		—		—		94,746		(94,746		)	—			—			—
Total Revenue	784,017		—			213,584		(186,606		)	810,995		48,633		199,148		321,119		(341,997		)	226,903			(62,901		)	974,997
Costs and Expenses:
Cost of Used Vehicles Sold	496,680		—			—		—			496,680		—		—		—		—			—			—			496,680
Provision for Credit Losses	—		—			—		—			—		—		—		181,840		—			181,840			—			181,840
Portfolio Debt Interest Expense	—		—			—		—			—		—		31,998		—		—			31,998			—			31,998
Non-Portfolio Debt Interest Expense	2,247		260			55		—			2,562		71		1,482		29,709		(923		)	30,339			(29,664		)	3,237
Senior Secured Notes Interest Expense	—		—			9,919		—			9,919		—		—		9,919		—			9,919			—			19,838
Selling and Marketing	23,002		—			—		—			23,002		114		—		—		—			114			—			23,116
General and Administrative	67,214		(2,435		)	6,260		—			71,039		44,311		40,207		60,553		(47,193		)	97,878			(33,237		)	135,680
Depreciation Expense	12,662		—			—		—			12,662		1,026		414		959		—			2,399			—			15,061
Total Costs and Expenses	601,805		(2,175		)	16,234		—			615,864		45,522		74,101		282,980		(48,116		)	354,487			(62,901		)	907,450
Income before Income Taxes	182,212		2,175			197,350		(186,606		)	195,131		3,111		125,047		38,139		(293,881		)	(127,584		)	—			67,547
Income Tax Expense (Benefit)	—		339			184		—			523		—		—		507		—			507			—			1,030
Net Income	$	182,212	$	1,836		$	197,166	$	(186,606	)	$	194,608	$	3,111	$	125,047	$	37,632	$	(293,881	)	$	(128,091	)	$	—		$	66,517

23

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Statements of Operations

Nine Months Ended September 30, 2011

($ in thousands)

	DriveTime Automotive Group, Inc.													DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non- Guarantor Subsidiary			Parent Company			Eliminations			Consolidated		Guarantor Subsidiaries Combined		Non- Guarantor Subsidiaries Combined		Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
Revenue:
Sales of Used Vehicles	$	682,247	$	—		$	—		$	—		$	682,247	$	—	$	—	$	—		$	—		$	—		$	—		$	682,247
Interest Income	—		—			—			—			—		—		186,339		212,941			(187,252		)	212,028			—			212,028
Other Revenue	28,858		—			20,243			—			49,101		64,096		—		1,976			(64,096		)	1,976			(51,077		)	—
Equity in Income of Subsidiaries	—		—			182,186			(182,186		)	—		—		—		137,201			(137,201		)	—			—			—
Total Revenue	711,105		—			202,429			(182,186		)	731,348		64,096		186,339		352,118			(388,549		)	214,004			(51,077		)	894,275
Costs and Expenses:
Cost of Used Vehicles Sold	441,060		—			—			—			441,060		—		—		—			—			—			—			441,060
Provision for Credit Losses	—		—			—			—			—		—		—		154,977			—			154,977			—			154,977
Portfolio Debt Interest Expense	—		—			—			—			—		—		32,745		102			—			32,847			—			32,847
Non-Portfolio Debt Interest Expense	1,516		—			(247		)	—			1,269		84		1,492		209,555			(187,252		)	23,879			(23,132		)	2,016
Senior Secured Notes Interest Expense	—		—			9,974			—			9,974		—		—		9,974			—			9,974			—			19,948
Selling and Marketing	19,124		—			—			—			19,124		—		—		8			—			8			—			19,132
General and Administrative	58,279		(982		)	6,915			—			64,212		41,430		36,503		76,830			(64,096		)	90,667			(27,945		)	126,934
Depreciation Expense	9,594		—			—			—			9,594		535		445		903			—			1,883			—			11,477
Total Costs and Expenses	529,573		(982		)	16,642			—			545,233		42,049		71,185		452,349			(251,348		)	314,235			(51,077		)	808,391
Income before Income Taxes	181,532		982			185,787			(182,186		)	186,115		22,047		115,154		(100,231		)	(137,201		)	(100,231		)	—			85,884
Income Tax Expense (Benefit)	—		328			(250		)	—			78		—		—		832			—			832			—			910
Net Income	$	181,532	$	654		$	186,037		$	(182,186	)	$	186,037	$	22,047	$	115,154	$	(101,063	)	$	(137,201	)	$	(101,063	)	$	—		$	84,974

24

DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Statements of Cash Flows

Nine Months Ended September 30, 2012

($ in thousands)

	DriveTime Automotive Group, Inc.															DT Acceptance Corp
	Guarantor Subsidiaries Combined			Non-Guarantor Subsidiary			Parent Company			Eliminations			Consolidated			Guarantor Subsidiaries Combined			Non-Guarantor Subsidiaries Combined			Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
Cash Flows from Operating Activities:
Net Income (Loss)	$	182,212		$	1,836		$	197,166		$	(186,606	)	$	194,608		$	3,111		$	125,047		$	37,632		$	(293,881	)	$	(128,091	)	$	—		$	66,517
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Provision for Credit Losses	—			—			—			—			—			—			—			181,840			—			181,840			—			181,840
Depreciation Expense	12,662			—			—			—			12,662			1,026			414			959			—			2,399			—			15,061
Amortization of Debt Issuance Costs and Debt Premium and Discount	75			—			450			—			525			—			4,990			450			—			5,440			—			5,965
Non-Cash Compensation Expense-Related Party	—			—			620			—			620			—			—			619			—			619			—			1,239
Loss (Gain) from Disposal of Property and Equipment	(113		)	—			—			—			(113		)	(23		)	—			(2		)	—			(25		)	—			(138		)
Originations of Finance Receivables	—			—			—			—			—			—			—			(749,268		)	—			(749,268		)	—			(749,268		)
Collections and Recoveries on Finance Receivable Principal Balances	—			—			—			—			—			—			—			420,709			—			420,709			—			420,709
Change in Accrued Interest Receivable and Loan Origination Costs	—			—			—			—			—			—			—			(4,433		)	—			(4,433		)	—			(4,433		)
(Increase) Decrease in Inventory	53,237			—			—			—			53,237			—			—			—			—			—			—			53,237
(Increase) Decrease in Other Assets	(21,329		)	(14,239		)	(200,670		)	193,356			(42,882		)	325,961			368,780			263,011			(518,844		)	438,908			(393,427		)	2,599
Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Liabilities	(212,603		)	(153		)	2,441			(6,750		)	(217,065		)	(296,671		)	(387		)	(109,269		)	264,754			(141,573		)	393,427			34,789
Net Cash Provided By (Used In) Operating Activities	14,141			(12,556		)	7			—			1,592			33,404			498,844			42,248			(547,971		)	26,525			—			28,117
Cash Flows from Investing Activities:
Origination of Dealer Finance Receivables	—			—			—			—			—			(25,602		)	—			—			—			(25,602		)	—			(25,602		)
Collections and Recoveries of Dealer Finance Receivables	—			—			—			—			—			1,970			—			—			—			1,970			—			1,970
Proceeds from Disposal of Property and Equipment	1,345			—			—			—			1,345			138			—			38			—			176			—			1,521
Purchase of Property and Equipment	(12,249		)	—			—			—			(12,249		)	(3,017		)	272			(813		)	—			(3,558		)	—			(15,807		)
Net Cash Provided By (Used In) Investing Activities	(10,904		)	—			—			—			(10,904		)	(26,511		)	272			(775		)	—			(27,014		)	—			(37,918		)
Cash Flows from Financing Activities:
Increase (Decrease) in Restricted Cash	—			—			—			—			—			(6,609		)	6,573			—			—			(36		)	—			(36		)
Deposits into Investments Held in Trust	—			—			—			—			—			—			(9,000		)	—			—			(9,000		)	—			(9,000		)
Collections, Buybacks and Change in Investments Held in Trust	—			—			—			—			—			—			38			—			—			38			—			38
Additions to Portfolio Term Financings	—			—			—			—			—			—			482,246			—			—			482,246			—			482,246
Repayment of Portfolio Term Financings	—			—			—			—			—			—			(345,481		)	—			—			(345,481		)	—			(345,481		)
Additions to Portfolio Warehouse Facilities	—			—			—			—			—			—			548,300			—			—			548,300			—			548,300
Repayment of Portfolio Warehouse Facilities	—			—			—			—			—			—			(630,992		)	—			—			(630,992		)	—			(630,992		)
Additions to Other Secured Notes Payable	30,001			12,968			—			—			42,969			—			—			—			—			—			—			42,969
Repayment of Other Secured Notes Payable	(30,179		)	(772		)	—			—			(30,951		)	(269		)	(155		)	—			—			(424		)	—			(31,375		)
Payment of Debt Issuance Costs	(410		)	—			(6		)	—			(416		)	—			(2,784		)	(6		)	—			(2,790		)	—			(3,206		)
Dividend Distributions	—			—			—			—			—			—			(547,971		)	(44,790		)	547,971			(44,790		)	—			(44,790		)
Net Cash Provided By (Used In) Financing Activities	(588		)	12,196			(6		)	—			11,602			(6,878		)	(499,226		)	(44,796		)	547,971			(2,929		)	—			8,673
Net Increase (Decrease) in Cash and Cash Equivalents	2,649			(360		)	1			—			2,290			15			(110		)	(3,323		)	—			(3,418		)	—			(1,128		)
Cash and Cash Equivalents at Beginning of Period	2,869			595			5			—			3,469			52			396			22,013			—			22,461			—			25,930
Cash and Cash Equivalents at End of Period	$	5,518		$	235		$	6		$	—		$	5,759		$	67		$	286		$	18,690		$	—		$	19,043		$	—		$	24,802

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DriveTime Automotive Group, Inc. and Subsidiaries

Consolidating Statements of Cash Flows

Nine Months Ended September 30, 2011

($ in thousands)

	DriveTime Automotive Group, Inc.															DT Acceptance Corp
	Guarantor Subsidiaries Combined			Non- Guarantor Subsidiary			Parent Company			Eliminations			Consolidated			Guarantor Subsidiaries Combined			Non- Guarantor Subsidiaries Combined			Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
Cash Flows from Operating Activities:
Net Income (Loss)	$	181,532		$	654		$	186,037		$	(182,186	)	$	186,037		$	22,047		$	115,154		$	(101,063	)	$	(137,201	)	$	(101,063	)	$	—		$	84,974
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Provision for Credit Losses	—			—			—			—			—			—			—			154,977			—			154,977			—			154,977
Depreciation Expense	9,594			—			—			—			9,594			535			445			903			—			1,883			—			11,477
Amortization of Debt Issuance Costs and Debt Premium and Discount	377			—			421			—			798			—			8,132			421			—			8,553			—			9,351
Non-Cash Compensation Expense-Related Party	—			—			1,162			—			1,162			—			—			1,162			—			1,162			—			2,324
Loss (Gain) from Disposal of Property and Equipment	(16		)	—			—			—			(16		)	—			—			(6		)	—			(6		)	—			(22		)
Originations of Finance Receivables	—			—			—			—			—			—			—			(672,965		)	—			(672,965		)	—			(672,965		)
Collections and Recoveries on Finance Receivable Principal Balances	—			—			—			—			—			—			—			408,768			—			408,768			—			408,768
Decrease in Accrued Interest Receivable and Loan Origination Costs	—			—			—			—			—			—			—			(1,841		)	—			(1,841		)	—			(1,841		)
(Increase) Decrease in Inventory	(8,154		)	—			—			—			(8,154		)	—			—			—			—			—			—			(8,154		)
(Increase) Decrease in Other Assets	(604,350		)	2,838			(306,817		)	286,637			(621,692		)	(411,529		)	234,360			(413,800		)	326,438			(264,531		)	882,763			(3,460		)
Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Liabilities	452,604			(3,311		)	119,371			(104,451		)	464,213			389,478			(16,963		)	778,483			(700,311		)	450,687			(882,763		)	32,137
Net Cash Provided By (Used In) Operating Activities	31,587			181			174			—			31,942			531			341,128			155,039			(511,074		)	(14,376		)	—			17,566
Cash Flows from Investing Activities:
Proceeds from Disposal of Property and Equipment	280			—			—			—			280			63			—			20			—			83			—			363
Purchase of Property and Equipment	(33,228		)	—			—			—			(33,228		)	(174		)	(184		)	(278		)	—			(636		)	—			(33,864		)
Net Cash Provided By (Used In) Investing Activities	(32,948		)	—			—			—			(32,948		)	(111		)	(184		)	(258		)	—			(553		)	—			(33,501		)
Cash Flows from Financing Activities:
Increase (Decrease) in Restricted Cash	5			—			—			—			5			(93		)	16,789			—			—			16,696			—			16,701
Deposits into Investments Held in Trust	—			—			—			—			—			—			(8,699		)	—			—			(8,699		)	—			(8,699		)
Collections, Buybacks and Change in Investments Held in Trust	—			—			—			—			—			—			(17,018		)	—			—			(17,018		)	—			(17,018		)
Additions to Portfolio Warehouse Facilities	—			—			—			—			—			—			692,800			—			—			692,800			—			692,800
Repayment of Portfolio Warehouse Facilities	—			—			—			—			—			—			(834,600		)	—			—			(834,600		)	—			(834,600		)
Additions to Portfolio Term Financings	—			—			—			—			—			—			461,061			—			—			461,061			—			461,061
Repayment of Portfolio Term Financings	—			—			—			—			—			—			(242,591		)	—			—			(242,591		)	—			(242,591		)
Additions to Other Secured Notes Payable	—			—			—			—			—						—			—			—			—			—			—
Repayment of Other Secured Notes Payable	—			—			—			—			—			(256		)	(147		)	—			—			(403		)	—			(403		)
Payment of Debt Issuance Costs	(250		)	—			(169		)	—			(419		)	—			(5,283		)	(169		)	—			(5,452		)	—			(5,871		)
Dividend Distributions	—			—			—			—			—			(350		)	(403,149		)	(153,434		)	511,074			(45,859		)	—			(45,859		)
Net Cash Provided By (Used In) Financing Activities	(245		)	—			(169		)	—			(414		)	(699		)	(340,837		)	(153,603		)	511,074			15,935			—			15,521
Net Increase (Decrease) in Cash and Cash Equivalents	(1,606		)	181			5			—			(1,420		)	(279		)	107			1,178			—			1,006			—			(414		)
Cash and Cash Equivalents at Beginning of Period	3,588			322			—			—			3,910			285			515			18,967			—			19,767			—			23,677
Cash and Cash Equivalents at End of Period	$	1,982		$	503		$	5		$	—		$	2,490		$	6		$	622		$	20,145		$	—		$	20,773		$	—		$	23,263

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A for the year ended December 31, 2011, included in our Annual Report on Form 10-K filed with the SEC on March 30, 2012, as well as our condensed consolidated financial statements and the accompanying notes included in Item 1 of this Form 10-Q.

Unless otherwise indicated in this Quarterly Report on Form 10-Q, the terms “DriveTime,” the “Company,” “we,” “our” and “us” refer to DriveTime Automotive Group, Inc. and its subsidiaries as a consolidated entity.

Entry into a Material Definitive Agreement

On September 11, 2012, DTAG and DTAC entered into definitive agreements to sell DriveTime in separate transactions.

Pursuant to the definitive agreements, DTAC agreed to sell its finance receivable portfolio, which consists of vehicle-related installment sales contracts, certificates representing its residual interests in securitizations of finance receivables, and certain other assets to Santander Consumer USA Inc. Immediately thereafter, a new entity owned by third-party investors would purchase all of the outstanding stock of DTAG and DTAC, effectively acquiring DTAG's used vehicle dealership operations, currently consisting of 93 owned and leased dealerships and 16 reconditioning and other facilities throughout the United States.

           Also in conjunction with the execution of the definitive agreements noted above, on September 24, 2012, DTAG issued an Offer to Purchase and Consent Solicitation (“Offer to Purchase”) with respect to the outstanding $200.0 million 12.625% Senior Secured Notes due 2017 issued by DTAG and DTAC (the “Notes”).  

Since execution of definitive agreements, the purchasers have requested that DTAG and DTAC restructure the proposed transactions and DTAG and DTAC engaged in good faith discussions with the other parties regarding various potential alternatives. However, no agreements were reached and DTAG and DTAC have notified the buyers that they are terminating the agreements for the buyers' inability to consummate the transactions. As a result, we have written-off approximately $2.6 million of transaction-related costs. We also expect to terminate the offer to purchase on or before its expiration date (November 19, 2012). While it is conceivable the parties will continue discussions regarding alternative transactions, it is not anticipated that the transactions reflected in the current definitive agreements will proceed.

Overview

We are the leading used vehicle retailer in the United States with a primary focus on the sale and financing of quality vehicles to the subprime market. Through our branded dealerships, we provide our customers with a comprehensive end-to-end solution for their automotive needs, including the sale, financing, and maintenance of their vehicles. As of September 30, 2012, we owned and operated 93 dealerships and 16 reconditioning facilities in 19 states. For the nine months endedSeptember 30, 2012, we sold 48,651 vehicles, generated $975.0 million of total revenue (sales revenue and interest income combined) and $136.9 million of Adjusted EBITDA. We provide our customers with financing for substantially all of the vehicles we sell. We historically have not utilized third-party finance companies or banks to finance vehicles for our customers, and many of our customers may be unable to obtain financing to purchase a vehicle from another company, therefore financing is an essential component of the services that we provide to our customers. As of September 30, 2012, our loan portfolio had a total outstanding principal balance of $1.6 billion. We maintain our loan portfolio and related financings on our balance sheet.

Over the past 20 years, we have developed an integrated business model that consists of vehicle acquisition, reconditioning, sales, underwriting and finance, loan servicing, and after sale support. We believe that our model enables us to operate successfully in the underserved subprime market. In addition, we believe that our model allows us to systematically open new dealerships in existing and new markets throughout the United States.

Select information regarding our dealerships is as follows:

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	Nine Months Ended
	September 30, 2012			As of September 30, 2012
State	# of Units Sold	Percent of Unit Sales Volume		Number of Stores	Number of Reconditioning Facilities	# of  Active Loans	Loan Principal		% of Portfolio
Texas	10,330	21.2	%	17	4	34,081	$	381,352	23.2	%
Florida	6,757	13.9	%	15	2	23,265	254,296		15.5	%
North Carolina	4,491	9.2	%	9	1	14,333	164,335		10.1	%
Georgia	4,048	8.4	%	7	1	11,091	125,451		7.6	%
Arizona	3,436	7.2	%	6	1	10,887	115,552		7.1	%
Tennessee	2,938	6.0	%	5	1	5,446	72,683		4.4	%
Virginia	2,820	5.8	%	6	1	10,371	110,282		6.7	%
California	2,063	4.2	%	4	1	7,019	75,841		4.6	%
South Carolina	2,016	4.1	%	3	—	4,439	58,195		3.5	%
Alabama	1,945	4.0	%	4	—	3,145	42,620		2.6	%
Nevada	1,806	3.7	%	2	1	6,216	67,854		4.1	%
New Mexico	1,362	2.8	%	3	1	5,088	51,991		3.2	%
Oklahoma	1,243	2.6	%	2	—	2,751	36,423		2.2	%
Indiana	996	2.0	%	2	1	1,416	20,904		1.3	%
Colorado	799	1.6	%	2	1	3,494	36,728		2.2	%
Ohio	766	1.6	%	3	—	817	12,049		0.7	%
Mississippi	721	1.5	%	1	—	1,041	14,900		0.9	%
Arkansas	110	0.2	%	1	—	110	1,757		0.1	%
Missouri	4	—	%	1	—	4	68		—	%
	48,651	100.0	%	93	16	145,014	$	1,643,281	100.0	%

Our integrated business model is focused on giving our customers the ability to acquire quality used vehicles through six key activities:

• Vehicle acquisition. We acquire inventory primarily from used vehicle auctions. Our centralized vehicle selection strategy takes into account many factors, including the retail value, age, and costs of buying, reconditioning, and delivering the vehicle for resale, along with buyer affordability and desirability. At September 30, 2012, we employed 39 buyers who averaged 5 years of experience with us. For the nine months endedSeptember 30, 2012, we purchased 53,173 vehicles from auctions nationwide.

• Vehicle reconditioning and distribution. Subsequent to acquisition, vehicles are transported to one of our 16 regional reconditioning facilities, where we recondition the vehicles and perform a rigorous multi-point inspection for safety and operability. During the nine months endedSeptember 30, 2012, we spent approximately $1,600 in reconditioning costs per vehicle sold, including parts and labor. Upon passing our quality assurance testing, we determine the distribution of vehicles to our dealerships based on current inventory mix and levels, along with sales patterns at each dealership.

• Vehicle sales and marketing. We focus on selling quality used vehicles with affordable financing terms through our extensive network of company-owned dealerships. Vehicle pricing is developed centrally for all dealerships and all regions and features our no-haggle pricing. We utilize targeted television, radio, and online advertising programs to promote our brand and encourage customers to complete an online credit application and visit our dealerships. Customers are able to search our website to view the inventory of our vehicles in their respective regions. Our dealerships are generally located in high traffic commercial districts and showcase our DriveTime logos and color schemes.

• Underwriting and finance. Using information provided as part of the credit application process, our centralized proprietary credit scoring system determines a customer’s credit grade and the corresponding minimum down payment and maximum installment payment. We monitor the performance of our portfolio and close rates on a real-time basis, allowing us to centrally adjust pricing and financing terms to balance sales volumes and loan performance.

28

• Loan servicing. We perform all servicing functions for our loan portfolio, from collections through the resale of repossessed vehicles. Customers can make cash payments through an electronic payment network at over 3,900 Wal-Mart stores and more than 25,000 other locations nationwide. Customers can also make payments through traditional payment methods such as check, money order, bill-pay and ACH. Our experienced collection staff utilizes our proprietary collection software, which we developed specifically for subprime auto loans. We use behavioral models designed to predict payment habits, as well as automated dialer and messaging systems to enhance collection efficiency. We utilize our vehicle acquisition and sales expertise in representing repossessed vehicles at auction in order to maximize the recovery value of repossessed vehicles.

• After sale support. After-sale support consists of our DriveCare^® limited warranty: a 36 month / 36,000 mile warranty, including three oil changes per year at Sears Automotive and other locations and 24/7 roadside assistance on each vehicle we sell. We self-administer and insure our warranty program through our in-house team of customer service representatives, including warranty claim specialists, who are certified mechanics, and our pre-approved vendor network of independent third-party repair facilities.

GO Financial

In December 2011, we launched a new indirect lending line of business, GFC Lending, LLC dba GO Financial (“GO”). GO, which is a wholly-owned subsidiary of DTAC, provides subprime auto financing to third-party automobile dealerships, focusing primarily in markets where we do not have existing DriveTime dealerships. The third-party automobile dealerships originate retail installment sales contracts to finance purchases of vehicles by their customers who have modest incomes and who have experienced credit difficulties or have a limited credit history (subprime customers). GO enters into a dealer servicing agreement with each of the third-party automobile dealerships whereby, subsequent to verification of a qualifying customer loan, GO advances funds (“Dealer Advance”) to the dealership through a non-recourse loan. GO is neither the legal lender nor a named lender on the underlying customer loan agreement. Once originated, GO performs the loan servicing of both the Dealer Advance to the dealership and the underlying customer loan to the end customer. Another subsidiary of DTAC (“DTCC”) serves as the servicer of the underlying customer loans, on behalf of GO. GO has no recourse to the dealerships with respect to customer loan performance. GO has a secured interest in each customer loan and the underlying collateral (the vehicle) and receives priority repayment of customer loans from cash flows collected by GO from customers.

The amount of each Dealer Advance from GO to a dealership is dependent upon the vehicle, our credit rating of the dealership and the credit quality of the customer, and is a percentage of the amount financed. GO provides the third-party dealership with a credit scoring model and underwriting guidelines similar to those used by DriveTime in its direct lending originations. The Dealer Advance amount is typically sixty percent (60%) to eighty percent (80%) of the customer loan. The exact amount of each Dealer Advance from GO to the dealership varies from loan to loan, based on a predetermined set of risk characteristics. Each individual dealership builds discrete pools of 80 loans and Dealer Advances are repaid by the dealerships based on cash flows collected by GO from the pool of underlying customer loans.

In general terms, each dealer agreement is a form of cash flow sharing arrangement. The dealer agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on customer loans from the dealership to GO. The dealer agreement states that as cash payments are received from the underlying customer loans, twenty percent (20%) of the cash is allocated to GO as a return covering both GO’s interest income on the Dealer Advance and servicing fee related to the customer loan. Eighty percent (80%) of the cash is allocated first to repayment of incremental and direct servicing expenses incurred by GO and then allocated to the pay down of the Dealer Advance. Once all Dealer Advances within a pool have been repaid in full, the future payments received from customers continue to be allocated twenty percent (20%) to GO, however the remaining eighty percent (80%), net of any incremental and direct servicing expenses, is paid to the dealership.

We believe this indirect lending program provides an opportunity for independent dealerships to sell additional vehicles to customers with subprime credit, and provides us with incremental profitability to supplement our existing operations.

Third Quarter 2012 Highlights

• Total revenue increased 6.6% to $305.0 million, compared to third quarter 2011.

• Unit sales increased 4.3% to 14,839 vehicles sold, compared to third quarter 2011.

• Originations increased 7.5% to $228.9 million, compared to third quarter 2011.

• GO Financial increased its dealer base to 169 dealers and funded $13.4 million in dealer advances.

29

• In July 2012, we completed our 43rd securitization transaction (2012-2) by issuing $247.2 million of asset backed securities, collateralized by approximately $300.0 million of finance receivables.

Special Note Regarding Forward-Looking Statements

This report contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, and availability of resources. These forward-looking statements include, without limitation, statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

• changes to our business plan that are currently being implemented, and those that may be implemented in the future, may not be successful and may cause unintended consequences;

• interest rates affect our profitability and cash flows and an increase in interest rates will increase our interest expense and lower our profitability and liquidity;

• general, wholesale used vehicle auction prices, and economic conditions and their effect on automobile sales;

• seasonal and other fluctuations in our results of operations;

• our ability to complete any pending financing transactions.

For additional information regarding risks that may cause our actual results to differ materially from any forward-looking statements, see the “Risk Factors” section of our Annual Report on Form 10-K, filed with the SEC on March 30, 2012, which identifies events and important risk factors that could cause actual results to differ materially from those contained in our forward-looking statements. Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Critical Accounting Policies

For information on critical accounting policies, see “Critical Accounting Policies” in MD&A included in Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2011. These policies relate to revenue recognition, allowance for credit losses, recovery receivables, valuation of inventory, secured financings, and our limited warranty accrual. In addition, subsequent to December 31, 2011, we added revenue recognition for our dealer advance receivables related to our indirect lending line of business as a critical accounting policy. This policy is included in Note 4 – Dealer Finance Receivables to our consolidated financial statements in Item 1 of this report.

Factors Affecting Comparability

We have set forth below selected factors that we believe have had, or can be expected to have, a significant effect on the comparability of recent or future results of operations:

New business line

In December 2011, we launched GO Financial. GO provides indirect subprime auto financing to non-DriveTime dealers, focusing primarily in markets where we do not have existing DriveTime dealerships. This business line was launched during our fourth quarter 2011 and was not material to our financial results in 2011; however in 2012, GO’s originations of dealer financings continued to grow. Growth of GO has increased our total revenue and portfolio size over time; however, GO is not expected to have a significant net impact to our consolidated results for 2012. Further, GO incurred operating expense as it hired personnel, organized and registered in various states with various regulatory authorities, and incurred other costs of doing business, thereby increasing our general and administrative expenses.

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Modification to Charge-off Policy

Prior to December 2011, loans were charged-off at 91 days contractually past due at month end. In December 2011, we made a modification to our charge-off policy. Under our new policy, we charge-off the entire principal balance of receivables that are contractually 91 or more days past due at the end of a month, unless the customer has made a qualifying minimum payment within the previous 30 days from month-end, in which case the customer loan would not charge-off until 121 days contractually past due. This change in policy was made as a result of a change in delinquency patterns, partially resulting from a fully centralized collections environment, and an analysis which indicated that loans which have made a payment within 30 days, are collectible, therefore, should not be charged-off. Although the change in policy may cause our delinquencies to be higher than historical rates, we do not expect this change to have a significant impact on 2012 charge-offs or the allowance as a percent of principal outstanding.

Seasonality

Historically, we have experienced higher revenues in the first quarter of the calendar year than in the last three quarters of the calendar year. We believe these results are due to seasonal buying patterns resulting, in part, because many of our customers receive income tax refunds during the first quarter of the year, which are a primary source of down payments on used vehicle purchases. Our portfolio of finance receivables also has historically followed a seasonal pattern, with delinquencies and charge-offs being the highest in the second half of the year.

Selected Historical Consolidated Financial and Other Data

The following table sets forth our selected historical consolidated financial and operating data as of the dates and for the periods indicated.

The following table sets forth our results of operations for the periods indicated:

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	As of and for the						As of and for the
	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	($ in thousands except per unit data)
Consolidated Statement of Operations Data:
Total revenue	$	304,957		$	286,012		$	974,997		$	894,275
Total costs and expenses	$	300,190		$	273,575		$	907,450		$	808,391
Income before income taxes	$	4,767		$	12,437		$	67,547		$	85,884
Net Income	$	4,396		$	12,376		$	66,517		$	84,974
Other Financial Data:
EBITDA (1)	$	28,666		$	34,001		$	137,681		$	152,172
Adjusted EBITDA (1)	$	28,156		$	33,299		$	136,873		$	153,420
Dealerships:
Dealerships in operation at end of period	93			88			93			88
Average number of vehicles sold per dealership per month	55			54			61			59
Retail Sales:
Number of used vehicles sold	14,839			14,233			48,651			45,967
Average age of vehicles sold (in years)	6.0			5.6			6.0			5.4
Average mileage of vehicles sold	91,132			83,184			85,865			78,725
Per vehicle sold data:
Average sales price	$	15,288		$	15,019		$	15,418		$	14,842
Average cost of vehicle sold	$	(10,194	)	$	(10,084	)	$	(10,209	)	$	(9,595	)
Average gross margin	$	5,094		$	4,935		$	5,209		$	5,247
Gross margin percentage	33.3		%	32.9		%	33.8		%	35.4		%
Loan Portfolio:
Principal balances originated	$	228,890		$	212,889		$	749,268		$	672,965
Average amount financed per origination	$	15,412		$	14,963		$	15,494		$	14,671
Number of loans outstanding—end of period	145,014			141,800			145,014			141,800
Principal outstanding—end of period	$	1,643,281		$	1,510,815		$	1,643,281		$	1,510,815
Average principal outstanding	$	1,636,811		$	1,503,811		$	1,569,973		$	1,458,054
Average effective yield on portfolio (2)	19.0		%	19.6		%	19.5		%	19.9		%
Allowance for credit losses as a percentage of portfolio principal	15.2		%	15.1		%	15.2		%	15.1		%
Portfolio performance data:
Portfolio delinquencies over 30 days (3)	12.6		%	9.4		%	12.6		%	9.4		%
Principal charged-off as a percentage of outstanding principal	6.2		%	6.4		%	16.4		%	16.2		%
Recoveries as a percentage of principal charged-off	37.8		%	41.8		%	41.1		%	42.9		%
Net charge-offs as a percentage of average principal (4)	3.9		%	3.7		%	9.6		%	9.2		%
Financing and Liquidity:
Unrestricted cash and availability (5)	$	257,862		$	183,065		$	257,862		$	183,065
Ratio of net debt to shareholders’ equity (6)	2.5x			2.3x			2.5x			2.3x
Total average debt	$	1,291,631		$	1,115,376		$	1,232,897		$	1,082,341
Weighted average effective borrowing rate on total debt (7)	5.8		%	6.1		%	5.9		%	6.7		%

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	September 30, 2012			December 31, 2011			December 31, 2010
	($ in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	24,802		$	25,930		$	23,677
Finance receivables (8)	$	1,676,374		$	1,495,340		$	1,408,741
Allowance for credit losses	$	(251,415	)	$	(221,533	)	$	(208,000	)
Inventory	$	159,010		$	212,330		$	145,961
Total assets	$	1,890,349		$	1,766,829		$	1,568,154
Total debt (9)	$	1,287,054		$	1,221,380		$	1,070,207
Shareholders’ equity	$	480,816		$	457,849		$	418,767

(1) See definition of EBITDA and Adjusted EBITDA in Management’s Discussion and Analysis – Non-GAAP discussion

(2) Average effective yield represents the interest income earned at the contractual rate (stated APR) less the write-off of accrued interest on charged-off loans and amortization of loan origination costs (which includes the write-off of unamortized loan origination costs on charged-off loans), plus interest earned on investments held in trust and late fees earned.

(3) Delinquencies are presented on a Sunday-to-Sunday basis, which reflects delinquencies as of the nearest Sunday to period end. Sunday is used to eliminate any impact of the day of the week on delinquencies since delinquencies tend to be higher mid-week. Delinquencies as of September 30, 2012, include 0.4% of delinquencies in the 91-120 day delinquency bucket, as a result of our change in charge-off policy in December 2011.

(4) Net charge-offs as a percentage of average principal outstanding is not annualized due to the seasonality of charge-offs.

(5) Unrestricted cash and availability consists of cash and cash equivalents plus available borrowings under the portfolio warehouse, residual, and inventory facilities, based on assets pledged or available to be pledged to the facilities.

(6) Net debt is calculated as total debt less restricted cash and investments held in trust securing various debt facilities. Ratio of net debt to shareholders’ equity is calculated as net debt divided by total shareholders’ equity.

(7) Weighted average effective borrowing rate includes the effect of amortization of discounts, debt issuance costs, and unused line fees.

(8) Finance receivables include principal balances, accrued interest, and capitalized loan origination costs.

(9) Total debt excludes accounts payable, accrued expenses, and other liabilities.

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Results of Operations

The following table sets forth our results of operations for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011		% Change	2012		2011		% Change
	($ in thousands)
Revenue:
Sales of Used Vehicles	$	226,866	$	213,766	6.1%	$	750,125	$	682,247	9.9%
Interest Income	77,334		72,246		7.0%	223,492		212,028		5.4%
Dealer Finance and Other Income	757		—		100.0%	1,380		—		100.0%
Total Revenue	304,957		286,012		6.6%	974,997		894,275		9.0%
Costs and Expenses:
Cost of Used Vehicles Sold	151,264		143,523		5.4%	496,680		441,060		12.6%
Provision for Credit Losses	70,110		61,951		13.2%	181,840		154,977		17.3%
Portfolio Debt Interest Expense	11,080		10,038		10.4%	31,998		32,847		(2.6)%
Non-Portfolio Debt Interest Expense	1,106		645		71.5%	3,237		2,016		60.6%
Senior Secured Debt Interest Expense	6,622		6,583		0.6%	19,838		19,948		(0.6)%
Selling and Marketing	7,336		5,742		27.8%	23,116		19,132		20.8%
General and Administrative	47,581		40,795		16.6%	135,680		126,934		6.9%
Depreciation Expense	5,091		4,298		18.5%	15,061		11,477		31.2%
Total Costs and Expenses	300,190		273,575		9.7%	907,450		808,391		12.3%
Income Before Income Taxes	4,767		12,437		(61.7)%	67,547		85,884		(21.4)%
Income Tax Expense	371		61		508.2%	1,030		910		13.2%
Net Income	$	4,396	$	12,376	(64.5)%	$	66,517	$	84,974	(21.7)%

Sales of used vehicles

Revenue from sales of used vehicles increased during the three and nine months ended September 30, 2012, compared to 2011. The increase in revenue was primarily due to an increase in sales volume as a result of opening new dealerships, coupled with an increase in the average sales price per vehicle sold. Since September 30, 2011, we opened a net of five additional dealerships by opening eight new dealerships and closing three legacy dealerships. Generally, our new dealerships have a larger footprint and support a larger region; therefore new dealerships generate higher sales volumes on average than the legacy dealerships we closed. The increase in average sales price per vehicle sold is attributable to an overall increase in the average cost of used vehicles sold, primarily as a result of an increase in wholesale used vehicle prices. See also “—Cost of used vehicles sold”.

Interest income

Interest income increased during the three and nine months ended September 30, 2012, compared to the same periods in 2011. This increase is primarily due to an increase in our average portfolio principal outstanding. Average portfolio principal outstanding increased $132.5 million as of September 30, 2012, compared to 2011. This increase was the result of an increase in originations over portfolio run-off. Partially offsetting the increase in average portfolio size was a decrease in average effective yield on our receivables period over period, as a result of a decrease in average APR of contracts originated.

Dealer Finance and other income

Dealer Finance and other income represents the finance income recognized on our portfolio of indirect lending activities through GO Financial (“GO”) and income recognized on other ancillary products offered by GO to its independent third party dealerships. Our average portfolio of dealer finance receivables for the three and nine months ended September 30, 2012 was $17.6 million and $11.8 million, respectively, and we had 169 active dealers participating in our indirect lending program at September 30, 2012. Other income consists of income from GPS devices and service contracts offered by GO dealer participants to their customers at time of originating an indirect lending auto loan.

Cost of used vehicles sold

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Total cost of used vehicles sold increased for the three and nine months ended September 30, 2012, compared to 2011. The increase was due to an increase in the number of vehicles sold and an increase in the average cost of vehicles sold during the three and nine months ended September 30, 2012. Our cost of vehicles sold per unit increased primarily as a result of higher acquisition costs at auction. Wholesale used vehicle prices are higher primarily, due to an increased demand for used vehicles, coupled with a decrease in supply of used vehicles nationwide. Acquisition costs are a function of the vehicle make, mileage, model, and year mix that we acquire, along with vehicle wholesale auction price trends for the segment of vehicles that we target for acquisition. The average vehicle age and mileage of vehicles sold in the third quarter of 2012 increased in an effort to maintain overall affordability for our customers, which has also increased vehicle reconditioning costs. Reconditioning costs have increased compared to the same period in 2011 in order to maintain similar initial quality of vehicles for our customers, despite an increase in vehicle age and mileage.

Gross margin

Gross margin total dollars increased for the three and nine months ended September 30, 2012 versus 2011. The increase in gross margin dollars is attributable to an increase in vehicles sold period over period. Gross margin as a percentage of sales revenue increased to 33.3% from 32.9% for the three months ended September 30, 2012 and decreased to 33.8% from 35.4% for the nine months endedSeptember 30, 2012, compared to the same periods in 2011. Generally, we strive to maintain profitability per vehicle at a level which maintains affordability for our customers. Year to year changes in gross margin percentage are primarily reflective of a change in sales price. Throughout 2012, sales price increased in order to keep pace with the inflation of the wholesale cost of vehicles. Our average price per vehicle sold increased 1.8% and 3.9%, respectively, for three and nine months ended September 30, 2012, compared to the same periods in 2011. Our total cost per vehicle sold increased 1.1% and 6.4%, respectively, during the three and nine months ended September 30, 2012 when compared to the same periods in 2011.

Provision for credit losses

Provision for credit losses increased for the three and nine months ended September 30, 2012, compared to the same periods in 2011. The increase is primarily the result of an increase in the principal balance of loans outstanding as a result of an increase in originations over portfolio run-off and a decrease in recovery rates for loans charged off.

Net charge-offs as a percentage of average outstanding principal increased slightly for the three and nine months ended September 30, 2012 compared to the same periods in 2011. Gross principal charged-off decreased slightly period over period for the three months ended September 30, 2012 compared to 2011. This decrease was attributable to higher save rates in third quarter 2012 as compared to the same time last year. Gross principal charged-off increased slightly for the nine months endedSeptember 30, 2012 compared to 2011. Influencing year to date gross loss rates are general economic conditions including unemployment and underemployment rates and wholesale vehicle prices, which have resulted in the sale of an older, higher mileage vehicle coupled with longer financing terms to maintain customer payment affordability. Recoveries as a percentage of principal charged-off decreased to 37.8% from 41.8% for the three months ended September 30, 2012 compared to 2011, and 41.1% from 42.9% for the nine months endedSeptember 30, 2012. Throughout 2011, the used vehicle wholesale market continually realized increases in values as a result of increased demand for used vehicles coupled with a decline in supply. This increase in values continued through the first quarter as we realized historical high post repossession wholesale recovery values at auction. However, beginning in the second quarter and continuing into the third quarter 2012, the market softened partially as a result of rising new vehicle sales increasing the inventory of used vehicles from trade-ins and an increase in supply of fleet vehicles as rental companies are retiring many vehicles.

Portfolio debt interest expense

Total portfolio debt interest expense increased for the three months ended September 30, 2012 and decreased for the nine months endedSeptember 30, 2012, compared to the same periods in 2011. The increase in expense for the three months ended September 30, 2012 is the result of an increase in the outstanding balance of portfolio debt period over period. Our average amount borrowed under portfolio debt increased to $994.2 million from $859.5 million for the three months ended September 30, 2012 compared to the same period in 2011 as a result of our 2012 securitizations. This increase was partially offset by a decrease in the overall cost of funds of portfolio debt. Cost of funds of portfolio debt decreased to 4.4% for the three months ended September 30, 2012 compared to 4.6% in 2011. The decrease in interest expense during the nine months endedSeptember 30, 2012 is reflective of a decrease in the overall cost of funds of portfolio debt to 4.5% for compared to 5.2% for the same period in 2011. The decrease in our costs of funds is primarily attributable to lower borrowing costs of our recent securitizations.

Non-portfolio debt interest expense

Total non-portfolio debt interest expense increased for the three and nine months ended September 30, 2012, compared to the same periods in 2011. The increase was primarily due to increased borrowings on our inventory line.

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Borrowings increased as a result of increasing the capacity of inventory facility from $50.0 million as of September 30, 2011 to $130.0 million as of September 30, 2012. As a result, the average balance outstanding of non-portfolio debt grew from $57.9 million and $58.3 million during the three and nine months ended September 30, 2011 to $99.2 million and $96.5 million during the three and nine months ended September 30, 2012.

Selling and marketing expense

Selling and marketing expenses increased for the three and nine months ended September 30, 2012, compared to the same periods in 2011. The increase was due to an increase in our advertising expenses. Advertising expense increased due to advertising in new markets as a result of expansion to new geographic regions, increasing advertising in selected legacy regions, expanding our marketing campaigns to include ads in Spanish, and advertising on the radio in 2012. This increase was partially offset by a decrease in production costs of $1.4 million for the nine months endedSeptember 30, 2012 as a result of producing two sets of television commercials in 2011, while we produced only one set of commercials during 2012 .

General and administrative expense

General and administrative expenses increased for the three and nine months ended September 30, 2012 compared to the same periods in 2011, primarily as a result of a general increase in legal and professional fees as well as an increase in location and operating costs related to the number of dealerships and reconditioning centers in operation year over year and a corresponding increase in salaries and wages as we increase the number of employees in conjunction with our overall expansion. Additionally, we wrote off approximately $2.6 million dollars of previously capitalized costs associated with the purchase transaction with Santander Consumer USA, Inc.

Depreciation expense

Depreciation expense increased for the three and nine months ended September 30, 2012 compared to 2011. This increase was primarily the result of an increase in capital expenditures in 2011 and 2012 associated with the expansion of our dealership base and information technology infrastructure.

Net income

Net income decreased for the three and nine months ended September 30, 2012 compared to the same periods in 2011. These decreases are primarily attributable to increases in general and administrative expenses and an increase in provision for loan losses, partially offset by increases in interest income and gross margin from retail sales.

Originations

The following table sets forth information regarding our originations for the periods indicated.

	Three Months Ended September 30,						Change			Nine Months Ended September 30,
	2012			2011						2012			2011			Change
	($ in thousands except per loan data)
Amount originated	$	228,890		$	212,889		$	16,001		$	749,268		$	672,965		$	76,303
Number of loans originated	14,838			14,226			612			48,650			45,951			2,699
Average amount financed per origination	$	15,412		$	14,963		$	449		$	15,494		$	14,671		$	823
Average APR originated	20.3		%	20.7		%	(0.4		)%	20.3		%	20.7		%	(0.4		)%
Average term (in months)	56.7			57.9			(1.2		)	57.3			56.8			0.5
Average down payment per origination	$	826		$	995		$	(169	)	$	1,032		$	1,141		$	(109	)
Down payment as a percent of amount financed	5.4		%	6.6		%	(1.2		)%	6.7		%	7.8		%	(1.1		)%
Percentage of sales revenue financed (1)	100.5		%	99.6		%	0.9		%	99.1		%	98.6		%	0.5		%

^{(1) Sales revenue is calculated as gross revenue net of sales back-out reserve and sales discounts.} 

We originate loans in conjunction with each vehicle we sell, unless the sale is a cash transaction. The balance on these loans, together with accrued interest and unamortized loan origination costs, comprises our portfolio of finance receivables. Our receivables are then financed through securitizations and warehouse facilities in order to generate liquidity for our business. See “—Liquidity and Capital Resources.”

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The principal amount of loans we originated increased for the three and nine months ended September 30, 2012 compared to the same periods in 2011. The increase was due to an increase in the number of used vehicles sold, an increase in the average amount financed per loan originated as a direct result of an increase in the average sales price per vehicle sold, and a decrease in the average down payment per loan originated.

Receivables portfolio

The following table shows the characteristics of our finance receivables portfolio for the periods indicated:

	As of and for the Three Months Ended September 30,						Change			As of and for the Nine Months Ended September 30,						Change
	2012			2011						2012			2011
	($ in thousands except per loan data)
Average remaining principal per loan, end of period	$	11,111		$	10,655		$	456		$	11,111		$	10,655		$	456
Weighted Average APR of contracts outstanding	20.5		%	20.9		%	(0.4		)%	20.5		%	20.9		%	(0.4		)%
Average age per loan (in months)	14.1			14.8			(0.7		)	14.5			15.1			(0.6		)
Delinquencies:
Delinquencies 31-60 days	8.0		%	6.2		%	1.8		%	8.0		%	6.2		%	1.8		%
Delinquencies 61-90 days	4.2		%	3.2		%	1.0		%	4.2		%	3.2		%	1.0		%
Delinquencies 91-120 days	0.4		%	—		%	0.4		%	0.4		%	—		%	0.4		%
Total Delinquencies over 30 days	12.6		%	9.4		%	3.2		%	12.6		%	9.4		%	3.2		%

Delinquencies

As a percentage of total outstanding loan principal balances, delinquencies over 30 days were 12.6% and 9.4% at September 30, 2012 and 2011, respectively. The increase in delinquencies is the result of our change in collection strategy for early delinquencies aimed to improve customer experience while reducing cost of servicing, coupled with the effects of the current economic environment, including high unemployment and underemployment. As a result, we anticipate delinquencies to be relatively higher than our historical rates.

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Liquidity and Capital Resources

General

We require capital for the purchase of inventory, to provide financing to our customers, for working capital and for general corporate purposes, including the purchase of property and equipment, and to open new dealerships and reconditioning facilities.

We have historically funded our capital requirements primarily through operating cash flow, portfolio warehouse facilities, securitizations, PALP financings, term facilities, inventory and other revolving debt facilities, real estate mortgage financing, and other notes payable (including senior secured notes, junior secured notes, senior unsecured notes, and subordinated notes).

Financing sources

We currently fund our capital requirements through the following debt instruments:

• Portfolio term financings including asset backed securitizations, and a term residual facility, both of which offer fixed rate secured financing for our receivables portfolio.

• Portfolio warehouse facilities including agreements with three different institutional lenders.

• Senior Secured Notes due 2017.

• Other secured notes payable including a revolving inventory facility, a mortgage loan for our operations call center in Mesa, Arizona, a real estate line, and other notes and capital leases secured by property and equipment.

• Operating leases for the majority of our dealerships, reconditioning centers, operations facilities and our corporate offices.

For additional details and terms regarding these debt instruments, see Note 5—Debt Obligations to our condensed consolidated financial statements included in Item 1 of this report.

Our warehouse facilities include certain favorable terms and conditions, including (i) the inability of the lender to subjectively lower collateral values and effectively lower the advance rate; (ii) limited recourse; and (iii) limited foreclosure rights upon a default.

We actively manage utilization of our various funding sources as we seek to minimize borrowing costs through drawing on our lower cost facilities and minimizing unused line fees, while at the same time balancing the effective advance rates and liquidity generated by each of the credit facilities in order to meet our funding needs. The effective advance rates on our portfolio warehouse and term financings are based on the outstanding principal balance of the loans we originate. However, our initial investment in the loans we originate is lower than the original principal balance of the loans.

Recent financing and cash flow transactions

During the three months ended September 30, 2012, we paid $19.1 million in dividends to shareholders related to income earned during the second quarter of 2012. In October 2012, the Board of Directors approved and the Company paid $6.4 million of dividends relating to third quarter 2012 earnings.

Liquidity

The following is a summary of total available liquidity, consisting of unrestricted cash and current availability under our portfolio warehouse and inventory facilities for the periods indicated:

	September 30, 2012		December 31, 2011		September 30, 2011
	(in thousands)
Liquidity
Unrestricted cash	$	24,802	$	25,930	$	23,263
Portfolio warehouse facilities	218,957		148,837		149,802
Inventory facility	14,103		55,500		10,000
Total liquidity	$	257,862	$	230,267	$	183,065

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The following table presents a summary of our access to liquidity under our portfolio warehouse facilities and our inventory facility based on collateral pledged as of September 30, 2012:

Components of Liquidity	Facility Amount		Amount Drawn		Unused Facility Amount		Borrowing Base		Amount Drawn		Total Availability
	(In thousands)
Deutsche Bank warehouse facility	$	150,000	$	22,300	$	127,700	$	51,572	$	22,300	$	29,272	(1)
Wells Fargo warehouse facility	150,000		20,500		129,500		74,192		20,500		53,692		(2)
RBS warehouse facility	125,000		15,900		109,100		54,131		15,900		38,231		(3)
DTAC receivables	N/A		N/A		N/A		97,762		N/A		97,762		(4)
Total portfolio warehouse facilities	$	425,000	$	58,700	$	366,300	$	277,657	$	58,700	$	218,957
Inventory facility	130,000		84,321		45,679		98,424		84,321		14,103
	$	555,000	$	143,021	$	411,979	$	376,081	$	143,021	233,060
Unrestricted cash											24,802
Total cash and availability											$	257,862

^{(1)  Excludes $3.0 million of warehouse cash collections per borrowing base definition. During October 2012, as a result of a rise in portfolio delinquencies, our advance rate contractually decreased on this facility from 58% to 54%.} 

^{(2)  Excludes $1.1 million of warehouse cash collections per borrowing base definition. During October 2012, as a result of a rise in portfolio delinquencies, our advance rate contractually decreased on this facility from 58% to 48%. This was cured by October 31, 2012.} 

^{(3)  Assumes collection and reserve amounts on deposit of $3.0 million are used to pay down amount drawn.} 

^{(4)  Includes $173.7 million of unpledged qualifying receivables that can be pledged immediately and bring total borrowing to our maximum capacity. The borrowing base is the lesser of total eligible collateral multiplied by the applicable advance rate and the facility amount.} 

Changes in liquidity

Changes in liquidity are affected by increases and decreases to our operating cash flow, changes in advance rates on our portfolio warehouse facilities, capacity of our portfolio warehouse and inventory facilities, portfolio term financings, and changes in other notes payable. The following is a summary of changes in liquidity for each period presented:

	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Liquidity—beginning of period	$	230,267		$	145,837
Net decrease in cash and cash equivalents	(1,128		)	(414		)
Increase in portfolio warehouse availability	70,120			37,642
(Decrease) in inventory facility availability	(41,397		)	—
Liquidity—end of period	$	257,862		$	183,065

Our liquidity for the nine months endedSeptember 30, 2012 increased $27.6 million, from $230.3 million at December 31, 2011, to $257.9 million at September 30, 2012. This increase was primarily the result of an increase in operating cash flow used to paydown our warehouse facilities, which was partially offset by a decrease in inventory facility availability as a result of a seasonal decrease in inventory levels.

Cash flows

Operating activities

For the nine months endedSeptember 30, 2012, net cash provided by operating activities was $28.1 million, as compared to $17.6 million for the nine months endedSeptember 30, 2011. The increase in cash provided by operating activities was primarily attributable to a reduction in inventory levels in comparison to an increase in 2011, which was partially offset by an increase in net originations over portfolio run-off and an increase in net income adjusted for non-cash items.

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Investing activities

For the nine months endedSeptember 30, 2012, net cash used in investing activities increased slightly to $37.9 million from $33.5 million for the same period in 2011. This increase was the result of originating dealer finance receivables for GO Financial during 2012. This increase was offset by a decrease in cash used to purchase dealership facilities, equipment for new dealerships and remodeling existing dealerships.

Financing activities

For the nine months endedSeptember 30, 2012, net cash provided by financing activities decreased to $8.7 million, compared to $15.5 million for the same period in 2011. This was primarily the result of increased cash from operating activities, reducing the financing levels required for our business funding.

Senior Secured Notes Collateral

Our Senior Secured Notes require us to maintain a collateral coverage ratio of 1.5x of the aggregate principal amount of outstanding Senior Secured Notes. The following is the calculation of the collateral coverage ratio as of September 30, 2012. This calculation is not meant to portray a GAAP summary of collateral but rather a summary of collateral as it resides legally within the Guarantor Subsidiaries, Non-Guarantor Subsidiaries, and Co-Issuers of the Senior Secured Notes.

	As of September 30, 2012
	Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Co-Issuers		Total
	($ In thousands)
Collateral Amounts
Net Receivables Value (1)	$	—	$	108,204	$	242,854	$	351,058
Net Inventory Value (2)	48,715		—		—		48,715
Cash Equivalents (3)	—		—		—		—
Total Collateral Amount	$	48,715	$	108,204	$	242,854	$	399,773
12.625% Senior Secured Notes							200,000
Collateral Coverage Ratio							2.0x

^{(1)  Receivables Value equals 85% of the finance receivables (including accrued interest and capitalized loan costs) minus debt (exclusive of Senior Secured Notes) collateralized by finance receivables (including accrued interest) plus cash equivalents securing such debt. The 12.625% Senior Secured Notes are excluded from this calculation.} 

^{(2)  Net Inventory Value equals 85% of the book value of inventory pledged as collateral minus debt obligations (including accrued interest) secured by inventory. The 12.625% Senior Secured Notes are excluded from this calculation.} 

^{(3)  Cash equivalents equal cash and equivalents pledged directly to secure the Senior Secured Notes.} 

Impact of New Accounting Pronouncements

For a discussion of recent accounting pronouncements applicable to us, see Note 12—Recent Accounting Pronouncements to our condensed consolidated financial statements included in Item 1 of this report.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than operating leases (see below) that have or are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

We lease the majority of our dealership and reconditioning facilities under operating leases. See Note 9- Commitments and Contingencies- Operating Leases to our condensed consolidated financial statements included in Item 1 of this report.

Impact of Inflation

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Inflation generally results in higher interest rates on our borrowings, which could decrease the profitability of our existing portfolio to the extent we have variable rate debt and could decrease profitability of our future originations if we are not able to pass the increase on to our customers. We may seek to limit the risk of increasing borrowing costs:

• through our portfolio term financings, which allowed us to fix a portion of our borrowing costs and generally match the term of the underlying finance receivables, and

• by increasing the interest rate charged for loans originated at our dealerships (if allowed under applicable law) while maintaining affordability of the customers’ payment.

The used vehicle market has experienced strong appreciation in used vehicle wholesale prices over the past couple of years. The appreciation resulted, in part, from a reduced supply of used vehicles in the market due to a decline in new car industry sales coupled with a decrease in used vehicle trade-in activity compared with pre-recession levels. Higher wholesale values increased our vehicle acquisition and related costs. In addition, we increased the age and mileage of vehicles we sell in order to maintain affordability for the customer. These increased costs led to an increase in our average selling price for used vehicles; however, we chose to only pass a portion of these costs to our customers in order to maintain affordability for our customers. Higher wholesale values also improved our recovery values as a percentage of principal charged-off.

Non-GAAP Discussion

EBITDA and Adjusted EBITDA, which we refer to as the non-GAAP financial measures, are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). The non-GAAP financial measures are not measures of our financial performance under GAAP and should not be considered as an alternative to GAAP net income (loss) or any other performance measures derived in accordance with GAAP.

We present non-GAAP financial measures because we consider them to be important supplemental measures of our operating performance. All of the adjustments made in our calculation of the non-GAAP financial measures are adjustments to items that management does not consider to be reflective of our core operating performance. Management considers our core operating performance to be that which can be affected by our managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period.

However, because these non-GAAP financial measures are not recognized measurements under GAAP, when analyzing our operating performance investors should use these non-GAAP financial measures in addition to, and not as an alternative for, net income, operating income, or any other performance measure presented in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. Because not all companies use identical calculations, our presentation of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies.

Because of these limitations, EBITDA and Adjusted EBITDA and other non-GAAP financial measures should not be considered as discretionary cash available to us to reinvest in the growth of our business. You should compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures supplementally.

EBITDA represents net income (loss) before income tax expense, total interest expense (secured and unsecured) and depreciation expense. Adjusted EBITDA represents EBITDA plus store closing costs, a legal settlement, non-cash compensation expense, Nevada sales tax liability, restricted stock compensation expense, IPO expense, less gain on extinguishment of debt, net.

In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments described above. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine, or non-recurring. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that it does reflect:

• cash expenditures for capital expenditures or contractual commitments;

• changes in, or cash requirements for, our working capital requirements;

• interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness;

• the cost or cash required to replace assets that are being depreciated or amortized; and

• the impact on our reported results of earnings or charges resulting from items accounted for in the GAAP measure from which EBITDA and Adjusted EBITDA is derived.

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The following table presents data relating to EBITDA and Adjusted EBITDA, which are non-GAAP measures, for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Net income:	$	4,396		$	12,376		$	66,517		$	84,974
Plus EBITDA adjustments:
Income tax expense	371			61			1,030			910
Total interest expense	18,808			17,266			55,073			54,811
Depreciation expense	5,091			4,298			15,061			11,477
EBITDA	28,666			34,001			137,681			152,172
Store closing costs (1)	16			(466		)	349			(99		)
Sales Tax Refund Adjustments (2)	(836		)	(701		)	(2,396		)	(978		)
Restricted Stock Compensation expense (3)	310			465			1,239			2,325
Adjusted EBITDA	$	28,156		$	33,299		$	136,873		$	153,420

^{(1)  Store closing costs represent ongoing costs to close stores in 2008 and 2009 related to downsizing (and do not include stores closed in the normal course of business).} 

^{(2)  Represents non-cash adjustments to sales tax refunds related to loans charged-off in prior periods.} 

^{(3)  Represents compensation expense related to a restricted stock agreement between the Company and Mr. Fidel.} 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our market risk since December 31, 2011. For information on our exposure to market risk, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Form 10-K, filed with the SEC on March 30, 2012.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by the Company in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Additionally, our disclosure controls and procedures were also effective in ensuring that information required to be disclosed by the Company in the reports we file or subject under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Change in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The description of our material pending legal proceedings is set forth in Note 9—Commitments and Contingencies to our condensed consolidated financial statements included in Item 1 of this report and is incorporated herein by reference.

Item 1A. Risk Factors

In connection with information set forth in this quarterly report on Form 10-Q, the factors discussed under “Risk Factors” in our Form 10-K filed with the SEC on March 30, 2012, should be considered. These risks could materially and adversely affect our business, financial condition, and results of operations. There have been no material changes to the factors discussed in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent sales of unregistered securities

None

Purchases of equity securities by the issuer and affiliated purchasers

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

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Item 6. Exhibits

Exhibit #	Description of Document
3.1.1	Amended and Restated Certificate of Incorporation of Ugly Duckling Corporation (former name of DriveTime Automotive Group, Inc.) (incorporated by reference to Exhibit 3.1.1 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.1.2.1	Articles of Incorporation of DriveTime Acceptance Corporation (former name of DT Acceptance Corporation) (incorporated by reference to Exhibit 3.1.2.1 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.1.2.2	Articles of Amendment to the Articles of Incorporation of DriveTime Acceptance Corporation (former name of DT Acceptance Corporation) (incorporated by reference to Exhibit 3.1.2.2 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.1.3	Articles of Incorporation of DriveTime Car Sales Company, LLC (incorporated by reference to Exhibit 3.1.3 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.1.4	Articles of Incorporation of DriveTime Sales and Finance Company, LLC (incorporated by reference to Exhibit 3.1.4 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.1.5	Articles of Incorporation of DT Credit Company, LLC (incorporated by reference to Exhibit 3.1.5 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.1.6	Articles of Incorporation of DT Jet Leasing, LLC (incorporated by reference to Exhibit 3.1.6 to our Registration Statement on Form S- 4/A filed on October 19, 2010)
3.2.1	By-laws of Ugly Duckling Corporation (former name of DriveTime Automotive Group, Inc.) (incorporated by reference to Exhibit 3.2.1 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.2.2	Bylaws of DriveTime Acceptance Corporation (former name of DT Acceptance Corporation) (incorporated by reference to Exhibit 3.2.2 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.2.3	Operating Agreement of DriveTime Car Sales Company, LLC (incorporated by reference to Exhibit 3.2.3 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.2.4	Operating Agreement of DriveTime Sales and Finance Company, LLC (incorporated by reference to Exhibit 3.2.4 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.2.5	Operating Agreement of DT Credit Company, LLC (incorporated by reference to Exhibit 3.2.5 to our Registration Statement on Form S-4/A filed on October 19, 2010)
3.2.6	Operating Agreement of DT Jet Leasing, LLC (incorporated by reference to Exhibit 3.2.6 to our Registration Statement on Form S- 4/A filed on October 19, 2010)
4.1.1	Indenture governing 12.625% Senior Secured Notes due 2017, including the form of 12.625% Senior Secured Notes due 2017, among DriveTime Automotive Group, Inc., DT Acceptance Corporation, DriveTime Car Sales Company, LLC, DriveTime Sales and Finance Company, LLC, DT Credit Company, LLC, DT Jet Leasing, LLC and Wells Fargo Bank, National Association, dated as of June 4, 2010 (incorporated by reference to Exhibit 3.1.1 to our Registration Statement on Form S-4/A filed on October 19, 2010)
4.1.2	First Supplemental Indenture governing 12.625% Senior Secured Notes due 2017, dated as of September 20, 2010, among DriveTime Automotive Group, Inc., DT Acceptance Corporation, Approval Services Company, LLC and Wells Fargo Bank, National Association, as Trustee. (incorporated by reference to Exhibit 4.1.2 to our Registration Statement on Form S-4/A filed on October 19, 2010)
4.1.3	Second Supplemental Indenture, dated as of August 16, 2011, by and among DriveTime Automotive Group, Inc., DT Acceptance Corporation, Wells Fargo Bank, National Association and Go Financial Company LLC (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on August 22, 2011)
4.1.4	Third Supplemental Indenture, dated as of October 6, 2011, by and among DriveTime Automotive Group, Inc., DT Acceptance Corporation, Wells Fargo Bank, National Association and DriveTime Ohio Company, LLC (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on October 13, 2011)
4.1.5	Fourth Supplemental Indenture, dated as of March 30, 2012, by and among DriveTime Automotive Group, Inc., DT Acceptance Corporation, Wells Fargo Bank, National Association, as Trustee and Collateral Agent and Carvana, LLC (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on April 5, 2012)

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Exhibit #	Description of Document
4.2.1	Security Agreement dated as of June 4, 2010, among DT Acceptance Corporation, DriveTime Automotive Group, Inc., DriveTime Car Sales Company, LLC, and Wells Fargo Bank, National Association, as collateral agent. (incorporated by reference to Exhibit 4.1.3 to our Registration Statement on Form S-4/A filed on February 2, 2011) †
4.2.2	Supplement No. 1 dated as of October 28, 2011 to the Security Agreement dated as of June 4, 2010, among DriveTime Automotive Group, Inc., DT Acceptance Corporation, DriveTime Car Sales Company, LLC, and Wells Fargo Bank, National Association or the Secured Parties (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on November 3, 2011)
4.2.3	Supplement No. 2, dated as of March 30, 2012 to the Security Agreement dated as of June 4, 2010, among DriveTime Automotive Group, Inc., DT Acceptance Corporation, DriveTime Car Sales Company, LLC and Wells Fargo Bank, National Association, as collateral agent for the Secured Parties (incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on April 5, 2012)
4.3	Pledge Agreement dated as of June 4, 2010, between DT Acceptance Corporation and Wells Fargo Bank, National Association, as collateral agent. (incorporated by reference to Exhibit 4.1.4 to our Registration Statement on Form S-4/A filed on February 2, 2011)†
4.4	Pledge Letter dated as of August 2, 2010, amending the Pledge Agreement dated as of June 4, 2010. (incorporated by reference to Exhibit 4.1.5 to our Registration Statement on Form S-4/A filed on February 2, 2011)
4.5	Intercreditor Agreement, dated as of June 4, 2010, among Santander Consumer USA Inc. and Manheim Automotive Financial Services, Inc. as First Priority Creditors, Wells Fargo Bank, National Association, as Collateral Agent and Second Priority Representative for the Second Priority Secured Parties (as defined therein), and as Trustee for the Holders (as defined therein), DriveTime Automotive Group, Inc., DriveTime Sales and Finance Company, LLC, DriveTime Car Sales Company, LLC, and DT Acceptance Corporation, and each of the other Loan Parties party thereto. (incorporated by reference to Exhibit 4.1.6 to our Registration Statement on Form S-4/A filed on February 2, 2011)
4.6	Registration Rights Agreement, dated June 4, 2010, among DriveTime Automotive Group, Inc., DT Acceptance Corporation, DriveTime Car Sales Company, LLC, DriveTime Sales and Finance Company, LLC, DT Credit Company, LLC, DT Jet Leasing, LLC, Jefferies & Company, Inc., RBS Securities Inc. and UBS Securities LLC (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-4/A filed on October 19, 2010)
4.7	Registration Rights Agreement, dated June 6, 2011, by and among DT Acceptance Corporation, DriveTime Automotive Group, Inc., DriveTime Sales and Finance Company, LLC, DriveTime Car Sales Company, LLC, DT Credit Company, LLC, DT Jet Leasing, LLC, Approval Services Company, LLC and RBS Securities Inc. (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on June 10, 2011)
10.1	Amendment No. 1, dated August 31, 2012, to the Loan and Servicing Agreement, dated December 28, 2011, by and among DT Warehouse, LLC, DT Credit Company, LLC, Wells Fargo Bank, National Association, as Backup Servicer, Paying Agent and Securities Intermediary, the commercial paper conduits from time to time party thereto, the financial institutions from time to time party thereto, and Deutsche Bank AG, New York Branch, as Program Agent for the Conduit Lenders and Committed Lenders (incorporated by reference to Exhibit 10.1 to our Form 8-k filed on September 7, 2012)
31.1	Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2	Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

45

* Filed herewith.

** Furnished herewith.

† Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission in accordance with an order granting confidential treatment pursuant to the Securities Exchange Act of 1934, as amended.

46

SIGNATURES

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

	DRIVETIME AUTOMOTIVE GROUP, INC.
Date: November 14, 2012	By:	/s/ Mark G. Sauder
		Name: Mark G. Sauder
		Title: Chief Financial Officer & Executive VP
	DT ACCEPTANCE CORPORATION
Date: November 14, 2012	By:	/s/ Mark G. Sauder
		Name: Mark G. Sauder
		Title: Chief Financial Officer & Executive VP

47