[EXECUTION COPY]

                               AMENDMENT NO. 1 TO
                      SERIES 1997-1 SUPPLEMENTAL INDENTURE


         THIS AMENDMENT NO. 1 TO SERIES 1997-1 SUPPLEMENTAL INDENTURE,  dated as
of December 9, 1998 (this "Amendment"), among AFG CREDIT CORPORATION, a Delaware
corporation,   as  Transferor,   AMERICAN   FINANCE  GROUP,   INC.,  a  Delaware
corporation, as Servicer, FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST
SECURITIES,  INC., a Virginia corporation,  as Deal Agent (the "Deal Agent") and
BANKERS TRUST COMPANY,  a banking  corporation  organized and existing under the
laws of the State of New York, as Trustee (in such capacity,  the "Trustee") and
as Collateral Trustee (in such capacity, the "Collateral Trustee").  Capitalized
terms used but not  otherwise  defined  herein are used as defined in the Series
1997-1 Supplemental Indenture, dated as of October 14, 1997, among AFG, the Deal
Agent,  the  Trustee  and  the  Collateral  Trustee  (as  amended,  modified  or
supplemented, the "Agreement").

         WHEREAS, the Transferor,  the Servicer, the Deal Agent, the Trustee and
the Collateral Trustee wish to amend the Agreement in the manner provided for in
this Amendment.

         NOW, THEREFORE, the parties hereto hereby agree as follows:

         1. The  definition  of "Facility  Amount" set forth in Section 2 of the
Agreement is amended and restated in its entirety to read as follows:

                  Facility Amount:  $150,000,000.

         2. Except as expressly amended,  modified and supplemented  hereby, the
provisions of the Agreement are and shall remain in full force and effect.

         3. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF  CALIFORNIA,  AND THE  OBLIGATIONS,  RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS,  PROVIDED,  HOWEVER,
THAT THE  OBLIGATIONS,  RIGHTS AND  REMEDIES OF THE  TRUSTEE AND THE  COLLATERAL
TRUSTEE  SHALL BE  DETERMINED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW
YORK.


         4. This Amendment may be executed in two or more  counterparts  (and by
different parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.



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           IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed  by  their  respective  officers  as of the day and  year  first  above
written.


                           AFG CREDIT CORPORATION,
                           as Transferor




                           By: /s/ J. Michael Allgood
                               ----------------------------------------
                               Name:  J. Michael Allgood
                               Title:    Vice President & Treasurer


                           AMERICAN FINANCE GROUP, INC.
                           as Servicer




                           By: /s/ J. Michael Allgood
                               --------------------------------------------
                               Name:  J. Michael Allgood
                               Title: Director


                            FIRST UNION CAPITAL MARKERS, a division
                            of WHEAT FIRST SECURITIES, INC.,
                            as Deal Agent




                            By: /s/ Darrell R. Baber
                                ---------------------------------------------
                                Name:  Darrell R. Baber
                                Title:    Director







                            BANKERS TRUST COMPANY,
                            as Trustee




                            By: /s/ Marc Parilla
                                ----------------------------------------
                                Name: Marc Parilla
                                Title:   Assistant Treasurer


                            BANKERS TRUST COMPANY,
                            as Collateral Trustee




                            By: /s/ Marc Parilla
                                ------------------------------------------
                                Name: Marc Parilla
                                Title:    Assistant Treasurer