[OID LEGEND]


                            UGLY DUCKLING CORPORATION

No.                                                                    $
                        ---------------------------------

                                CUSIP 903512 AB 7

                      11% SUBORDINATED DEBENTURES DUE 2007
                    DATE OF ORIGINAL ISSUANCE: APRIL 20, 2000

         Ugly Duckling  Corporation,  a corporation  duly organized and existing
under the laws of Delaware (herein called the "Company," which term includes any
successor  Person  under  the  Indenture  hereinafter  referred  to),  for value
received, hereby promises to pay to _____________________________, or registered
assigns,  the principal sum of ___________ Dollars on April 15, 2007, and to pay
interest  thereon  from the  original  date of  issuance or from the most recent
Interest  Payment  Date to which  interest has been paid or duly  provided  for,
semi-annually  on April 15 and October 15 in each year,  commencing  October 15,
2000, at the rate of 11% per annum,  until the principal  hereof is paid or made
available  for payment.  The interest so payable,  and  punctually  paid or duly
provided for, on any Interest  Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this  Security  (or one or more  Predecessor
Securities)  is registered  at the close of business on the Regular  Record Date
for such  interest,  which  shall be the April 1 or October 1 (whether  or not a
Business Day), as the case may be, next  preceding  such Interest  Payment Date.
Any such  interest not so punctually  paid or duly  provided for will  forthwith
cease to be payable to the Holder on such Regular  Record Date and may either be
paid to the  Person in whose  name  this  Security  (or one or more  Predecessor
Securities)  is registered at the close of business on a Special Record Date for
the  payment  of such  Defaulted  Interest  to be fixed by the  Trustee,  notice
whereof  shall be given to Holders of Securities of this series not less than 10
days  prior to such  Special  Record  Date,  or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities  exchange
on which the  Securities  of this series may be listed,  and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.

         Payment of the principal of (and premium, if any) and any such interest
on this Security will be made at the office or agency of the Company  maintained
for that  purpose in Chicago,  Illinois,  in such coin or currency of the United
States of  America as at the time of  payment  is legal  tender  for  payment of
public and private debts;  provided,  however, that at the option of the Company
payment of  interest  may be made by check  mailed to the  address of the Person
entitled thereto as such address shall appear in the Security Register.

         Reference is hereby made to the further provisions of this Security set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

         Unless the  certificate of  authentication  hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall  not be  entitled  to any  benefit  under  the  Indenture  or be  valid or
obligatory for any purpose.

         In Witness  Whereof,  the Company has caused this instrument to be duly
executed.

Dated:
                            UGLY DUCKLING CORPORATION
                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION
              This is one of the Securities described in the within
                                 named Indenture

ATTEST:
BY:
               HARRIS TRUST AND SAVINGS BANK

By:
                   Authorized Signatory
SECRETARY               PRESIDENT AND CHIEF EXECUTIVE OFFICER


<PAGE>


         Form of Reverse of Security.

         This  Security is one of a duly  authorized  issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series  under an  Indenture,  dated as of October  15, 1998  (herein  called the
"Indenture",  which  term  shall  have  the  meaning  assigned  to  it  in  such
instrument),  between the Company and Harris Trust and Savings  Bank, as Trustee
(herein  called the "Trustee",  which term includes any successor  trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights,  limitations of rights,  duties and immunities thereunder
of the Company,  the Trustee and the Holders of the  Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.  This
Security  is  one of the  series  designated  on the  face  hereof,  limited  in
aggregate principal amount to $27,500,000.

         The  Securities of this series are subject to redemption  upon not less
than 30  days'  notice  by mail,  at any  time,  as a whole  or in part,  at the
election of the Company,  at a Redemption  Price equal to 100% of the  principal
amount,  together with accrued  interest to the  Redemption  Date,  but interest
installments  whose Stated  Maturity is on or prior to such Redemption Date will
be  payable  to the  Holders  of such  Securities,  or one or  more  Predecessor
Securities,  of record at the close of business  on the  relevant  Record  Dates
referred to on the face hereof for such interest  installments,  all as provided
in the  Indenture.  The Indenture  provides  that a notice of redemption  may be
given that is  conditional  upon the  receipt by the  Trustee on or prior to the
Redemption Date of amounts sufficient to pay principal of, and premium,  if any,
and interest on, the  Securities to be redeemed,  and that if such amounts shall
not have been so  received,  said notice  shall be of no force and  effect,  the
Securities  to be  redeemed  will not become due and  payable on the  Redemption
Date,  and the Company  will not be required to redeem such  Securities  on such
date.

         In the  event  of  redemption  of this  Security  in part  only,  a new
Security  or  Securities  of this  series and of like  tenor for the  unredeemed
portion  hereof  will be  issued  in the  name of the  Holder  hereof  upon  the
cancellation hereof.

         The Securities of this series are  subordinate in right of payment,  in
the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior  Indebtedness of the Company. To the extent and in the manner
provided in the Indenture,  Senior  Indebtedness must be paid before any payment
may be made to any  Holder  of this  Security.  Any  Holder  by  accepting  this
Security  agrees to the  subordination  and  authorizes  the  Trustee to give it
effect.

         The Indenture  contains  provisions  for  defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default  with respect to this  Security,  in each case upon  compliance  with
certain conditions set forth in the Indenture.

         If an Event of Default with respect to  Securities of this series shall
occur and be  continuing,  the principal of the Securities of this series may be
declared  due and  payable in the manner  and with the  effect  provided  in the
Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company  and the rights of the  Holders of the  Securities  of each series to be
affected under the Indenture at any time by the Company and the Trustee  without
the consent of any Holders in certain limited cases, and with the consent of the
Holders  of a  majority  in  principal  amount  of the  Securities  at the  time
Outstanding  of each series to be affected  subject to certain  exceptions.  The
Indenture  also  contains   provisions   permitting  the  Holders  of  specified
percentages  in principal  amount of the  Securities  of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance  by the Company with certain  provisions of the Indenture and certain
past defaults  under the Indenture and their  consequences.  Any such consent or
waiver shall be conclusive and binding upon the Holder of this Security and upon
all  future  Holders  of this  Security  and of any  Security  issued  upon  the
registration  of  transfer  hereof or in  exchange  herefor  or in lieu  hereof,
whether or not notation of such consent or waiver is made upon this Security.

         As provided  in and subject to the  provisions  of the  Indenture,  the
Holder of this  Security  shall not have the right to institute  any  proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder,  unless such Holder shall have previously given
the Trustee written notice of a continuing  Event of Default with respect to the
Securities of this series,  the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the  Trustee  to  institute  proceedings  in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have  received  from the Holders of a majority in principal  amount of
Securities of this series at the time Outstanding a direction  inconsistent with
such  request,  and shall have failed to institute any such  proceeding,  for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit  instituted  by the Holder of this  Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

<PAGE>

         No reference  herein to the Indenture and no provision of this Security
or of the Indenture  shall alter or impair the obligation of the Company,  which
is  absolute  and  unconditional,  to pay the  principal  of and any premium and
interest  on this  Security  at the  times,  place and rate,  and in the coin or
currency, herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set  forth,  the  transfer  of this  Security  is  registrable  in the  Security
Register,  upon surrender of this Security for  registration  of transfer at the
office or agency of the  Company  in any place  where the  principal  of and any
premium  and  interest  on this  Security  are  payable,  duly  endorsed  by, or
accompanied  by a written  instrument  of transfer in form  satisfactory  to the
Company and the Security  Registrar  duly  executed by the Holder  hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this  series and of like tenor,  of  authorized  denominations  and for the same
aggregate  principal  amount,  will be issued to the  designated  transferee  or
transferees.

         The  Securities  of this series are issuable  only in  registered  form
without coupons in denominations of $1.00 and any integral multiple thereof.  As
provided in the Indenture and subject to certain  limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of  Securities  of this  series  and of like  tenor  of a  different  authorized
denomination, as requested by the Holder surrendering the same.

         No service charge shall be made for any such  registration  of transfer
or exchange,  but the Company may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the  Company,  the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes,  whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         All terms used in this  Security  which are  defined  in the  Indenture
shall have the meanings assigned to them in the Indenture.

                                  ABBREVIATIONS

         The following  abbreviations,  when used in the inscription on the face
of this Note,  shall be  construed  as  through  they were  written  out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>

<S>           <C>                                          <C>
TEN COM       - as tenants in common                          UNIF GIFT MIN ACT -______Custodian _______
TEN ENT       - as tenants by the entireties                                    (Cust)            (Minor)
JT TEN        - as joint tenants with right of                     under Uniform Gifts to Minors Act
               survivorship and not as tenants                                _____________
               in common                                                         (State)
</TABLE>

              Additional abbreviations may also be used though not
                               in the above list.

<PAGE>

                                   ASSIGNMENT

For value received  _________________________________  hereby sell(s), assign(s)
                              and transfer(s) unto

(Please insert name,  address and social security or other identifying number of
                                   assignee)

$__________________ of the within Security,  and hereby irrevocably  constitutes
                                  and appoints

attorney to transfer the said  Security on the books of the  Company,  with full
power of substitution in the premises.

Dated:


                                                               Signature(s)
                                                          Signature(s)  must  be
                                                          guaranteed    by    an
                                                          eligible     Guarantor
                                                          Institution    (banks,
                                                          stock brokers, savings
                                                          and loan  associations
                                                          and   credit   unions)
                                                          with  membership in an
                                                          approved     signature
                                                          guarantee    medallion
                                                          program   pursuant  to
                                                          Securities         and
                                                          Exchange    Commission
                                                          Rule 17Ad-15.


                                                          Signature Guarantee

         NOTICE:  The  signature(s)  on the assignment  must correspond with the
         name(s) as written  upon the face of the  Security in every  particular
         without alteration or enlargement or any change whatever.