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                                                                    EXHIBIT 10.4

                                  June 12, 1998



Mr. Eric J. Splaver
3102 East Brookwood Court
Phoenix, Arizona  85048

         Re:      Terms of Employment

Dear Eric:

         I am pleased that you have accepted the offer of employment made by
Cygnet Financial Corporation ("Cygnet"). Initially, Cygnet will be a wholly
owned subsidiary of Ugly Duckling Corporation but it is intended that Cygnet be
separated from Ugly Duckling Corporation in connection with the spin-off of all
non-dealership operations of Ugly Duckling Corporation (the "Spin-Off"). The
purpose of this letter is to confirm the terms and conditions under which you
will be employed by Cygnet.

POSITION:      You will serve as Chief Financial Officer of Cygnet. As Chief
               Financial Officer you will be responsible for all accounting and
               financial reporting activities of Cygnet and its subsidiaries.
               You will also manage all personnel involved in these activities.
               You will report to the Chief Executive Officer of Cygnet. You
               will be employed on a full-time basis and will devote all of your
               working time and efforts exclusively to Cygnet. Your position is
               an executive position and, therefore, you are exempt from the
               minimum wage and overtime provisions of the Fair Labor Standards
               Act.

LOCATION:      Your office will be located at 2525 East Camelback Road, Phoenix,
               Arizona 85016. The location of your office may be changed from
               time to time. Also, you may be required to provide services from
               time to time at other Cygnet locations. You may also be required
               to travel in the performance of services.

SALARY:        You will receive a salary at the rate of $120,000.00 per year.
               Your salary will be reviewed annually in December and may be
               adjusted at the discretion of the Board of Directors of Cygnet.

BENEFITS:      Enclosed is a summary of the employee benefits of Ugly Duckling
               Corporation. Cygnet is expected to have similar benefits. You
               will be
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Mr. Eric J. Splaver
June 12, 1998
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               entitled to the current benefits of Ugly Duckling Corporation as
               an employee of Cygnet.

STOCK OPTIONS: Upon completion of the Spin-Off you will receive options to
               purchase 30,000 shares of common stock of Cygnet (the "Cygnet
               Stock Options"). The Cygnet Stock Options will be qualified to
               the maximum extent possible. The exercise price of the Cygnet
               Stock Options will be the price that Ugly Duckling Corporation
               shareholders must pay to acquire common stock of Cygnet in the
               Spin-Off (the "Spin-Off Price"). The Cygnet Stock Options will
               vest over five years from the date of grant and be subject to
               other usual and customary terms and conditions. The Cygnet Stock
               Options are granted to provide you an incentive to work in a
               manner that adds as much value as possible to Cygnet. However,
               Cygnet makes no representations or warranties as to, and, shall
               have no liability for, the value of the Cygnet Stock Options or
               the price of common stock of Cygnet at any time. You acknowledge
               that the issuance and/or exercise of the Cygnet Stock Options may
               constitute compensation to you and you shall be responsible for
               paying all income taxes assessed on said compensation. In
               addition to the Cygnet Stock Options, upon the effective date of
               the Spin-Off all stock options of Ugly Duckling Corporation now
               held by you shall be fully vested and exercisable.

STOCK GRANT:   Upon completion of the Spin-Off you will receive that number of
               shares of common stock of Cygnet at the Spin-Off Price equal to
               $100,000 (the "Restricted Stock"). The Restricted Stock will vest
               over four years from the effective date of the Spin-Off. The
               Restricted Stock is granted to induce you to bear all risk of
               terminating your current employment with Ugly Duckling and
               accepting employment with Cygnet under the terms of this letter.
               However, Cygnet makes no representations or warranties as to,
               and, shall have no liability for, the value or price of the
               Restricted Stock at any time. You acknowledge that the issuance
               of the Restricted Stock will constitute compensation to you and
               you shall be responsible for paying all income taxes assessed on
               said compensation. You authorize Cygnet to withhold from the
               Restricted Stock at the time of issuance that number of shares
               with a value equal to the withholdings required by applicable
               law. If any withholdings are required prior to the issuance of
               the Restricted Stock you authorize Cygnet to make the
               withholdings from your Salary. The Restricted Stock will not be
               registered under the Securities Act of 1933 and will be subject
               to transfer restrictions under Rule 144 of the Securities Act of
               1933.

TERM:          Your employment will commence on or about the effective date of
               the Spin-Off. There is no minimum term for your employment. You
               are employed at will and your employment may be terminated at any
               time for any lawful reason, all at the discretion and will of
               Cygnet. However, if your employment is terminated by Cygnet
               without cause prior to the third anniversary of the effective
               date of the Spin-Off, then your Salary 
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Mr. Eric J. Splaver
June 12, 1998
Page 3

                              and benefits will be continued for one year. If
                              your employment is terminated (a) by Cygnet
                              without cause after the third anniversary of the
                              effective date of the Spin-Off; (b) by Cygnet at
                              any time for cause; or (c) by you at any time,
                              then your Salary and benefits will not be
                              continued after the termination. The continuation
                              of your Salary and benefits, if required, will be
                              a severance benefit (the "Severance Benefit") and
                              the Severance Benefit will be your exclusive
                              benefit and remedy for the termination of your
                              employment by Cygnet without cause. For purposes
                              of this letter and the termination of your
                              employment by Cygnet without cause, "without
                              cause" shall mean termination for any reason other
                              than your (a) illegal conduct; (b) gross
                              negligence or intentional misconduct; (c) willful
                              failure to perform your duties after receipt of
                              written demand for performance of your duties; or
                              (d) conduct that harms or threatens to harm any
                              employee of Cygnet or any employee of any
                              organization that does business with Cygnet.

CHANGE OF CONTROL:            If a change in control of Cygnet occurs at any
                              time during the term of your employment and your
                              employment by Cygnet is either (a) terminated by
                              you within 12 months after the change of control;
                              (b) terminated by Cygnet without cause within 90
                              days prior to the change of control; or (c)
                              terminated by Cygnet without cause within 12
                              months after the change of control, then in any
                              such event all Cygnet Stock Options and Restricted
                              Stock granted to you pursuant to this letter and
                              thereafter that are not yet vested shall
                              automatically be fully vested. For purposes of
                              this letter, change of control shall be defined by
                              the Long Term Incentive Stock Option Plan of Ugly
                              Duckling Corporation but shall include the removal
                              and/or resignation of Ernest C. Garcia II as the
                              Chairman of the Board of Directors of Cygnet.

OTHER TERMS:                  There are no material terms and conditions
                              of your employment other than as stated in this
                              letter and any personnel policies of Cygnet that
                              may be adopted and revised by Cygnet from time to
                              time (the "Personnel Policies"). This letter, but
                              not the Personnel Policies, constitutes a legally
                              binding and enforceable contract under Arizona
                              law. You acknowledge that you have received, or
                              had the opportunity to receive, the advice of
                              independent legal counsel prior to signing this
                              letter.
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Mr. Eric J. Splaver
June 12, 1998
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         If these terms and conditions of employment are acceptable to you, then
please acknowledge your acceptance by signing this letter and returning it to
me. If you have any questions or comments regarding these terms and conditions
of your employment, please contact me.

         I look forward to working with you.

                                   Cordially,

                                   /s/ ERNEST C. GARCIA, II


                                   Ernest C. Garcia, II

ECG:ag

Accepted this 16 day of June, 1998.

/s/ ERIC J. SPLAVER
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Eric J. Splaver