SUBORDINATION AND STANDSTILL AGREEMENT

     THIS SUBORDINATION AND STANDSTILL  AGREEMENT  ("Agreement") is entered into
by and among UGLY DUCKLING  CORPORATION,  a Delaware corporation  ("UDC"),  UGLY
DUCKLING CAR SALES AND FINANCE CORPORATION,  an Arizona corporation  ("UDCSFC"),
VERDE INVESTMENTS,  INC., an Arizona corporation ("Verde") and BNY MIDWEST TRUST
COMPANY,  as  Collateral  Agent  ("Collateral  Agent") for the Lenders  ("Senior
Lenders")  under that certain Senior  Secured Loan  Agreement  dated January 11,
2001.

                                    RECITALS

     A. UDC is or will be  borrowing  money  and  obtaining  credit  from  Verde
pursuant to that certain  Loan  Agreement  dated  January 11, 2001 among UDC and
Verde ("Junior Loan Agreement");

     B. UDC is also in the process of  obtaining a loan from the Senior  Lenders
pursuant to the Senior Loan Agreement (as defined below); and

     C. The Senior  Lenders have  indicated that they will enter into the Senior
Loan Agreement if certain conditions are met, including, without limitation, the
requirement that Verde execute this Agreement.

     NOW,  THEREFORE,  as an inducement to the Senior  Lenders to enter into the
Senior Loan Agreement and for other valuable  consideration,  the parties hereto
agree as follows:

          1.  INDEBTEDNESS AND LIENS  SUBORDINATED.  Verde  subordinates (i) all
     indebtedness  and other  obligations of every type and nature created under
     or in connection with the Junior Loan  Agreement,  including any amendments
     or modifications  thereto,  and now or at any time hereafter owing from UDC
     to  Verde  pursuant  to  the  Junior  Loan  Agreement  (including,  without
     limitation,  interest  thereon which may accrue  subsequent to UDC becoming
     subject to any state or federal debtor-relief  statute) ("Junior Debt") and
     (ii) all liens and/or  security  interests  held by Verde in any Collateral
     ("Junior  Liens") to the prior  payment in full in cash of all Senior  Debt
     (as defined  below) and all liens  and/or  security  interests  held by the
     Senior  Lenders  in  the  Collateral  ("Senior  Liens").   Subject  to  the
     provisions  of Section 3, Verde  irrevocably  agrees and  directs  that all
     Senior  Debt shall be paid in full in cash prior to UDC making any  payment
     on any Junior Debt,  unless the Senior  Lenders  authorize such payments on
     the Junior Debt.  Verde will, and the Collateral Agent is authorized in the
     name of  Verde  from  time to time to,  execute  and  file  such  financing
     statements and other documents as the Collateral Agent may require in order
     to give notice to other persons and entities of the terms and provisions of
     this  Agreement.  For purposes  hereof,  the term  "Senior  Debt" means the
     "Obligations"  (as such term is  defined  in the  Senior  Loan  Agreement),
     together with (a) any partial or complete  refinancing of the  Obligations,
     (b) any amendments, restatements,  modifications, renewals or extensions of
     any of the foregoing, and (c) any interest accruing on any of the foregoing
     before  or  after  the   commencement   of  any   bankruptcy,   insolvency,
     reorganization or similar proceeding, without regard to whether or not such
     interest is an allowed claim.  For purposes  hereof,  the term "Senior Loan
     Agreement"  means that certain Senior  Secured Loan  Agreement  dated as of
     January 11, 2001 by and among UDC, certain Lenders and Collateral Agent, as
     the same may be amended,  supplemented  or otherwise  modified from time to
     time.  For purposes  hereof,  the term "Senior  Debt  Documents"  means the
     Senior Loan Agreement and all other  documents,  instruments and agreements
     evidencing,  pertaining  to or  securing  all or any  portion of the Senior
     Debt.

          2. COLLATERAL.  The word  "Collateral"  shall have the same meaning as
     specified  in the Senior Loan  Agreement.  If share  certificates  or other
     instruments  representing  the Collateral  were delivered to the Collateral
     Agent to effect  perfection of the Senior Liens as provided under the terms
     of that certain  Stock Pledge  Agreement  dated January 11, 2001 among UDC,
     UDCSFC, Ugly Duckling  Receivables II, Ugly Duckling  Receivables Corp. III
     and the Collateral Agent (as the same may be amended, modified or replaced,
     the "Senior Stock Pledge  Agreement")  and Senior  Lenders,  the Collateral
     Agent   acknowledges   and  agrees,   that  in  addition  to  holding  such
     certificates   to  perfect  the  Senior  Lien,  it  is  holding  the  share
     certificates or other instruments  representing the Collateral on behalf of
     Verde to perfect Verde's Junior Liens. Further, the Collateral Agent agrees
     that it will not deliver or return to UDC,  UDCSFC or,  except  pursuant to
     foreclosure or similar proceedings under the Senior Stock Pledge Agreement,
     any  other  party and UDC and  UDCSFC  agree  that they will not  accept or
     receive  the  share  certificates  or other  instruments  representing  the
     Collateral.  Instead,  except pursuant to foreclosure or similar proceeding
     under the Senior Stock Pledge Agreement, the same shall be returned only to
     Verde  according to the terms of that certain Stock Pledge  Agreement dated
     January 11, 2001 among UDC, UDCSFC and Verde,  unless  otherwise  agreed in
     writing  by  Verde.   Except  for  the  obligation  to  deliver  the  share
     certificates or other  instruments  representing the Collateral to Verde as
     provided herein, the Collateral Agent owes no further duty and has no other
     obligation  to  Verde  with  respect  to the  share  certificates  or other
     instruments and shall have no liability to Verde unless Collateral  Agent's
     actions or omissions with respect to the same constitute  gross  negligence
     or willful misconduct.

          3.  RESTRICTION  OF PAYMENT OF JUNIOR  DEBT;  DISPOSITION  OF PAYMENTS
     RECEIVED BY VERDE. UDC will not make, and Verde will not accept or receive,
     any payment or benefit in cash or  otherwise  (or exercise any right of, or
     permit  any  set-off  with  respect  to,  the  Junior  Debt),  directly  or
     indirectly,  on account of any amounts  owing on the Junior Debt.  However,
     UDC may make, and Verde may accept,  (i) payments of interest only owing in
     accordance with the terms of the Junior Debt and (ii) payments of principal
     to the extent  permitted  under the  Senior  Loan  Agreement,  in each case
     provided  that (a) at the time of such  payment  and  after  giving  effect
     thereto,  no Event of Default  under the Senior Loan  Agreement  shall have
     occurred and be continuing,  and (b) both before and after giving effect to
     such payments,  UDC will remain in compliance  with the covenants set forth
     in Sections 6.13 to 6.18 of the Senior Loan Agreement. In the event payment
     is made in violation of this  Paragraph,  Verde shall promptly  deliver the
     same to the Collateral Agent in the form received,  with any endorsement or
     assignment  necessary  for the  transfer of such  payment from Verde to the
     Collateral Agent, to be either (in the Collateral  Agent's sole discretion)
     held as cash collateral securing the Senior Debt or applied in reduction of
     the Senior Debt in such order as the Collateral Agent shall determine,  and
     until so  delivered,  Verde  shall  hold such  payment  in trust for and on
     behalf of, and as the property of, the Collateral  Agent for the benefit of
     the holders of the Senior Debt. In the event that Verde shall  exercise any
     right of  set-off  which  Verde is not  permitted  to  exercise  under  the
     provisions  of  this  Agreement,  Verde  shall  promptly  pay  over  to the
     Collateral  Agent, in immediately  available  funds, an amount equal to the
     amount of the  claims or  obligations  offset.  If Verde  fails to make any
     endorsement  required under this Agreement,  the Collateral Agent is hereby
     irrevocably appointed as the attorney in-fact (which appointment is coupled
     with an interest) for Verde to make such endorsement in Verde's name.

          4.  ACTION  ON  SUBORDINATED  DEBT.  As long as this  Agreement  is in
     effect,  Verde  will not take  any  action  or  initiate  any  proceedings,
     judicial or otherwise,  to enforce  Verde's rights or remedies with respect
     to any Junior Debt and/or Junior Liens, including,  without limitation, any
     action to enforce  remedies with respect to any Collateral or to obtain any
     judgment or prejudgment  remedy against UDC or any of its  Subsidiaries  or
     any such  Collateral.  Further,  Verde  will not  commence  any  action  or
     proceeding  against  UDC or any of its  Subsidiaries  to recover all or any
     part of the  Junior  Debt,  or join with any  other  creditor  (unless  the
     Collateral  Agent shall so join) in bringing any proceeding  against UDC or
     any of its Subsidiaries under any bankruptcy, reorganization,  readjustment
     of debt, arrangement of debt receivership, liquidation or insolvency law or
     statute of the  federal or any state  government,  or take  possession  of,
     sell,  or dispose of any  Collateral,  or  exercise or enforce any right or
     remedy available to Verde with respect to any such  Collateral,  unless and
     until  the  Senior  Debt has been  paid in full in  cash.  Nothing  in this
     Agreement   restricts   Verde  in  giving  any  notice  of  default  and/or
     acceleration  of payment of the Junior  Debt or taking any other  action to
     preserve and enforce its rights under the Junior Loan  Agreement,  provided
     such actions do not result in any payment on the Junior Debt not  expressly
     permitted  hereunder  prior to payment of the Senior  Debt in full in cash.
     Nothing  in  this  Agreement  restricts  Verde  and/or  its  affiliates  in
     enforcing any rights and remedies  against UDC and/or its affiliates  under
     any other agreements between Verde and/or its affiliates and UDC and/or its
     affiliates to the extent such other agreements do not relate to, and do not
     have the effect, directly or indirectly, of repaying the Junior Debt.

          5. DISPOSITION OF EVIDENCE OF  INDEBTEDNESS.  If there is any existing
     promissory  note or other evidence of any Junior Debt, or if any promissory
     note or other evidence of the Junior Debt is executed at any time hereafter
     with respect  thereto,  then UDC and Verde will mark the same with a legend
     stating that it is subject to this Agreement.  Verde shall not, without the
     Collateral Agent's prior written consent, assign, transfer,  hypothecate or
     otherwise dispose of any claim it now has or may at any time hereafter have
     against UDC at any time that any Senior Debt remains outstanding and/or the
     Senior Lenders remain committed to extend any credit to UDC.

          6. CONTINUING  EFFECT.  This Agreement  shall  constitute a continuing
     agreement of  subordination,  and the Senior Lenders may, without notice to
     or consent by Verde,  modify any term of the Senior Debt in  reliance  upon
     this  Agreement.  Without  limiting the  generality of the  foregoing,  the
     Collateral Agent and Senior Lenders may, at any time and from time to time,
     without  the   consent  of  or  notice  to  Verde  and  without   incurring
     responsibility  to  Verde  or  impairing  or  releasing  any of the  Senior
     Lenders'  or  Collateral  Agent's  rights  or  any of  Verde's  obligations
     hereunder:

               (a) change the interest rate, change the amount of payment,  make
          further  advances  to UDC under the Senior  Debt,  extend the time for
          payment or renew or  otherwise  alter the terms of the Senior  Debt or
          any instrument evidencing the same in any manner;

               (b) sell,  exchange,  release or otherwise deal with any property
          at any time  securing  payment of the Senior Debt or any part thereof;
          (c) release  anyone liable in any manner for the payment or collection
          of the Senior Debt or any part  thereof;  (d) exercise or refrain from
          exercising  any  right  against  UDC or any  other  person  (including
          Verde);  (e) and apply any sums received by the Collateral  Agent,  by
          whomsoever  paid and  however  realized,  to the  Senior  Debt in such
          manner as the Collateral Agent shall deem appropriate.

          7.  ADDITIONAL  WAIVERS BY VERDE.  Verde hereby  waives  notice of the
     creation,  existence,  renewal, or modification or extension of the time of
     payment,  of the Senior Debt. Verde agrees that the Senior Lenders,  at any
     time and from  time to time,  either  before  or after  revocation  of this
     Agreement,  may enter into such  agreement or  agreements  with UDC and its
     affiliates,  as the Senior  Lenders may deem proper,  extending the time of
     payment or renewing or  otherwise  altering  the terms of all or any of the
     obligations of UDC to the Senior Lenders, or affecting the Senior Liens, or
     may exchange,  sell or surrender or otherwise  deal with any such security,
     or may release any balance of funds of UDC with the Senior Lenders, without
     notice  to  Verde  and  without  in any way  impairing  or  affecting  this
     Agreement.

          8.  FORECLOSURE OF COLLATERAL.  Notwithstanding  the Junior Liens, any
     other  provision  hereof or any  security  interest  hereafter  acquired by
     Verde, the Collateral  Agent may take possession of, sell,  dispose of, and
     otherwise deal with all or any part of the Collateral,  and may enforce any
     right or remedy available to it with respect to the Collateral, all without
     notice to or consent of Verde except as specifically required by applicable
     law.  Except as provided in Section 2, the  Collateral  Agent shall have no
     duty to preserve,  protect,  care for, insure, take possession of, collect,
     dispose of, or  otherwise  realize  upon any of the  Collateral,  and in no
     event shall the  Collateral  Agent be deemed  Verde's agent with respect to
     the Collateral.  All proceeds received by the Collateral Agent with respect
     to any Collateral may be applied, first, to pay or reimburse the Collateral
     Agent for all costs and expenses (including  reasonable attorneys' fees and
     costs)  incurred by the Collateral  Agent in connection with the collection
     of such proceeds,  and, second,  to any indebtedness  secured by the Senior
     Liens in any order that it may choose.

          9. INFORMATION.  Verde has established adequate,  independent means of
     obtaining from UDC on a continuing  basis  financial and other  information
     pertaining to UDC's  financial  condition.  Verde agrees to keep adequately
     informed from such means of any facts,  events or circumstances which might
     in any way affect Verde's risks hereunder, and Verde agrees that the Senior
     Lenders and the  Collateral  Agent shall have no  obligation to disclose to
     Verde  information  or  material  about UDC which is acquired by the Senior
     Lenders or  Collateral  Agent in any  manner.  The Senior  Lenders  and the
     Collateral Agent may, at their sole option and without obligation to do so,
     disclose  to Verde any  information  or  material  relating to UDC which is
     acquired by them by any means,  and UDC hereby agrees to and authorizes any
     such disclosure.

          10. TRANSFER OF ASSETS OR  REORGANIZATION  OF UDC. In the event of any
     distribution,  division, or application,  partial or complete, voluntary or
     involuntary,  by operation of law or  otherwise,  of all or any part of the
     assets  of UDC or any of its  Subsidiaries,  or the  proceeds  thereof,  to
     creditors of UDC or any of its Subsidiaries,  by reason of the liquidation,
     dissolution,  or other  winding  up of  UDC's  or any of its  Subsidiaries'
     business,  or in  the  event  of  any  sale,  receivership,  insolvency  or
     bankruptcy  proceedings  by or against UDC or any of its  Subsidiaries,  or
     assignment  for the  benefit  of  creditors,  or of any  proceedings  by or
     against UDC or any of its  Subsidiaries for any relief under any bankruptcy
     or insolvency  laws, or relating to the relief of debtors,  readjustment of
     indebtedness, reorganizations, arrangements, compositions or extensions, or
     of any other event  whereby it becomes  necessary  or  desirable to file or
     present  claims against UDC or any of its  Subsidiaries  for the purpose of
     receiving  payment  thereof,  or on account  thereof,  then and in any such
     event, any payment or distribution of any kind or character, either in cash
     or other property,  which shall  thereafter be made or shall  thereafter be
     payable  with  respect to any Junior Debt shall be paid over to  Collateral
     Agent for application to the payment of the Senior Debt, whether due or not
     due, and no payments shall be made upon or in respect of Junior Debt unless
     and until the Senior  Debt shall  have been paid and  satisfied  in full in
     cash. In any such event,  all claims of the Collateral Agent and all claims
     of Verde shall, at the option of the Senior Lenders,  forthwith  become due
     and payable without demand or notice.

          11.  REPRESENTATIONS  AND  WARRANTIES.  Verde  hereby  represents  and
     warrants:

               (a) Verde owns the Junior Debt and Junior Liens free and clear of
          any lien,  security interest or other  encumbrance;  (b) Verde has all
          requisite  power and  authority  to execute,  deliver and perform this
          Agreement;  (c) The  execution,  delivery and  performance by Verde of
          this Agreement is not and will not contravene any law or  governmental
          regulation  or any  contractual  restriction  binding on or  effecting
          Verde;  (d) No authorization or approval or other action by, or notice
          to, or filing with any governmental authority or other regulatory body
          or  consent of any other  person is  required  for the due  execution,
          delivery  and  performance  by Verde of this  Agreement;  and (e) This
          Agreement  constitutes  the legal,  valid and  binding  obligation  of
          Verde, enforceable against it in accordance with its terms.

          12.  POWER OF  ATTORNEY.  Verde  irrevocably  authorizes  and empowers
     Collateral Agent, or any person  Collateral Agent may designate,  to act as
     attorney for Verde with full power and  authority in the name of Verde,  or
     otherwise,  to make and present such claims or proofs of claims against UDC
     on account of the Junior Debt as Collateral  Agent,  or its appointee,  may
     deem  expedient  and proper and, if  necessary,  to vote such claims in any
     proceedings  and to receive  and  collect  any and all  dividends  or other
     payments and  disbursements  made thereon in whatever form they may be paid
     or issued, and to give acquittance therefor and to apply same to the Senior
     Debt, and Verde hereby agrees, from time to time and upon request, to make,
     execute  and  deliver  to   Collateral   Agent  such  powers  of  attorney,
     assignments,  endorsements,  proofs  of  claim,  pleadings,  verifications,
     affidavits,  consents, agreements or other instruments as may be reasonably
     requested by Collateral  Agent in order to enable the  Collateral  Agent to
     enforce any and all claims upon,  or with respect to, the Junior Debt,  and
     to collect and receive any and all payments or  distributions  which may be
     payable or deliverable at any time upon or with respect to the Junior Debt.

          13. OTHER AGREEMENTS; NO THIRD PARTY BENEFICIARIES.  Verde understands
     that there may be various  agreements  between  the Senior  Lenders and UDC
     evidencing and governing the Senior Debt, and Verde acknowledges and agrees
     that such  agreements  are not  intended  to confer any  benefits on Verde.
     Verde further  acknowledges  that the  Collateral  Agent may administer the
     Senior Debt and any of the Senior  Lenders'  agreements with UDC in any way
     the Collateral Agent may deem  appropriate,  without regard to Verde or the
     Junior Debt,  except as may be required by applicable law. Verde waives any
     right Verde might  otherwise  have to require a marshalling of any security
     held by the  Collateral  Agent for all or any part of the Senior Debt or to
     direct or affect  the  manner or timing  with  which the  Collateral  Agent
     enforces any of their security.

          14. BREACH OF AGREEMENT BY UDC OR VERDE. In the event of any breach of
     this  Agreement  by UDC or  Verde,  then  and at any  time  thereafter  the
     Collateral  Agent  shall  have the  right to  declare  immediately  due and
     payable all or any portion of the Senior Debt without presentment,  demand,
     protest or notice of dishonor,  all of which are hereby expressly waived by
     UDC and Verde. No delay,  failure or discontinuance of the Collateral Agent
     in exercising  any right,  privilege,  power or remedy  hereunder  shall be
     deemed a waiver of such right,  privilege,  power or remedy;  nor shall any
     single or partial  exercise of any such right,  privilege,  power or remedy
     preclude,  waive or otherwise  affect the further  exercise  thereof or the
     exercise  of any other  right,  privilege,  power or  remedy.  Any  waiver,
     permit,  consent  or  approval  of any kind by the  Collateral  Agent  with
     respect to this Agreement must be in writing and shall be effective only to
     the extent set forth in such writing.

          15.  DISCLOSURE  OF  SUBORDINATION.  Verde  and UDC  agree to make and
     maintain in their books of account notations reasonably satisfactory to the
     Collateral  Agent  of the  rights  and  priorities  of the  Senior  Lenders
     hereunder,  and from time to time, upon request,  to furnish the Collateral
     Agent with sworn  financial  statements.  Collateral  Agent may inspect the
     books of account  and any  records of the UDC at any time  during  business
     hours.  Verde and UDC agree that any instrument  evidencing the Junior Debt
     shall be marked with a specific  statement  that the  indebtedness  thereby
     evidenced is subject to the provisions of this Subordination Agreement.

          16.  SENIOR  LENDERS'  RELIANCE.  Verde  consents  and agrees that all
     Senior Debt shall be deemed to have been made or incurred at the request of
     Verde and in reliance upon this Agreement;  provided, however, that neither
     the  foregoing  provision,  nor  any  other  provision  contained  in  this
     Agreement,  shall be deemed or construed to constitute,  either directly or
     by  implication,   a  guaranty  by  Verde  of  any  debts,  obligations  or
     liabilities incurred by UDC to the Senior Lenders.

          17.  MISCELLANEOUS.  This Agreement shall be binding upon and inure to
     the benefit of the heirs, executors, administrators, legal representatives,
     successors  and  assigns  of the  parties.  All  words  used  herein in the
     singular  shall be deemed to have been used in the plural where the context
     so requires.

          18.  COSTS,   EXPENSES  AND  ATTORNEYS'  FEES.  If  any  party  hereto
     institutes any judicial or  administrative  action or proceeding to enforce
     any provisions of this  Agreement,  or alleging any breach of any provision
     hereof or seeking damages or any other judicial or  administrative  remedy,
     the  prevailing  party or parties  in such  action or  proceeding  shall be
     entitled  to  receive  from the  losing  party or  parties  all  costs  and
     expenses,  including reasonable attorneys' fees (to include outside counsel
     fees and all allocated costs of such party's in-house counsel), incurred in
     connection with such action or proceeding.

          19.  CONFLICT IN AGREEMENTS.  If the  subordination  provisions of any
     instrument  evidencing  the  Junior  Debt  conflict  with the terms of this
     Agreement,  the  terms of this  Agreement  shall  govern  the  relationship
     between the Senior Lenders and Verde

          20.  NO  WAIVER.  No waiver  shall be deemed to be made by the  Senior
     Lenders of any of its rights  hereunder unless the same shall be in writing
     signed on behalf of the Senior Lenders, and each such waiver, if any, shall
     be a waiver only with  respect to the  specific  matter or matters to which
     the  waiver  relates  and shall in no way  impair  the rights of the Senior
     Lenders  or the  obligations  of Verde to the  Senior  Lenders in any other
     respect at any time.

          21. BINDING EFFECT;  ACCEPTANCE.  This Agreement shall be binding upon
     Verde and its heirs,  legal  representatives,  successors  and  assigns and
     shall  inure to the benefit of the Senior  Lenders and their  participants,
     successors  and  assigns  irrespective  of  whether  this  or  any  similar
     agreement  is  executed  by any  other  creditor  of  the  UDC.  Notice  of
     acceptance  by the Senior  Lenders of this  Agreement or of reliance by the
     Senior Lenders upon this Agreement is hereby waived by Verde. 22. GOVERNING
     LAW. This Agreement  shall be governed by and construed in accordance  with
     the laws of the State of Arizona.

<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
January 11, 2001.

                        UGLY DUCKLING CAR SALES AND FINANCE CORPORATION,
                        an Arizona corporation
                        By:
                        Name:
                        Title:

                        UGLY DUCKLING CORPORATION,
                        a Delaware corporation
                        By:
                        Name:
                        Title:

                        VERDE INVESTMENTS, INC.,
                        an Arizona corporation
                        By:
                        Name:
                        Title:

                        BNY MIDWEST TRUST COMPANY
                        By:
                        Name:
                        Title: