UGLY DUCKLING CORPORATION
                               WARRANT AGREEMENT

     THIS WARRANT  AGREEMENT  (the  "Agreement"),  dated as of July 25, 2001, is
between UGLY DUCKLING CORPORATION,  a Delaware corporation (the "Company"),  and
VERDE INVESTMENTS, INC. (the "Lender").

     WHEREAS,  the Company has entered into a Loan Agreement dated as of January
11,  2001 (the  "Loan  Agreement"),  by and among the  Company  and the  Lender,
pursuant to which the Lender will make a term loan to the Company,  as set forth
in, and subject to the terms and conditions of, the Loan Agreement; and WHEREAS,
as a condition  precedent to the execution  and delivery of the Loan  Agreement,
the Company has agreed to execute this  Agreement  pursuant to which the Company
shall on July 25,  2001,  subject  to the terms set forth  herein,  issue to the
Lender warrants (the  "Warrants") to purchase shares of common stock,  $.001 par
value per share  ("Common  Stock"),  of the  Company,  subject  to the terms and
conditions of this Agreement.

     NOW, THEREFORE,  in consideration of the promises and the mutual agreements
herein set forth, the parties agree as follows:

Section 1. Issuance of Warrants and Form of Warrants.

     (a) Subject to the terms and conditions  hereof, the Company shall issue to
the Lender on July 25, 2001 and the Lender shall accept from the Company on such
date, 1,500,000 Warrants substantially in the form of Exhibit A hereto.

     (b) Each Warrant shall  entitle the  registered  holder of the  certificate
representing  such Warrant to purchase  upon the  exercise  thereof one share of
Common Stock,  subject to the vesting schedule provided for in Section 2 and the
adjustments  provided  for in Section 8 hereof,  between  July 25, 2001 and 1:30
p.m., Phoenix,  Arizona time, on July 25, 2011, unless earlier redeemed pursuant
to Section 10 hereof.

     (c) The Warrant certificates shall be in registered form only. Each Warrant
certificate  shall be dated as of the date of  issuance  thereof  (whether  upon
initial issuance or upon transfer or exchange),  and shall be executed on behalf
of the Company by the manual signature of its President,  Senior Vice President,
or a Vice President, and attested to by the manual signature of its Secretary or
an Assistant Secretary. In case any officer of the Company who shall have signed
any Warrant  certificate  shall cease to be such officer of the Company prior to
the issuance  thereof,  such Warrant  certificate may nevertheless be issued and
delivered  with the same  force and  effect as though  the person who signed the
same had not ceased to be such officer of the Company.

Section 2.  Exercise of  Warrants,  Duration and Warrant  Price.  Subject to the
provisions  of this  Agreement,  each  registered  holder of one or more Warrant
certificates  shall have the right,  which may be  exercised as provided in such
Warrant certificates,  to purchase from the Company (and the Company shall issue
and sell to such  registered  holder)  the  number of shares of Common  Stock or
other securities to which the Warrants  represented by such  certificates are at
the time entitled hereunder.

     (a) The registered holder shall be entitled to exercise 500,000 Warrants on
July 25, 2001,  and an additional  250,000  Warrants upon the expiration of each
successive three month period  thereafter (i.e.,  October 25, 2001,  January 25,
2002,  April 25, 2002,  and July 25, 2002) until the  registered  holder has the
right to exercise all 1,500,000 Warrants;  provided,  however, that this Warrant
Agreement  and the  registered  holder's  right to exercise  any of the Warrants
shall  terminate  immediately if the Note issued  pursuant to the Loan Agreement
has been paid in full on or prior to July 25, 2001.

     (b) Each  Warrant not  exercised  by the  expiration  date of July 25, 2011
shall become void, and all rights  thereunder and all rights in respect  thereof
under this Agreement shall cease on such date.

     (c) A  Warrant  may be  exercised  by  the  surrender  of  the  certificate
representing such Warrant to the Company with the subscription form set forth on
the reverse  thereof duly  executed and properly  endorsed  with the  signatures
properly  guaranteed,  and upon  payment in full to the  Company of the  Warrant
Price (as hereinafter defined) for the number of shares of Common Stock or other
securities  as to which the Warrant is  exercised.  Such Warrant  Price shall be
paid in full in cash,  or by  certified  check or bank  draft  payable in United
States  currency to the order of the Company or by  surrender of this Warrant to
the  Company  together  with a notice of cashless  exercise,  in which event the
Company  shall  issue to the  registered  holder  the number of shares of Common
Stock determined as follows:

          X = Y x (A-B)/A

          X = the  number  of  shares  of  Common  Stock  to be  issued  to  the
          registered holder.

          Y = the  number of shares of Common  Stock  with  respect to which the
          Warrant is being exercised.

          A = the Current Market Price determined as of the date of exercise.

          B = the Warrant Price.

     (d) Subject to adjustment in  accordance  with Section 8 hereof,  the price
per share of Common Stock at which each Warrant may be exercised  (the  "Warrant
Price")  shall be at a price  per  share  equal to the last  sales  price of the
Common  Stock on the Nasdaq  National  Market on the date of the  closing of the
Loan Agreement.

     (e) Subject to the further  provisions  of this  Section 2 and of Section 5
hereof, upon surrender of Warrant certificates and payment of the Warrant Price,
the Company shall issue and cause to be delivered, as promptly as practicable to
or upon the written order of the registered  holder of such Warrants and in such
name or names as such  registered  holder may  designate,  subject to applicable
securities  laws, a certificate or certificates  for the number of securities so
purchased upon the exercise of such Warrants, together with cash, as provided in
Section 9 of this  Agreement,  in respect of any fraction of a share or security
otherwise issuable upon such surrender. All shares of Common Stock or other such
securities  issued  upon the  exercise  of a Warrant  shall be duly  authorized,
validly issued, fully paid and nonassessable and free and clear of all liens and
other encumbrances.

     (f) Certificates  representing such securities shall be deemed to have been
issued and any person so  designated to be named therein shall be deemed to have
become a holder of record of such  securities as of the date of the surrender of
such  Warrants  and  payment  of the  Warrant  Price.  The  rights  of  purchase
represented by each Warrant certificate shall be exercisable, at the election of
the registered  holder  thereof,  either as an entirety or from time to time for
part of the number of  securities  specified  therein and, in the event that any
Warrant  certificate  is exercised in respect of less than all of the securities
specified  therein  at any time  prior  to the  expiration  date of the  Warrant
certificate,  a new Warrant  certificate or certificates  will be issued to such
registered  holder  for the  remaining  number of  securities  specified  in the
Warrant certificate so surrendered.

Section 3. Countersignature and Registration.

     (a) The Company  shall  maintain  books (the  "Warrant  Register")  for the
registration and the registration of transfer of the Warrants.  Upon the initial
issuance of the  Warrants,  the Company shall issue and register the Warrants in
the name of the Lender in accordance with Section 1 hereof.

     (b) Prior to due  presentment  for  registration of transfer of any Warrant
certificate,  the  Company  may deem and  treat the  person  in whose  name such
Warrant   certificate  shall  be  registered  upon  the  Warrant  Register  (the
"registered  holder") as the absolute owner of such Warrant  certificate  and of
each Warrant represented thereby  (notwithstanding  any notation of ownership or
other writing on the Warrant certificate made by anyone other than the Company),
for the purpose of any exercise  thereof,  of any  distribution or notice to the
holder  thereof,  and for all  other  purposes,  and the  Company  shall  not be
affected by any notice to the contrary.

Section 4. Transfer and Exchange of Warrants.

     (a) The Company  shall  register the  transfer,  from time to time,  of any
outstanding Warrant or portion thereof upon the Warrant Register, upon surrender
of the certificate evidencing such Warrant for transfer,  properly endorsed with
signatures properly  guaranteed and accompanied by appropriate  instructions for
transfer.  Upon any such transfer,  a new Warrant  certificate  representing  an
equal  aggregate  number  of  Warrants  so  transferred  shall be  issued to the
transferee  and the  surrendered  Warrant  certificate  shall be canceled by the
Company.  In the event that only a portion of a Warrant  is  transferred  at any
time,  a new  Warrant  certificate  representing  the  remaining  portion of the
Warrant will also be issued to the transferring holder. Notwithstanding anything
to the contrary herein, no transfer or exchange may be made except in compliance
with applicable securities laws and Section 12 hereof.

     (b) Warrant certificates may be surrendered to the Company, together with a
written request for exchange,  and thereupon the Company shall issue in exchange
therefor one or more new Warrant  certificates  as  requested by the  registered
holder of the Warrant  certificate or certificates so surrendered,  representing
an equal aggregate number of Warrants.

     (c) The  Company  shall not be  required  to  effect  any  registration  of
transfer or exchange which will result in the issuance of a Warrant  certificate
for a fraction of a Warrant.

     (d) No service  charge  shall be made for any exchange or  registration  of
transfer of Warrant certificates.

Section 5. Payment of Taxes.  The Company will pay any  documentary  stamp taxes
attributable  to the initial  issuance or delivery of the shares of Common Stock
or other securities issuable upon the exercise of Warrants;  provided,  however,
the  Company  shall not be required to pay any tax or taxes which may be payable
in respect of any  transfer  of the  Warrants  or  involved  in the  issuance or
delivery of any Warrant  certificate or certificates  for shares of Common Stock
in a name  other than  registered  holder of  Warrants  in respect of which such
shares are issued,  and in such case the Company  shall not be required to issue
or deliver any certificate for shares of Common Stock or any Warrant certificate
until the person  requesting the same has paid to the Company the amount of such
tax or has  established  to the  Company's  satisfaction  that such tax has been
paid.

Section  6.  Mutilated  or  Missing  Warrants.   In  case  any  of  the  Warrant
certificates  shall be mutilated,  lost,  stolen or  destroyed,  the Company may
issue and deliver in exchange and substitution for and upon  cancellation of the
mutilated  Warrant  certificate,  or in lieu of and substitution for the Warrant
certificate lost, stolen or destroyed, a new Warrant certificate representing an
equal  aggregate  number  of  Warrants,   but  only  upon  receipt  of  evidence
satisfactory  to the Company of such loss,  theft or destruction of such Warrant
certificate and reasonable  indemnity,  if requested,  also  satisfactory to it.
Applicants for such substitute Warrant  certificates shall also comply with such
other reasonable  conditions and pay such reasonable  charges as the Company may
prescribe.

Section 7. Reservation of Common Stock.

     (a) There  have been  reserved,  and the  Company  shall at all times  keep
reserved, out of its authorized and unissued shares of Common Stock, a number of
shares  sufficient  to  provide  for the  exercise  of the  rights  of  purchase
represented by the Warrants then outstanding or issuable upon exercise,  and the
transfer agent for the Common Stock and every subsequent  transfer agent for any
shares of the Company's  capital stock  issuable upon the exercise of any of the
rights of purchase aforesaid are hereby  irrevocably  authorized and directed at
all times to reserve such number of authorized  and unissued  shares as shall be
requisite  for such purpose.  The Company will keep a copy of this  Agreement on
file with the  transfer  agent for the Common  Stock and with  every  subsequent
transfer  agent for any shares of the Company's  capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants.

     (b) The  Company  will  supply  such  transfer  agent  with  duly  executed
certificates  and will provide or otherwise  make available any cash as provided
in Section 9 of this  Agreement.  All Warrant  certificates  surrendered  in the
exercise  thereby  evidenced  shall  be  canceled  by  the  Company.  After  the
expiration  date of the Warrants,  no shares of Common Stock shall be subject to
reservation in respect of such Warrants.

Section 8. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities  purchasable upon the exercise of the Warrants and
the  Warrant  Price  shall be subject to  adjustment  from time to time upon the
happening of certain events, as follows:

     8.1  Adjustments.  The number of shares of Common Stock or other securities
          purchasable  upon the exercise of each  Warrant and the Warrant  Price
          shall be subject to adjustment as follows:

               (a) If the Company (i) pays a dividend in Common Stock or makes a
          distribution  in Common Stock or shares  convertible  in Common Stock,
          (ii) subdivides its outstanding  Common Stock into a greater number of
          shares,  (iii)  combines its  outstanding  Common Stock into a smaller
          number of shares,  or (iv) issues, by  reclassification  of its Common
          Stock,  other  securities of the Company,  then the number and kind of
          shares of Common Stock or other  securities  purchasable upon exercise
          of a Warrant  immediately  prior  thereto will be adjusted so that the
          holder of a Warrant will be entitled to receive the kind and number of
          shares of Common  Stock or other  securities  of the Company that such
          holder  would  have  owned and would  have been  entitled  to  receive
          immediately  after the happening of any of the events described above,
          had the Warrant been exercised  immediately  prior to the happening of
          such event or any record date with  respect  thereto.  Any  adjustment
          made  pursuant  to  this  subsection   8.1(a)  will  become  effective
          immediately  after the effective date of such event retroactive to the
          record date, if any, for such event.

               (b) If the Company  issues or sell any shares of Common  Stock or
          any  rights  or  warrants  to  purchase  shares  of  Common  Stock  or
          securities  convertible  into  Common  Stock at a price  per  share of
          Common  Stock  that is less  than 90% of the  Daily  Market  Price (as
          defined in Section 10(e) hereof) of the Common Stock as of the trading
          day  immediately  preceding  (or the  same  day if  trading  has  been
          completed  for such day) of such  issuance or sale,  the Warrant Price
          shall be reduced by  multiplying  the  Warrant  Price in effect on the
          date of  issuance  of such  shares,  warrants,  rights or  convertible
          securities by a fraction, the denominator of which shall be the number
          of  shares  of  Common  Stock  (excluding  treasury  shares,  if  any)
          outstanding on the date of issuance of such shares,  rights,  warrants
          or  convertible  securities  plus the number of  additional  shares of
          Common  Stock  offered  for  subscription  or  purchase or issuable on
          conversion,  and the  numerator of which shall be the number of shares
          of Common Stock (excluding treasury shares, if any) outstanding on the
          date of  issuance of such  shares,  rights,  warrants  or  convertible
          securities  plus the  number of shares  which the  aggregate  offering
          price of the total  number of shares so offered,  issued or  issuable,
          or,   with   respect  to   convertible   securities,   the   aggregate
          consideration  received  or to be  received  by the  Company  for  the
          convertible  securities,  would  purchase at such Daily Market  Price.
          Such  adjustment  shall be made  successively  whenever  such  shares,
          rights, warrants or convertible securities are issued and shall become
          effective  immediately after the date of such issuance.  However, upon
          the  expiration  of any right or warrant to purchase  Common  Stock or
          conversion  right,  the issuance of which resulted in an adjustment in
          the Warrant  Price,  if any such right,  warrant or  conversion  right
          shall  expire and shall not have been  exercised,  the  Warrant  Price
          shall  immediately  upon such  expiration be recomputed  and effective
          immediately  upon such  expiration  be increased to the price which it
          would have been (but  reflecting any other  adjustments in the Warrant
          Price made pursuant to the provisions of this Section 8.1(b) after the
          issuance of such rights,  warrants or convertible  securities) had the
          adjustment  of the Warrant  Price upon the  issuance  of such  rights,
          warrants or convertible  securities been made on the basis of offering
          for  subscription  or  purchase  only that  number of shares of Common
          Stock actually  purchased upon the exercise of such rights or warrants
          actually  exercised or the  conversion of the  convertible  securities
          actually converted.

               (c) If the Company  distributes  to all  holders of Common  Stock
          evidences of its  indebtedness or assets  (excluding cash dividends or
          cash distributions paid out of earned surplus and made in the ordinary
          course of  business)  or  rights  to  subscribe  for or  purchase  any
          security, then in each such case the Warrant Price shall be determined
          by  multiplying  the Warrant  Price in effect prior to the record date
          fixed for  determination  of  stockholders  entitled  to receive  such
          distribution  by a  fraction,  the  denominator  of which shall be the
          Daily Market Price of Common  Stock  determined  as of the record date
          mentioned above, and the numerator of which shall be such Daily Market
          Price of the  Common  Stock,  less  the then  fair  market  value  (as
          determined  by the Board of  Directors  of the  Company in good faith,
          whose  determination  shall  be  conclusive  if made  in  good  faith;
          provided,  however,  that in the event of a distribution  or series of
          related distributions  exceeding 10% of the net assets of the Company,
          then  such fair  market  value  shall be  determined  by a  nationally
          recognized  or  major  regional  investment  banking  firm  or firm of
          independent certified public accountants of recognized standing (which
          may be the firm that  regularly  examines the financial  statements of
          the  Company)  selected in good faith by the Board of Directors of the
          Company, and in either case shall be described in a statement provided
          to  Warrant  holders)  of  the  portion  of  assets  or  evidences  of
          indebtedness so distributed or such subscription  rights applicable to
          one share of Common Stock.  Such adjustment shall be made successively
          whenever  any such  distribution  is made and shall  become  effective
          immediately  after the record date mentioned  above. In the event such
          distribution is not made, the Warrant Price shall again be adjusted to
          the number that was in effect immediately prior to such record date.

               (d)  No   adjustment  in  the  number  of  shares  or  securities
          purchasable  pursuant to the  Warrants  shall be required  unless such
          adjustment  would  require an  increase  or  decrease  of at least one
          percent in the number of shares or securities  then  purchasable  upon
          the exercise of the Warrants,  provided,  however, that any adjustment
          which by reason of this  subsection  8.1(d) is not required to be made
          shall be  carried  forward  and taken into  account in any  subsequent
          adjustments.

               (e) The Company  may, at its option,  at any time during the term
          of the Warrant,  reduce the then current  Warrant Price to any amount,
          consistent with  applicable  law,  deemed  appropriate by the Board of
          Directors of the Company.

               (f) Whenever the number of shares or securities  purchasable upon
          the  exercise of the  Warrants is adjusted,  as herein  provided,  the
          Warrant Price for shares  payable upon exercise of the Warrants  shall
          be adjusted by  multiplying  such Warrant Price  immediately  prior to
          such  adjustment  by a fraction,  the  numerator of which shall be the
          number  of  shares  purchasable  upon  the  exercise  of  the  Warrant
          immediately  prior to such  adjustment,  and the  denominator of which
          shall be the number of shares so purchasable immediately thereafter.

               (g) Whenever the number of shares or securities  purchasable upon
          the exercise of the Warrants  and/or the Warrant  Price is adjusted as
          herein provided, the Company shall cause to be promptly mailed to each
          registered  holder of a Warrant by first class mail,  postage prepaid,
          notice of such  adjustment  and a certificate  of the chief  financial
          officer  of  the  Company  setting  forth  the  number  of  shares  or
          securities  purchasable  upon the exercise of the Warrants  after such
          adjustment,  the Warrant Price as adjusted,  a brief  statement of the
          facts  requiring  such  adjustment  and the  computation by which such
          adjustment was made.

               (h) For the  purpose of this  subsection  8.1,  the term  "Common
          Stock"  shall  mean (i) the class of stock  designated  as the  voting
          Common Stock of the Company at the date of this Agreement, or (ii) any
          other class of stock or securities  resulting from successive  changes
          or reclassifications of such Common Stock consisting solely of changes
          in par value,  or from par value to no par value, or from no par value
          to par  value.  In the  event  that at any  time,  as a  result  of an
          adjustment made pursuant to this Section 8, a registered  holder shall
          become  entitled to purchase any  securities of the Company other than
          shares of Common Stock, thereafter the number of such other securities
          so  purchasable  upon  exercise  of the  Warrants  shall be subject to
          adjustment  from  time to time in a  manner  and on  terms  as  nearly
          equivalent as practicable to the provisions with respect to the shares
          contained in this Section 8.

     8.2  No Adjustment for Dividends.  Except as provided in subsection 8.1, no
          adjustment in respect of any dividends or distributions  shall be made
          during the term of the Warrants or upon the exercise of the Warrants.

     8.3  No Adjustment in Certain Cases. No adjustments are required to be made
          pursuant to Section 8 hereof in connection with the issuance of shares
          of Common Stock or the Warrants  (or the  underlying  shares of Common
          Stock) in the transactions contemplated by this Agreement.

     8.4  Preservation of Purchase Rights upon Reclassification,  Consolidation,
          etc. In case of any consolidation of the Company with or merger of the
          Company into another  corporation or in case of any sale or conveyance
          to another  corporation  of the  property,  assets or  business of the
          Company as an entirety or substantially as an entirety, the Company or
          such  successor or purchasing  corporation,  as the case may be, shall
          execute an  agreement  with the  registered  holders  of the  Warrants
          providing such holders with the right thereafter,  upon payment of the
          Warrant Price in effect immediately prior to such action, to purchase,
          upon exercise of each Warrant, the kind and amount of shares and other
          securities  and  property  which it  would  have  owned  or have  been
          entitled to receive after the happening of such consolidation, merger,
          sale or conveyance had each Warrant been exercised  immediately  prior
          to such action. Any such agreements referred to in this subsection 8.4
          shall provide for adjustments,  which shall be as nearly equivalent as
          may be  practicable  to the  adjustments  provided  for in  Section  8
          hereof. The provisions of this subsection 8.4 shall similarly apply to
          successive consolidations, mergers, sales, or conveyances.

     8.5  Par Value of Shares of Common  Stock.  Before  taking any action  that
          would cause an  adjustment  reducing the Warrant  Price below the then
          par value of the Common Stock  issuable upon exercise of the Warrants,
          the Company will take any  corporate  action which may, in the opinion
          of its counsel, be necessary in order that the Company may validly and
          legally  issue  fully  paid  and  nonassessable  Common  Stock at such
          adjusted Warrant Price.

     8.6  Independent  Public  Accountants.  The  Company  may but  shall not be
          required  to  retain  a firm  of  independent  public  accountants  of
          recognized  regional or national  standing (which may be any such firm
          regularly  employed by the Company) to make any  computation  required
          under this Section 8, and a  certificate  signed by such firm shall be
          conclusive  evidence of the correctness of any computation  made under
          this  Section 8 and the Company  shall cause to be promptly  mailed to
          each  registered  holder of a Warrant  by first  class  mail,  postage
          prepaid, a copy of such certificate.

     8.7  Statement on Warrant Certificates.  Irrespective of any adjustments in
          the Warrant Price or the number of  securities  issuable upon exercise
          of Warrants, Warrant certificates theretofore or thereafter issued may
          continue  to express  the same price and number of  securities  as are
          stated in the similar Warrant certificates initially issuable pursuant
          to this Agreement.  However,  the Company may, at any time in its sole
          discretion (which shall be conclusive), make any change in the form of
          Warrant  certificate  that it may deem  appropriate  and that does not
          affect the substance thereof;  and any Warrant certificate  thereafter
          issued,  whether upon  registration of, transfer of, or in exchange or
          substitution for, an outstanding  Warrant  certificate,  may be in the
          form so changed.

     8.8  Notices  to  Holders  of  Warrants.  If,  at  any  time  prior  to the
          expiration of a Warrant and prior to its exercise,  any one or more of
          the following events shall occur:

               (a) any action  that  would  require an  adjustment  pursuant  to
          subsection 8.1 or 8.4 hereof; or

               (b) a  dissolution,  liquidation  or  winding  up of the  Company
          (other than in connection with a consolidation,  merger or sale of its
          property,  assets and business as an entirety or  substantially  as an
          entirety)  shall be  proposed;  then the  Company  must give notice in
          writing of such event to the  registered  holders of the Warrants,  as
          provided  in  Section  14  hereof,  at least 20  days,  to the  extent
          practicable,  prior to the date fixed as a record  date or the date of
          closing the transfer books for the  determination  of the stockholders
          entitled to any relevant dividend,  distribution,  subscription rights
          or other rights or for the  determination of stockholders  entitled to
          vote on such  proposed  dissolution,  liquidation  or winding up. Such
          notice  must  specify  such  record  date or the date of  closing  the
          transfer  books,  as the case may be.  Failure to mail or receive such
          notice or any  defect  therein  will not affect  the  validity  of any
          action taken with respect thereto.

Section 9. Fractional Interests. The Company is not required to issue fractional
shares of Common Stock on the exercise of a Warrant.  If any fraction of a share
of Common Stock would,  except for the provisions of this Section 9, be issuable
on the exercise of a Warrant (or specified portion thereof), the Company will in
lieu  thereof  pay an  amount in cash  equal to the then  Current  Market  Price
multiplied by such fraction.  For purposes of this Agreement,  the term "Current
Market  Price"  means (i) if the  Common  Stock is listed for  quotation  on the
Nasdaq National Market or the Nasdaq SmallCap Market or on a national securities
exchange,  the average for the 10 consecutive trading days immediately preceding
the date in question of the daily per share  closing  prices of the Common Stock
as quoted by the Nasdaq  National Market or the Nasdaq SmallCap Market or on the
principal stock exchange on which it is listed, as the case may be, whichever is
the higher, or (ii) if the Common Stock is traded in the over-the-counter market
and is not listed for  quotation  on the  Nasdaq  National  Market or the Nasdaq
SmallCap Market nor on any national securities exchange,  the average of the per
share closing bid prices of the Common Stock on the 10 consecutive  trading days
immediately  preceding  the  date in  question,  as  reported  by  Nasdaq  or an
equivalent  generally accepted reporting service.  The closing price referred to
in clause (i) above  shall be the last  reported  sale price or, in case no such
reported  sale takes place on such day, the average of the reported  closing bid
and asked prices,  in either case as quoted by the Nasdaq National Market or the
Nasdaq  SmallCap  Market or on the  national  securities  exchange  on which the
Common  Stock is then listed.  For purposes of clause (ii) above,  if trading in
the Common  Stock is not reported by Nasdaq,  the bid price  referred to in said
clause shall be the lowest bid price as reported on the OTC Bulletin Board or in
the "pink sheets" published by National Quotation Bureau, Incorporated.

Section 10. Redemption.

     (a) The then  outstanding  Warrants may be  redeemed,  at the option of the
Company,  at $.10 per share of Common Stock  purchasable  upon  exercise of such
Warrants,  at any time after [July 25,  2006] if the average  Daily Market Price
per share of the Common  Stock for a period of at least 20  consecutive  trading
days  ending  not more than  fifteen  (15) days  prior to the date of the notice
given  pursuant to Section  10(b) hereof has equaled or exceeded  [$12.00],  and
prior to expiration of the Warrants.  The Daily Market Price of the Common Stock
will be determined by the Company in the manner set forth in Section 10(e) as of
the end of each trading day (or, if no trading in the Common  Stock  occurred on
such  day,  as of the end of the  immediately  preceding  trading  day in  which
trading  occurred).  All  outstanding  Warrants  must  be  redeemed  if any  are
redeemed,  and any right to exercise an outstanding  Warrant shall  terminate at
1:30 p.m. (Phoenix, Arizona time) on the date fixed for redemption.  Trading day
means a day in which  trading of  securities  occurred  on the  Nasdaq  National
Market.

     (b) The  Company  may  exercise  its right to redeem the  Warrants  only by
giving the notice set forth in the following sentence.  If the Company exercises
its right to  redeem,  it shall  give  notice to the  registered  holders of the
outstanding  Warrants  by  mailing  to  such  registered  holders  a  notice  of
redemption,  first  class,  postage  prepaid,  at their  addresses as they shall
appear on the records of the Company.  Any notice mailed in the manner  provided
herein will be conclusively  presumed to have been duly given whether or not the
registered holder actually receives such notice.

     (c) The notice of redemption  must specify the redemption  price,  the date
fixed for redemption  (which must be at least 30 days after the date such notice
is mailed),  the place where the Warrant  certificates must be delivered and the
redemption price paid, and that the right to exercise the Warrant will terminate
at 1:30 P.M. (Phoenix, Arizona time) on the date fixed for redemption.

     (d) Appropriate adjustment shall be made to the redemption price and to the
minimum Daily Market Price prerequisite to redemption set forth in Section 10(a)
hereof,  in each case on the same basis as  provided  in  Section 8 hereof  with
respect to adjustment of the Warrant Price.

     (e) For purposes of this Agreement, the term "Daily Market Price" means (i)
if the  Common  Stock is  quoted on the  Nasdaq  National  Market or the  Nasdaq
SmallCap  Market  or on a  national  securities  exchange,  the  daily per share
closing price of the Common Stock as quoted on the Nasdaq National Market or the
Nasdaq  SmallCap Market or on the principal stock exchange on which it is listed
on the trading day in question,  as the case may be, whichever is the higher, or
(ii) if the Common Stock is traded in the over-the-counter market and not quoted
on the Nasdaq  National Market or the Nasdaq SmallCap Market nor on any national
securities  exchange,  the closing bid price of the Common  Stock on the trading
day in  question,  as reported  by Nasdaq or an  equivalent  generally  accepted
reporting  service.  The closing price  referred to in clause (i) above shall be
the last  reported  sale price or, in case no such  reported sale takes place on
such day, the average of the reported  closing bid and asked  prices,  in either
case on the  Nasdaq  National  Market or the  Nasdaq  SmallCap  Market or on the
national  securities  exchange  on which the Common  Stock is then  listed.  For
purposes of clause (ii) above, if trading in the Common Stock is not reported by
Nasdaq,  the bid price  referred to in said clause shall be the lowest bid price
as quoted on the OTC Bulletin  Board or reported in the "pink sheets"  published
by National Quotation Bureau, Incorporated.

     (f) On the redemption  date, each Warrant will be  automatically  converted
into the right to receive the  redemption  price and the Company  will no longer
honor any purported exercise of a Warrant. On or before the redemption date, the
Company will deposit  sufficient  funds for the purpose of redeeming  all of the
outstanding unexercised Warrants in an interest-bearing,  segregated account for
payment  to holders of  Warrants  upon  surrender  of  Warrant  Certificates  in
exchange for the redemption  price therefor.  Funds remaining in such account on
the date three years from the redemption date will be returned to the Company.

Section 11. Rights as Warrantholders.  Nothing contained in this Agreement or in
any of the Warrants shall be construed as conferring  upon the holders  thereof,
as such, any of the rights of  stockholders of the Company,  including,  without
limitation,  the right to receive dividends or other distributions,  to exercise
any  preemptive  rights,  to  vote  or  to  consent  or  to  receive  notice  as
stockholders  in respect of the  meetings  of  stockholders  or the  election of
directors of the Company or any other matter.

Section 12. Restrictions on Transfer; Registration Rights.

     (a) Each holder of a Warrant agrees that prior to making any disposition or
transfer  of the  Warrants or shares  issuable  upon  exercise  of the  Warrants
("Shares"), unless a registration statement under the Securities Act of 1933, as
amended  (the  "Securities  Act"),  is in effect  with  regard  thereto  and the
disposition may be effected in accordance  therewith and with  applicable  state
securities laws, the holder shall give written notice to the Company  describing
briefly the manner in which any such proposed  disposition  or transfer is to be
made; and no such disposition shall be made except pursuant to an exemption from
the  registration  requirements of all applicable  federal and state  securities
laws.

     (b) Each  certificate  evidencing  the  Warrants  shall  bear a  legend  in
substantially  the  following  form,  and  each  certificate  evidencing  Shares
issuable upon exercise of the Warrants  shall bear such a legend until such time
as such Shares have been sold pursuant to a registration  statement contemplated
in subsection (c) or (d) below or unless, in the opinion of legal counsel to the
Company,  such legend is not required in order to establish  compliance with any
provisions of applicable security laws:

          THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
          REGISTERED  UNDER THE SECURITIES  ACT OF 1933 OR ANY STATE  SECURITIES
          LAWS  AND  MAY  NOT BE  SOLD,  EXCHANGED,  HYPOTHECATED  OR  OTHERWISE
          TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE  WITH SECTION 12 OF THE
          WARRANT  AGREEMENT  DATED  AS OF JULY  25,  2001,  AS THE  SAME MAY BE
          AMENDED FROM TIME TO TIME.

     (c)  Subject to the next  sentence  below,  beginning  on the date that the
Warrants are  exercised,  if the Company  proposes to file with the Commission a
registration  statement with respect to equity  securities of the Company (other
than as to  securities  issued  pursuant to an employee  benefit plan or as to a
transaction  subject to Rule 145  promulgated  under the  Securities  Act or for
which a Form S-4  Registration  Statement  could be used), it shall, at least 30
days prior to such filing,  give written  notice of such proposed  filing to the
holders of Warrants  and Shares which bear a legend as  contemplated  in Section
12(b) above and which shall not have  previously been included in a registration
statement filed under this Section 12(c) or Section 12(d),  at their  respective
addresses as they appear on the records of the Company or the Company, and shall
offer to include and shall  include,  subject to the  provisions of this Section
12(c),  in such filing any proposed  disposition  of such Shares upon receipt by
the  Company,  not less than 10 days prior to the  proposed  filing  date,  of a
request  therefor  setting  forth  the  facts  with  respect  to  such  proposed
disposition and all other information with respect to the holders of such Shares
requested to be included in such filing as shall be  reasonably  necessary to be
included in such Registration  Statement.  Notwithstanding the above, after such
time as the holders  shall have been given two  opportunities  to include  their
Shares in a Registration  Statement of the Company  pursuant to the  immediately
preceding sentence,  and all securities of holders who shall have requested such
inclusion in accordance  herewith and who have not withdrawn  such request prior
to the  filing  of such  Registration  Statement  have been  included  in such a
Registration  Statement  which shall have become  effective and such  securities
shall have been  effectively  registered  under the Securities  Act, the Company
will have no further obligation to such holders under this Section 12(c) and the
Shares of such holders that have not been included  previously in a Registration
Statement  under this  Section  12(c) will have no further  registration  rights
under  Section  12(c) of this  Agreement.  In the  event  that (i) the  managing
underwriter  for any such  offering  advises  the  Company in  writing  that the
inclusion of such Shares in the offering would be detrimental to the offering or
(ii) in the event that there is no managing  underwriter,  if, in the good faith
judgment of the Board of Directors  of the  Company,  inclusion of the Shares in
the  registration  would be seriously  detrimental  to the Company,  then,  such
Shares shall not be included in the  Registration  Statement,  provided  that no
other shares of the  Company's  Common  Stock are  included in the  registration
pursuant to any other piggyback  registration  rights granted to others.  In the
event that Shares  requested  to be included in an offering  are not included in
accordance with the immediately preceding sentence,  any notice given to holders
of Warrants  and Shares  hereunder  with respect to such  offering  shall not be
counted  against  the  limitation  provided  for in the second  sentence of this
Section 12(c).

     (d) In addition to any  Registration  Statement  pursuant to Section  12(c)
hereof,  after written notice upon exercise (the "Request") by the holders of at
least 50% of the shares of Common  Stock which have been (or may be) issued upon
exercise of the Warrants,  the Company will, as promptly as practicable  (but in
any event  within 60 days),  prepare and file at its own expense a  Registration
Statement with the Commission and appropriate Blue Sky authorities sufficient to
permit  the  public  offering  of the  shares of  Common  Stock  underlying  the
Warrants,  and  will use  reasonable  efforts  at its own  expense  through  its
officers,  directors,  auditors and counsel, in all ways necessary or advisable,
to  cause  such  Registration  Statement  to  become  effective  as  quickly  as
practicable  and to maintain  such  effectiveness  so as to permit resale of the
shares of Common Stock covered by the Request until the earlier of the time that
all such shares of Common Stock has been sold or the expiration of 120 days from
the effective date of the Registration  Statement;  provided,  however, that the
Company shall only be obligated to file one such  Registration  Statement  under
this Section  12(d).  The Company shall not be required to effect a registration
pursuant  to  this  Section  12(d)  if the  Company  shall  furnish  to  holders
requesting  a  registration   statement   pursuant  to  this  Section  12(d),  a
certificate  signed by the Chairman of the Board  stating that in the good faith
judgment  of the  Board of  Directors  of the  Company,  it  would be  seriously
detrimental to the Company and its shareholders for such registration  statement
to be effected at such time,  in which event the Company shall have the right to
defer such filing for a period of not more than  ninety (90) days after  receipt
of the request of the  initiating  holders;  provided that such right to delay a
request  shall be exercised by the Company not more than once in any twelve (12)
month period.

     (e)  All  fees,  disbursements,  and  out-of-pocket  expenses  incurred  in
connection  with the filing of any  Registration  Statement  under Section 12(c)
hereof and in complying  with  applicable  securities and Blue Sky laws shall be
borne by the Company, provided, however, that any expenses of the holders of the
Warrants  or the  Shares,  including  but not  limited  to  attorneys'  fees and
discounts and  commissions,  shall be borne by such holders.  The Company at its
expense  will  supply  the  holders  of the Shares  included  in a  Registration
Statement  with copies of such  Registration  Statement  and the  prospectus  or
offering  circular  included  therein in such  quantities  as may be  reasonably
requested by such holders.

     (f) Each  holder of  Shares  to be  included  in a  Registration  Statement
pursuant to this Section 12 agrees to reasonably  cooperate with the Company and
to provide the  Company on its  request  with all  information  concerning  such
holder and his  Warrants  and Shares that may  reasonably  be  requested  by the
Company in order for the Company to perform its  obligations  under this Section
12.

     (g) The registration  rights provided pursuant to Section 12(c) and Section
12(d) above are subject to any other  registration  rights previously granted by
the Company.

Section 13. Indemnification.

     (a) In the event of the filing of any  Registration  Statement with respect
to the Shares pursuant to Section 12 above,  the Company agrees to indemnify and
hold  harmless  the  holders of such Shares  (for  purposes of this  Section 13,
references  to any holder of Shares  shall  refer only to such  holders who have
agreed to be bound by this  Section  13),  and each  person  who  controls  such
holders  within the meaning of the  Securities  Act and such holders'  officers,
directors,   managers,   members,   partners,   and  principle   equity  holders
(collectively,  "Indemnitees") against all losses, claims, damages, expenses and
liabilities,  joint or several (which shall, for all purposes of this Agreement,
include,  but not be limited to, all costs of defense and  investigation and all
attorneys'  fees and expenses),  to which such  Indemnitees  may become subject,
under the Securities Act or otherwise,  insofar as such losses, claims, damages,
expenses  or  liabilities  (or actions in respect  thereof)  arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained  in  any  such  Registration  Statement,  or any  related  preliminary
prospectus,  final prospectus,  offering circular,  notification or amendment or
supplement  thereto,  or arise out of or are based upon the  omission or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the statements  therein,  in the light of the circumstances in
which they were made, not misleading;  provided,  however, that the Company will
not be liable in any such case to the extent that any such loss, claim,  damage,
expenses,  or  liability  arises out of or is based upon an untrue  statement or
alleged  untrue   statement  or  omission  or  alleged  omission  made  in  such
Registration  Statement,  preliminary  prospectus,  final  prospectus,  offering
circular,  notification or amendment or supplement thereto in reliance upon, and
in conformity  with,  written  information  furnished to the Company by any such
holder  specifically for use in the preparation  thereof and,  provided further,
that the indemnity  agreement provided in this Section 13(a) with respect to any
preliminary  prospectus shall not inure to the benefit of any holder of Warrants
or  Shares  from  whom  the  person  asserting  any  losses,  claims,   damages,
liabilities  or  actions  based  upon any untrue  statement  or  alleged  untrue
statement of material  fact or omission or alleged  omission to state  therein a
material fact purchased Warrants or Shares, if a copy of the prospectus in which
such  untrue  statement  or alleged  untrue  statement  or  omission  or alleged
omission was corrected had not been sent or given to such person within the time
required by the Securities Act and the rules and regulations thereunder,  unless
such  failure  is the  result of  non-compliance  by the  Company  with the last
sentence of Section  12(f)  hereof.  This  indemnity  will be in addition to any
liability which the Company may otherwise have.

     (b) Each holder of a Warrant and each holder of a Share agrees that he will
indemnify  and hold  harmless  the  Company,  each other  person  referred to in
subparts (1), (2) and (3) of Section 11(a) of the  Securities  Act in respect of
the  Registration  Statement,  each officer of the Company,  and each person who
controls  the Company  within the  meaning of the  Securities  Act,  against any
losses,  claims,  damages or liabilities  (which shall, for all purposes of this
Agreement,   include,   but  not  be  limited  to,  all  costs  of  defense  and
investigation  and all  attorneys'  fees)  to  which  the  Company  or any  such
director,  officer or controlling person may become subject under the Securities
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities  (or
actions in respect  thereof) arise out of or are based upon any untrue statement
or  alleged  untrue  statement  of any  material  fact  contained  in  any  such
Registration Statement, or any related preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto, or arise out
of or are  based  upon the  omission  or  alleged  omission  to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein  not  misleading,  but in each case only to the extent  that such untrue
statement or alleged untrue  statement or omission or alleged  omission was made
in  such  Registration  Statement,  preliminary  prospectus,  final  prospectus,
offering  circular,  notification or amendment or supplement thereto in reliance
upon, and in conformity with,  written  information  furnished to the Company by
such holder specifically for use in the preparation thereof. This indemnity will
be in addition to any liability which the holder may otherwise have.

     (c) Promptly after receipt by an indemnified party under this Section 13 of
notice of the  commencement  of any action,  such  indemnified  party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section  13,  notify the  indemnifying  party of the  commencement  thereof.  No
indemnification  provided for in this Section 13 shall be available to any party
who shall fail to give the  notice to the  extent the party to whom such  notice
was not given was materially  prejudiced by the failure to give the notice,  but
the  omission  so  to  notify  the  indemnifying  party  will  not  relieve  the
indemnifying  party  or  parties  from  any  liability  which it may have to any
indemnified  party for contribution  otherwise than as to the particular item as
to which  indemnification  is then being sought solely  pursuant to this Section
13. In case any such action is brought  against any  indemnified  party,  and it
notifies the indemnifying  party of the commencement  thereof,  the indemnifying
party will be entitled to  participate  in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified,  reasonably assume
the defense  thereof,  subject to the provisions  herein stated and after notice
from the  indemnifying  party to such  indemnified  party of its  election so to
assume the defense thereof,  the  indemnifying  party will not be liable to such
indemnified  party  under  this  Section  13 for any  legal  or  other  expenses
subsequently  incurred by such indemnified  party in connection with the defense
thereof other than reasonable  costs of  investigation  unless the  indemnifying
party shall not pursue the action to its final conclusion. The indemnified party
shall  have the right to  employ  separate  counsel  in any such  action  and to
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall not be at the expense of the  indemnifying  party.  No  settlement  of any
action  against an  indemnified  party shall be made  without the consent of the
indemnifying  party,  which shall not be  unreasonably  withheld in light of all
factors of importance to such indemnified party.

Section 14. Notices. Notices or demands authorized by this Agreement to be given
or made by the holder of any Warrant  certificate  to or on the Company shall be
sufficiently given or made if sent by registered or certified mail, addressed as
follows (and shall be deemed given upon receipt):

                Ugly Duckling Corporation
                2525 East Camelback Road
                Suite 1150
                Phoenix, Arizona 85016
                Attention: Jon D. Ehlinger
                           Vice President, General Counsel and Secretary

                With a copy to:
                Steven D. Pidgeon
                Snell & Wilmer L.L.P.
                One Arizona Center
                Phoenix, Arizona 85004-0001

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company to the holder of any Warrant  certificate shall be sufficiently given or
made if sent by first class mail,  postage prepaid,  addressed to such holder at
the address of such holder as shown in the Warrant Register.

Section 15.  Supplements  and  Amendments.  This Agreement may be amended by the
Company  and the holder or holders of a  majority  of the  outstanding  Warrants
representing a majority of the shares of Common Stock  underlying such Warrants;
provided,  however, that without the consent of each holder of a Warrant,  there
can be no increase of the Warrant Price or reduction of the exercise  period for
such holder's Warrants.

Section 16. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the  registered  holders of the Warrants  will
bind and  inure  to the  benefit  of their  respective  successors  and  assigns
hereunder.

Section 17.  Governing  Law. This Agreement will be deemed to be a contract made
under the laws of the State of Arizona and for all purposes will be construed in
accordance with the laws of said State.

Section  18.  Benefits  of this  Agreement.  Nothing in this  Agreement  will be
construed  to give to any person or  corporation  other than the Company and the
registered holders of the Warrants any legal or equitable right, remedy or claim
under this  Agreement.  This Agreement is for the sole and exclusive  benefit of
the Company and the registered holders of the Warrants.

Section 19.  Counterparts.  This Agreement may be executed in  counterparts  and
each of such counterparts will for all purposes be deemed to be an original, and
all such counterparts will together constitute but one and the same instrument.

Section  20.  Descriptive  Headings.  The  descriptive  headings  of the several
Sections of this Agreement are inserted for convenience  only and do not control
or affect the meaning or construction of any of the provisions hereof.


<PAGE>

     IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be duly
executed, as of the day and year first above written.


                                UGLY DUCKLING CORPORATION
                                By:
                                Name:
                                Its:

                                VERDE INVESTMENTS, INC.
                                By:
                                Name: Ernest C. Garcia II
                                Its: President

                                Address for notices:

                                2575 East Camelback Road, Suite 700
                                Phoenix, Arizona 85016
                                Attn: Steven P. Johnson
                                FAX: (602) 778-5025

<PAGE>

                                   EXHIBIT A

Warrant No.  ____

              WARRANT TO PURCHASE 1,500,000 SHARES OF COMMON STOCK

                              VOID AFTER 1:30 P.M.

                    PHOENIX, ARIZONA TIME, ON JULY 25, 2011

                     OR SUCH EARLIER DATE SET FORTH HEREIN


                           UGLY DUCKLING CORPORATION

     This  certifies  that,  for value  received,  VERDE  INVESTMENTS,  INC., an
Arizona corporation, the registered holder hereof or its assigns (the "Holder"),
is entitled,  pursuant to the vesting schedule  detailed below, to purchase from
UGLY DUCKLING  CORPORATION,  a Delaware corporation (the "Company"),  until 1:30
p.m.,  Phoenix,  Arizona time, on July 25, 2011 unless  earlier  redeemed by the
Company,  at the purchase price per share of $_____ (the "Warrant  Price"),  the
aggregate  number of shares of Common Stock,  par value $0.001 per share, of the
Company  set forth  above (the  "Shares").  The  Holder  shall have the right to
purchase 500,000 Shares as of the date hereof,  and an additional 250,000 Shares
for each  successive  three month  period  thereafter,  until the Holder has the
right to  purchase  all of the  Shares.  The number of Shares  purchasable  upon
exercise of the  Warrant  evidenced  hereby and the Warrant  Price is subject to
adjustment from time to time as set forth in the Warrant  Agreement  referred to
below.

     This  Warrant  may be  redeemed,  at the option of the  Company and as more
specifically  provided  in the  Warrant  Agreement,  at $.10 per share of Common
Stock  purchasable upon exercise hereof,  at any time after July 25, 2006 if the
average  Daily Market Price (as defined in Section 10 of the Warrant  Agreement)
per share of the Common Stock for a period of at least  twenty (20)  consecutive
trading  days ending not more than  fifteen days prior to the date of the notice
given  pursuant to Section  10(b)  thereof has equaled or exceeded  $12.00,  and
prior to expiration of this Warrant. The Holder's right to exercise this Warrant
terminates at 1:30 p.m. (Phoenix, Arizona time) on the date fixed for redemption
in the notice of  redemption  delivered  by the Company in  accordance  with the
Warrant Agreement.

     The Warrants  evidenced  hereby may be exercised during the period referred
to above, in whole or in part, by presentation of this Warrant  certificate with
the Purchase Form attached hereto duly executed and guaranteed and  simultaneous
payment of the Warrant Price (as defined in the Warrant Agreement and subject to
adjustment as provided therein) at the principal office of the Company.  Payment
of such price may be made at the  option of the  Holder in cash or by  certified
check or bank draft, all as provided in the Warrant Agreement.

     The  Warrants  evidenced  hereby  are  part of a duly  authorized  issue of
Warrants and are issued under and in accordance with the Warrant Agreement dated
as of July 25, 2001,  between the Company and the Lender, and are subject to the
terms  and  provisions  contained  in  such  Warrant  Agreement,  which  Warrant
Agreement is hereby  incorporated by reference herein and made a part hereof and
is hereby referred to for a description of the rights,  limitations,  duties and
indemnities thereunder of the Company and the Holder of the Warrants, and to all
of which the Holder of this Warrant certificate by acceptance hereof consents. A
copy of the Warrant  Agreement  may be  obtained  for  inspection  by the Holder
hereof upon  written  request to the Company.  Upon any partial  exercise of the
Warrants  evidenced  hereby,  there will be issued to the  Holder a new  Warrant
certificate  in  respect  of the  Shares  evidenced  hereby  that  have not been
exercised.  This  Warrant  certificate  may be  exchanged  at the  office of the
Company by  surrender  of this  Warrant  certificate  properly  endorsed  either
separately or in combination with one or more other Warrants for one or more new
Warrants to purchase  the same  aggregate  number of Shares as  evidenced by the
Warrant or  Warrants  exchanged.  No  fractional  Shares will be issued upon the
exercise of rights to  purchase  hereunder,  but the  Company  will pay the cash
value of any fraction upon the exercise of one or more Warrants,  as provided in
the  Warrant  Agreement.  The  Warrant  Price and the number of shares of Common
Stock  issuable  upon  exercise  of this  Warrant is subject  to  adjustment  as
provided in Section 8 of the Warrant  Agreement.  The Warrant  Agreement  may be
amended  by  the  Company  and  the  holder  or  holders  of a  majority  of the
outstanding  Warrants  representing  a majority  of the  shares of Common  Stock
underlying such Warrants;  provided that without the consent of each holder of a
Warrant certain specified changes cannot be made to such holder's Warrants.

     Neither the Warrants nor the shares of Common Stock underlying the Warrants
may be sold,  assigned,  or otherwise  transferred except in accordance with the
provisions  of the Warrant  Agreement.  The Holder  hereof may be treated by the
Company and all other  persons  dealing  with this  Warrant  certificate  as the
absolute  owner hereof for all  purposes and as the person  entitled to exercise
the rights represented hereby, any notice to the contrary  notwithstanding,  and
until any  transfer is entered on such  books,  the Company may treat the Holder
hereof as the owner for all  purposes.  Notices  and  demands to be given to the
Company must be given by certified or registered mail at the addresses  provided
in the Warrant Agreement.

     All terms used in the Warrant  Certificate  that are defined in the Warrant
Agreement  shall  have the  respective  meanings  ascribed  to such terms in the
Warrant Agreement.

Dated:   July 25, 2001          UGLY DUCKLING CORPORATION

                                By:
                                Jon D. Ehlinger
                                Vice President, General Counsel and Secretary

<PAGE>

                           UGLY DUCKLING CORPORATION
                                 PURCHASE FORM

                                Mailing Address:
                           UGLY DUCKLING CORPORATION
                            2525 East Camelback Road
                                   Suite 1150
                             Phoenix, Arizona 85016

     The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant  certificate for, and to purchase  thereunder,
_____________Shares  of Common Stock  provided for  therein,  and requests  that
certificates for such Shares be issued in the name of:

(Please Print or Type Name, Address and Social Security Number)

and that such certificates be delivered to  ____________________________________
whose address is _______________________________________________________________
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant  certificate for the balance of the Shares  purchasable under
the within  Warrant  certificate  be registered  in the name of the  undersigned
Holder or his or her Assignee as below  indicated  and  delivered to the address
stated below.

                                                           Dated:_______________

Name of Holder or Assignee:

(Please Print)

Address: __________________________

Signature:

___________________________________
Note: The above  signature must  correspond with the name as it appears upon the
face of the within Warrant  certificate in every particular,  without alteration
or enlargement or any change whatever, unless these Warrants have been assigned.

Signature Guaranteed:

___________________________________
THE  SIGNATURE(S)  SHOULD BE  GUARANTEED  BY AN ELIGIBLE  GUARANTOR  INSTITUTION
(Banks,  Stock Brokers,  Savings and Loan  Association,  and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED  SIGNATURE  GUARANTEE  MEDALLION  PROGRAM  PURSUANT TO
S.E.C. RULE 17Ad-15.

<PAGE>

                                   ASSIGNMENT

                (To be signed only upon assignment of Warrants)

          FOR  VALUE  RECEIVED,   the  undersigned  hereby  sells,  assigns  and
     transfers unto

(Name  and   Address  of   Assignee   Must  Be  Printed  or   Typewritten)

_______________   Warrants,   hereby  irrevocably  constituting  and  appointing
________________ Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.

Dated:  ______________________


                    Signature of Registered Holder

                    Note:The signature on this  assignment  must correspond with
                         the name as it  appears  upon  the  face of the  within
                         Warrant certificate in every particular manner, without
                         alteration or enlargement or any change whatever.

Signature Guaranteed:

_____________________________
THE  SIGNATURE(S)  SHOULD BE  GUARANTEED  BY AN ELIGIBLE  GUARANTOR  INSTITUTION
(Banks,  Stock Brokers,  Savings and Loan  Association,  and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED  SIGNATURE  GUARANTEE  MEDALLION  PROGRAM  PURSUANT TO
S.E.C. RULE 17Ad-15.