March 20, 2002



KZH Soleil - 2 LLC c/o The Chase Manhattan Bank 140 East 45th Street - 11th
Floor New York, NY 10017

Galaxy CLO 1999-1, Ltd.
c/o Chase Bank of Texas, National Association
600 Travis Street - 48th Floor, 48-CTH-304
Houston, TX  77002

Sun America Life Insurance Company
1 SunAmerica Center - 34th Floor
Century City
Los Angeles, CA  90067-6002


RE:  Ugly Duckling Corporation Senior Secured Loan Agreement Dated as of January
     11, 2001


Dear Sirs:

With this letter we are requesting a waiver of the following:

     o    Consolidated  EBITDA to Consolidated  Interest Expense ratio contained
          in Section 6.13 for January 2002,
     o    Consolidated  Senior Debt to Consolidated Total  Capitalization  ratio
          contained in Section 6.14 for February 2002 and March 2002, and
     o    Event of  Default  in  Section  8.1 (j),  triggered  by our  hitting a
          termination  event  under  our Bond  Insurance  Policy,  of the  above
          referenced loan agreement for December 2001 and January 2002.

In addition,  we are requesting a waiver for the periods  indicated below and an
amendment of the Senior  Secured Loan  Agreement  with respect to the  following
covenants and we have attached a form of Amendment for your review and execution
(if acceptable):
<PAGE>

     o    Minimum  Capital Base covenant  contained in Section 6.16 for December
          2001, January 2002 and February 2002 and
     o    Minimum Other Interest  Coverage  ratio  contained in Section 6.17 for
          December 2001.

We are in compliance  with all other  covenants of the agreement for the periods
mentioned above.

As we shared with you in recent  months,  the reason for the  shortfall in these
covenants is due to a number of changes we are making in the business to improve
long term portfolio performance. These changes include:

     1.   Enhancing  underwriting  criteria through the implementation of credit
          scoring and increasing down payment requirements,  resulting in slower
          sales, a smaller  portfolio than  forecasted and lower interest income
          from the smaller portfolio.

     2.   The increase in loan loss reserves on the balance sheet resulting from
          higher than expected  losses from older  portfolios and a smaller base
          of originations in the quarter, as previously discussed.

In addition, we took a one-time charge to earnings for a restructuring/reduction
in staff and privatization  expenses.  Combined,  these charges resulted in more
than $5 million in charges for the year. We expect these  initiatives to produce
annualized savings in excess of $5 million.

With respect to the  termination  events on the Bond  Insurance  Policy,  we hit
three  termination  charge-off  triggers  on  trusts  2000B,  2000C and 2001A in
December and one termination delinquency trigger on trust 1999C in January. On a
cumulative  charge-off  curve,  these  trusts  are in  line  with  prior  period
originations at the same time of year, however the impact of the recession,  the
events of 9/11 and the poor auction recovery market at year-end caused us to hit
higher  single  month  levels than we have in the past.  All of these trusts are
currently below the termination trigger levels.

In light of these  changes  and the  impact to our  profitability  in 2001,  the
"B-piece"  contracts securing your loan continue to perform at consistently high
levels.  Cash  generated  from these loans  through 2001 was  approximately  $73
million, which is approximately $13 million greater than 2000. Additionally,  at
the end of February,  you have $40.5  million in over  collateralization  in the
transaction  as well as $5.0 million in Cash  Collateral  and the residual  cash
flow was $3.4 million for the month.

We have also recently extended the warehouse facility with Greenwich Capital for
an additional 364 days. The new facility has a maximum borrowing of $120 million
for the month of March 2002 and then $100  million for the term of the loan.  We
have also  negotiated a slightly  better advance rate. All of the other material
terms and conditions are  essentially  the same.  This letter also requests your
consent to this extension of the warehouse facility.


<PAGE>



Thank you for your time and  consideration.  I have  provided  an area below for
your  signature  authorizing  the waiver and  consent.  Please  call me with any
further questions at 602-852-6635.


Sincerely,



Jon Ehlinger
VP/Secretary/General Counsel
Ugly Duckling Corporation





<PAGE>


The undersigned hereby waive the covenants as requested and consent to the
renewal of the Greenwich Capital warehouse facility:


KZH Soleil - 2 LLC

By:      _________________________
Name:    _________________________
Title:   _________________________

Galaxy CLO 1999-1, Ltd.
By:      SAI Investment Advisors, Inc.
         its Collateral Manager

By:      _________________________
Name:    _________________________
Title:   _________________________

Sun America Life Insurance Company

By:      _________________________
Name:    _________________________
Title:   _________________________