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                                                                     Exhibit 4.2

                            UGLY DUCKLING CORPORATION

                                WARRANT AGREEMENT

         THIS WARRANT AGREEMENT (the "Agreement"), dated as of           , 1998,
is between UGLY DUCKLING CORPORATION, a Delaware corporation (the "Company"),
and HARRIS TRUST COMPANY OF CALIFORNIA, as warrant agent (the "Warrant Agent").

         WHEREAS, on July 11, 1997, First Merchants Acceptance Corporation, a
Delaware corporation ("FMAC"), filed a Chapter 11 petition under the provisions
of Title 11, United States Code, as amended, in the United States District Court
for the District of Delaware and such petition is currently pending as Case No.
97-1500 (JJF) (the "Bankruptcy Case");

         WHEREAS, the Company has entered into a Binding Agreement to Propose
and Support Modified Plan Agreement dated as of December 15, 1997 (the "Letter
Agreement"), by and among the Company, FMAC, and The Official Committee of
Unsecured Creditors of First Merchants Acceptance Corporation, in connection
with the Bankruptcy Case, pursuant to which the parties agreed to jointly
support a plan of reorganization of FMAC in compliance with the Letter Agreement
(the "Plan");

         WHEREAS, pursuant to the Letter Agreement, the Company has agreed to
issue to FMAC warrants (the "Warrants") to purchase up to an aggregate of
325,000 shares of common stock, $.001 par value per share ("Common Stock"), of
the Company, subject to the terms and conditions of this Agreement;

         WHEREAS, FMAC may, but is under no obligation to, redistribute the
Warrants, to its creditors or interest holders in the manner provided for in the
Plan; and

         WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange, exercise, and redemption of the
Warrants.

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

         Section 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints
the Warrant Agent to act as agent of the Company in accordance with the terms
and conditions set forth in this Agreement, and the Warrant Agent hereby accepts
such appointment.
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         Section 2.        ISSUANCE OF WARRANTS AND FORM OF WARRANTS.

         (a) Subject to the terms and conditions hereof, the Company shall issue
to FMAC and FMAC shall accept from the Company, 325,000 Warrants substantially
in the form attached hereto as Exhibit A.

         (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 adjustments provided for in Section 9 hereof, at
any time until 5:00 p.m., New York City time, on        , 200 , unless earlier
redeemed pursuant to Section 11 hereof.

         (c) The Warrant certificates shall be in registered form only. Each
Warrant certificate shall be dated by the Warrant Agent 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 or facsimile
signature of its President or a Vice President, and attested to by the manual or
facsimile 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 before such Warrant Certificate has been
countersigned by the Warrant Agent or 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 3. 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) Each Warrant not exercised by its expiration date shall become
void, and all rights thereunder and all rights in respect thereof under this
Agreement shall cease on such date.

         (b) A Warrant may be exercised by the surrender of the certificate
representing such Warrant to the Company, at the office of the Warrant Agent, or
at the office of a successor to the Warrant Agent, 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 Warrant Agent
for the account of 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
Warrant Agent.





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         (c) The price per share of Common Stock at which each Warrant may be
exercised (the "Warrant Price") shall be Twenty Dollars ($20.00) (subject to
adjustment in accordance with Section 9 hereof).

         (d) Subject to the further provisions of this Section 3 and of Section
6 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 a current Prospectus meeting the requirements of Section 10 of the
Securities Act of 1933 and cash, as provided in Section 10 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.

         (e) 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; provided, however,
that if, at the date of surrender of such Warrants and payment of such Warrant
Price, the transfer books for the Common Stock or other securities purchasable
upon the exercise of such Warrants shall be closed, the certificates for the
securities in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened and until such
date the Company shall be under no duty to deliver any certificate for such
securities and the person to whom such securities are issuable shall not be
deemed to have became a holder of record of such securities. 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 4.        COUNTERSIGNATURE AND REGISTRATION.

         (a) The Warrant Agent 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 Warrant Agent shall issue and register the
Warrants in the name of FMAC in accordance with Section 2 hereof. The Warrant
certificates shall be countersigned manually or by facsimile by the Warrant
Agent (or by any successor to the Warrant Agent then acting as such under this
Agreement) and shall not be valid for any purpose unless so countersigned.
Warrant certificates may be so countersigned, however, by the Warrant Agent and
delivered by the Warrant Agent, notwithstanding




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that the persons whose manual or facsimile signatures appear thereon as proper
officers of the Company shall have ceased to be such officers at the time of
such countersignature or delivery.

         (b) Prior to due presentment for registration of transfer of any
Warrant certificate, the Company and the Warrant Agent 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 or the Warrant Agent), for the purpose of any exercise
thereof, of any distribution or notice to the holder thereof, and for all other
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.

         Section 5.        TRANSFER AND EXCHANGE OF WARRANTS.

         (a) The Warrant Agent 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 Warrant Agent. 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. The
Warrant certificates so canceled shall be delivered by the Warrant Agent to the
Company from time to time upon written request. Notwithstanding the foregoing,
no transfer or exchange may be made except in compliance with applicable
securities laws and Section 14 hereof.

         (b) Warrant certificates may be surrendered to the Warrant Agent,
together with a written request for exchange, and thereupon the Warrant Agent
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 Warrant Agent 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.

         (e) The Warrant Agent is hereby authorized to countersign and to
deliver, in accordance with the terms of this Agreement, the new Warrant
certificates required to be issued pursuant to the provisions hereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with certificates duly executed on behalf of the Company for such purpose.




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         Section 6. 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 neither the Company nor the Warrant
Agent shall 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 7. MUTILATED OR MISSING WARRANTS. In case any of the Warrant
certificates shall be mutilated, lost, stolen or destroyed, the Company may
issue, and the Warrant Agent shall countersign 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 and the
Warrant Agent of such loss, theft or destruction of such Warrant certificate and
reasonable indemnity, if requested, also satisfactory to them. Applicants for
such substitute Warrant certificates shall also comply with such other
reasonable conditions and pay such reasonable charges as the Company or the
Warrant Agent may prescribe.

         Section 8. 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 Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such transfer agent stock certificates required to honor
outstanding Warrants. The Company will supply such transfer agent with duly
executed certificates for such purpose and will itself provide or otherwise make
available any cash as provided in Section 10 of this Agreement. All Warrant
certificates surrendered in the exercise of the rights thereby evidenced shall
be canceled by the Warrant Agent and shall thereafter be delivered to the
Company. Promptly after the expiration date of the Warrants, the Warrant Agent
shall certify to the Company the aggregate number of such




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Warrants which expired unexercised, and after the expiration date of the
Warrants, no shares of Common Stock shall be subject to reservation in respect
of such Warrants.

         Section 9. 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:

         9.1 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, (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 9.1(a) will become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.

                  (b) 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.

                  (c) 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.

                  (d) 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 the Warrant Agent and
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




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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. The Warrant Agent shall be fully protected in
relying on any such certificate and any adjustment therein contained, and shall
not be obligated or responsible for calculating any adjustment nor shall it be
deemed to have knowledge of such an adjustment unless and until it shall have
received such certificate.

                  (e) For the purpose of this subsection 9.1, 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 9, 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 9.

         9.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection 9.1,
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.

         9.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustments are required to be
made pursuant to Section 9 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.

         9.4 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 with the Warrant Agent
an agreement that the registered holders of the Warrants shall have 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 9.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 9 hereof. The provisions of this subsection
9.4 shall similarly apply to successive consolidations, mergers, sales, or
conveyances.





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         9.5 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.

         9.6 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 9, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 9 and the Company shall cause to be
promptly mailed to the Warrant Agent and each registered holder of a Warrant by
first class mail, postage prepaid, a copy of such certificate.

         9.7 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.

         9.8 NO RIGHTS AS STOCKHOLDER; 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 9.1 or 9.4 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 21 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.





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         Section 10. 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 10,
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 11.       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 the average Daily Market Price per share of the
Common Stock for a period of at least 10 consecutive trading days ending not
more than fifteen days prior to the date of the notice given pursuant to Section
11(b) hereof has equaled or exceeded $28.50, 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 11(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) and verified
to the Warrant Agent before the Company may give notice of redemption. All
outstanding Warrants must be redeemed if any are redeemed, and any right to
exercise an outstanding Warrant shall terminate at 5:00 p.m. (New York City
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 Warrant Agent and the
registered holders of the outstanding Warrants by mailing or causing




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the Warrant Agent to mail to such registered holders a notice of redemption,
first class, postage prepaid, at their addresses as they shall appear on the
records of the Warrant Agent. 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 5:00 P.M. (New York City 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
11(a) hereof, in each case on the same basis as provided in Section 9 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 Warrant Agent
will no longer honor any purported exercise of a Warrant. On or before the
redemption date, the Company will deposit with the Warrant Agent sufficient
funds for the purpose of redeeming all of the outstanding unexercised Warrants.
All such funds shall be maintained by the Warrant Agent 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. Any Warrants thereafter submitted to the Warrant Agent for
redemption will be forwarded for redemption by the Warrant Agent to the Company,
and the Warrant Agent will have no further responsibility with respect thereto.





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         Section 12. 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 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS. The
Warrant Agent must account promptly to the Company with respect to Warrants
exercised, and must promptly pay to the Company all monies received by it upon
the exercise of such Warrants, and agrees to keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.

         Section 14.       REGISTRATION OF WARRANTS.

         (a) The Company has registered the Warrants and the Common Stock
issuable upon exercise of the Warrants under the Securities Act of 1933, as
amended (the "Securities Act"). The Company agrees to use its best efforts to
maintain such registration for the period during which the Warrants are
exercisable. If at any time during the continuance of such registration, the
Company shall determine that the applicable registration statement contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, or if for any other reason as
required by law it is necessary to amend or supplement the registration
statement or to discontinue trading in or exercise of the Warrants, the Company
may request the Warrant Agent in writing to discontinue effecting the
registration of transfer and/or exercise of the Warrants, as appropriate, until
such time as the Company subsequently advises the Warrant Agent in writing that
trading and/or exercises, as applicable, of the Warrants may be continued. The
Company will use best efforts to promptly amend or supplement its registration
statement to permit trading and exercise.


         (b) All fees, disbursements, and out-of-pocket expenses incurred in
connection with the filing of any registration statement under Section 14(a)
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 their attorneys' fees,
shall be borne by such holders.

         (c) Until sold by FMAC pursuant to the applicable prospectus included
within the registration statement filed by the Company and in effect from time
to time as contemplated in Section 14(a) above, the certificates evidencing the
Warrants and shares issuable upon exercise of the Warrants will bear a legend in
substantially the following form:

               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 14 OF THE WARRANT AGREEMENT DATED AS OF        , 1998,
               BETWEEN UGLY DUCKLING CORPORATION AND HARRIS TRUST COMPANY OF
               CALIFORNIA, AS WARRANT AGENT, AS THE SAME MAY BE AMENDED FROM
               TIME TO TIME.

         Section 15.       [Intentionally Left Blank]





                                       11
<PAGE>   12
         Section 16. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.

         (a) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 19 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement and any of the Warrant certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
certificates so countersigned; and in case at that time any of the Warrant
certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent, and in
all such cases the Warrants represented by such Warrant certificates shall have
the full force provided in the Warrant certificates and in this Agreement. Any
such successor Warrant Agent shall promptly give notice of its succession as
Warrant Agent to the Company and to the registered holder of each Warrant
certificate.

         (b) If at any time the name of the Warrant Agent is changed and at such
time any of the Warrant certificates have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrant certificates so countersigned; and if at that time any of the
Warrant certificates have not been countersigned, the Warrant Agent may
countersign such Warrant certificates either in its prior name or in its changed
name; and in all such cases the Warrants represented by such Warrant
certificates will have the full force provided in the Warrant certificates and
in this Agreement.

         Section 17. CONCERNING THE WARRANT AGENT. The Company agrees to pay to
the Warrant Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Warrant Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Warrant Agent, and its
officers, agents and directors for, and to hold each of them harmless against,
any loss, liability, or expense incurred without negligence or willful
misconduct on the part of the Warrant Agent, for anything done or omitted by the
Warrant Agent or such indemnified party in connection with the acceptance or
administration of this Agreement or the exercise or performance of its duties
hereunder, including the costs and expenses of defending against any claim of
liability in the premises. The indemnification provided for hereunder shall
survive the expiration of the Warrant, the termination of this Agreement and the
resignation or removal of the Warrant Agent. The costs and expenses of enforcing
this right of indemnification shall also be paid by the Company.





                                       12
<PAGE>   13
         The Warrant Agent may conclusively rely upon and shall be protected by
the Company and shall incur no liability for, or in respect of any action taken,
suffered or omitted by it in connection with, its administration of this
Agreement or the exercise or performance of its duties hereunder in reliance
upon any Warrant certificate or certificate for the Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth herein.

         Notwithstanding anything in this Agreement to the contrary, in no event
shall the Warrant Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Warrant Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action.

         Section 18. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Warrant
Agent, upon the following terms and conditions, by all of which the Company and
the holders of Warrant certificates, by their acceptance thereof, shall be
bound:

         (a) Before the Warrant Agent acts or refrains from acting, the Warrant
Agent may consult with legal counsel (who may be legal counsel for the Company)
and the opinion of such counsel shall be full and complete authorization and
protection to the Warrant Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.

         (b) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or factual
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any person believed in good faith by the
Warrant Agent to be one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.

         (c) The Warrant Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or wilful misconduct.

         (d) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Warrant
certificates (except its countersignature




                                       13
<PAGE>   14
thereof) or be required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only.

         (e) The Warrant Agent is serving as an administrative agent and,
accordingly, shall not be under any responsibility in respect of the validity of
any provision of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant certificate; nor shall
it be responsible for any change in the exercisability of the Warrant (including
the Warrant becoming void) or any adjustment in the terms of the Warrant
(including the manner, method or amount thereof) provided for herein, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of any Warrant evidenced by a
Warrant certificate after actual notice to the Warrant Agent that such change or
adjustment is required); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common stock to be issued pursuant to this Agreement or any Warrant
certificate or as to whether any shares of Common stock will, when issued, be
validly authorized and issued, fully paid and nonassessable.

         (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Warrant Agent for the carrying out or performing by the Warrant Agent of
the provisions of this Agreement.

         (g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed in good faith by the Warrant Agent to be one of the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer, or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in accordance with
instructions of any such officer of for any delay in acting while waiting for
those instructions.

                  Any application by the Warrant Agent for written instructions
from the Company may, at the option of the Warrant Agent, set forth in writing
any action proposed to be taken or omitted by the Warrant Agent under this
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Warrant Agent shall not be liable for any
action taken by, or omission of, the Warrant Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than ten Business Days after the date
any officer of the Company actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Warrant Agent shall have received




                                       14
<PAGE>   15
written instructions in response to such application subject to the proposed
action or omission and/or specifying the action to be taken or omitted.

         (h) Subject to applicable law, the Warrant Agent and any stockholder,
director, officer or employee of the Warrant Agent may buy, sell or deal in any
of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.

         (i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Warrant Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided that reasonable care was exercised in the
selection and continued employment thereof.

         (j) No provision of this Agreement shall require the Warrant Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

         (k) The Warrant Agent shall not be required to take notice or be deemed
to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement) under this Agreement
unless and until the Warrant Agent shall be specifically notified in writing by
the Company of such fact, event or determination.

                  Section 19. CHANGE OF WARRANT AGENT. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving the
Company at least 30 days prior notice in writing, and by mailing notice in
writing to the registered holders at the expense of the Company at their
addresses appearing on the Warrant Register, of such resignation, at least 15
days prior to the date such resignation shall take effect and specifying a date
when such resignation shall take effect. The Warrant Agent may be removed by
like notice to the Warrant Agent from the Company and by like mailing of notice
to the registered holders of the Warrants. If the Warrant Agent resigns or is
removed or otherwise becomes incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company fails to make such appointment
within 30 days after such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Warrant Agent
or by the registered holder of a Warrant (who shall, with such notice, submit
his Warrant certificate for inspection by the Company), then the Warrant Agent
or the registered holder of any Warrant may, at the expense of the Company,
apply to any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent. Pending appointment of a successor to the Warrant Agent,
either by the Company




                                       15
<PAGE>   16
or such a court, the Company shall carry out the duties of the Warrant Agent.
Any successor Warrant Agent, whether appointed by the Company or by such a
court, must be registered and otherwise authorized to serve as a transfer agent
pursuant to the Securities Exchange Act of 1934, as amended. If at any time the
Warrant Agent ceases to be eligible in accordance with the provisions of this
Section 19, it will resign immediately in the manner and with the effect
specified in this Section 19. After acceptance in writing of the appointment,
the successor Warrant Agent will be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent will deliver and transfer to
the successor Warrant Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
this purpose. Upon request of any successor Warrant Agent, the Company will
make, execute, acknowledge and deliver any and all instruments in writing for
more fully and effectually vesting in and confirming to such successor Warrant
Agent all such powers, rights, duties and responsibilities. Failure to file or
mail any notice provided in this Section 19, however, or any defect therein,
will not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor Warrant Agent, as the case may
be.

         Section 20. IDENTITY OF TRANSFER AGENT. Following the appointment of
any transfer agent for the Common Stock or of any subsequent transfer agent for
shares of the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such transfer agent.

         Section 21. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Warrant Agent or 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 (until another address is filed in
writing with the Warrant Agent) as follows (and shall be deemed given upon
receipt):

                           Ugly Duckling Corporation
                           2525 East Camelback Road
                           Suite 1150
                           Phoenix, Arizona 85016
                           Attention:  Steven P. Johnson, Senior 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




                                       16
<PAGE>   17
Notices or demands authorized by this Agreement to be given or made by the
Company or by the holder of any Warrant certificate to or on the Warrant Agent
shall be sent by registered or certified mail, addressed (until another address
is filed in writing with the Company) as follows (and shall be deemed given upon
receipt):

                           Harris Trust Company of California
                           601 South Figueroa
                           49th Floor
                           Los Angeles, CA 90017
                           Attention: Neil Rosso, Corporate Trust

Notices or demands authorized by this Agreement to be given or made by the
Company or the Warrant Agent 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. The Company shall deliver a copy of any notice or demand it delivers
to the holder of any Warrant certificate to the Warrant Agent.

         Section 22. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants, or which shall not adversely
affect the interests of the holders of Warrants (including reducing the Warrant
Price or extending the redemption or expiration date). In any situation in which
this Agreement cannot be amended pursuant to the next sentence above, this
Agreement may be amended by the Company, the Warrant Agent 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, except as otherwise provided in Section
9, there can be no increase of the Warrant Price, reduction of the number of
shares of Common Stock purchasable or reduction of the exercise period for such
holder's Warrants and provided, further, that no such supplement or amendment
may affect the rights or duties of the Warrant Agent under this Agreement
without the written consent of the Warrant Agent. Notwithstanding anything in
this Agreement to the contrary, no supplement or amendment that changes the
rights and duties of the Warrant Agent under this Agreement shall be effective
against the Warrant Agent without the execution of such supplement or amendment
by the Warrant Agent.

         Section 23. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company, or the Warrant Agent or the
registered holders of the Warrants will bind and inure to the benefit of their
respective successors and assigns hereunder.





                                       17
<PAGE>   18
         Section 24. 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, except as to Sections
17, 18 and 22, which shall be governed by and construed in accordance with the
laws of the State of Illinois. Each holder of a Warrant by its acceptance
thereof agrees to submit to the jurisdiction of a court of competent
jurisdiction in the State of Arizona, but to the State of Illinois as to
Sections 17, 18 and 22, for the purpose of resolving any disputes arising with
respect to the rights and obligations of the Warrant Agent.

         Section 25. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement will
be construed to give to any person or corporation other than the Company, the
Warrant Agent 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, the Warrant Agent and the registered holders
of the Warrants.

         Section 26. 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 27. 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.

         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:________________________


                                 HARRIS TRUST COMPANY
                                 OF CALIFORNIA, as Warrant Agent

                                 By:_________________________
                                 Name:_______________________

                                 Its:________________________





                                       18
<PAGE>   19
Warrant No.  ____

                                    EXHIBIT A

               WARRANT TO PURCHASE ________ SHARES OF COMMON STOCK

                              VOID AFTER 5:00 P.M.,
                    NEW YORK CITY TIME, ON _______ __, 200_

                            UGLY DUCKLING CORPORATION

         This certifies that, for value received ________________________, the
registered holder hereof or assigns (the "Holder"), is entitled to purchase from
UGLY DUCKLING CORPORATION, a Delaware corporation (the "Company"), at any time
before 5:00 p.m., New York City time, on _______ __, 200_, at the purchase price
per share of $20 (the "Warrant Price"), the number of shares of Common Stock,
par value $0.001 per share, of the Company set forth above (the "Shares"). The
number of shares of Common Stock 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 the average Daily
Market Price (as defined in Section 11 of the Warrant Agreement) per share of
the Common Stock for a period of at least 10 consecutive trading days ending not
more than fifteen days prior to the date of the notice given pursuant to Section
11(b) thereof has equaled or exceeded $28.50, and prior to expiration of this
Warrant. The Holder's right to exercise this Warrant terminates at 5:00 p.m.
(New York City 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 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 in Los Angeles, California, of Harris Trust Company of
California (the "Warrant Agent"). 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 _____ __, 1998, between the Company and the Warrant Agent, and are subject
to the terms and provisions contained in such




                                       19
<PAGE>   20
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
Warrant Agent.

         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 Warrant Agent 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 9
of the Warrant Agreement. The Warrant Agreement may be amended by 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 and no amendment may affect the rights and duties of the
Warrant Agent without the consent of the Warrant Agent. Pursuant to the Warrant
Agreement, by acceptance of a Warrant, each holder consents to the jurisdiction
of a court of competent jurisdiction in the State of Arizona for the purpose of
resolving any disputes arising with respect to the Warrants or the Warrant
Agreement.

         The Holder hereof may be treated by the Company, the Warrant Agent 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 or
the Warrant Agent 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:______________                        UGLY DUCKLING CORPORATION

                                            By:_____________________________
                                                     President





                                       20
<PAGE>   21
ATTEST:

____________________________
Secretary

                                    This is one of the Warrants referred to in
                                    the within mentioned Warrant Agreement.

                                    HARRIS TRUST COMPANY OF CALIFORNIA

                               By:  __________________________________________
                                    Authorized Representative





                                       21
<PAGE>   22
                            UGLY DUCKLING CORPORATION
                                  PURCHASE FORM

                                Mailing Address:
                       HARRIS TRUST COMPANY OF CALIFORNIA
                               601 South Figueroa
                                   49th Floor
                             Los Angeles, CA 90017
                           Attention: Corporate Trust

         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




                                       22
<PAGE>   23
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15.


                                   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, 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.





                                       23