Sprentd\PHX\745195.3                                 8

Sprentd\PHX\745195.3

                                                              November 12, 1999

SAI Investment Adviser, Inc.
1 SunAmerica Center, 34th Floor
Century City
Los Angeles, CA 90067-6022

SunAmerica Life Insurance Company
1 SunAmerica Center, 34th Floor
Century City
Los Angeles, CA 90067-6022

KZH Soleil-2 LLC
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001

Harris Trust & Savings Bank
111 West Monroe Street
Chicago, Illinois 60603

Ladies and Gentlemen:

         Reference is made to that certain Senior  Secured Loan Agreement  dated
as of May 14, 1999 (the "Loan  Agreement")  among Ugly Duckling  Corporation,  a
Delaware  corporation  ("Borrower"),  Harris Trust & Savings Bank, as Collateral
Agent (the  "Collateral  Agent") and the Lenders  party thereto  (together  with
their respective successors and assigns,  "Lenders"). All capitalized terms used
herein and not otherwise  defined shall have the meanings given to such terms in
the Loan Agreement.

         Borrower has previously  advised Collateral Agent and Lenders that with
respect to the month of  September  1999,  Borrower  is not in  compliance  with
Section 6.16 of the Loan Agreement (entitled "Minimum B Piece Cash Flows").

         By  countersigning  this letter,  Collateral  Agent and Lenders  hereby
permanently waive such failure to comply with Section 6.16 of the Loan Agreement
for such month (and only for such month) and agree that such  failure  shall not
constitute a Default or Event of Default  pursuant to the Loan  Agreement or the
other Loan Documents.

         In  consideration  of the  foregoing  waiver  and for  other  good  and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged,  the Loan Documents are, upon execution hereof by Collateral Agent
and the Required Lenders, hereby amended as follows:

1. The  definition  of  "B-Piece  Cash  Flows" in the Loan  Agreement  is hereby
amended and restated in its entirety to read as follows:

                  "B-Piece  Cash  Flows"  means,   for  any  period,   all  cash
                  distributions  with  respect  to a B-Piece  together  with all
                  related spread account distributions, in each case during such
                  period;    provided,    however,   upon   termination   of   a
                  Securitization  Trust  at  recapture  or  the  exercise  of an
                  optional  repurchase  right,  the B-Piece  Cash Flows for such
                  Securitization Trust in the month of such termination shall be
                  (i) the B-Piece Value of such  Securitization  Trust as of the
                  Calculation Date immediately preceding the date of termination
                  multiplied  by  (ii)  the  Advance  Rate  applicable  to  such
                  Securitization Trust on such preceding Calculation Date.

2. The  definition  of "Monthly  Amortization  Amount" in the Loan  Agreement is
hereby amended and restated in its entirety to read as follows:

                  "Monthly Amortization Amount" means:
                   ---------------------------

                           (i) with respect to any Payment Date occurring  prior
                           to November 15, 1999, the greater of (A) $500,000.00,
                           and (B) subject to Section 2.6,  the amount,  if any,
                           by which the then Outstanding Principal Amount of the
                           Loan  exceeds the  Borrowing  Base as of such date as
                           set forth in the Collateral Servicing Report required
                           to be delivered with respect to such Payment Date;

                           (ii) with  respect to the  November  15, 1999 Payment
                           Date and each Payment Date  thereafter  prior to June
                           15,  2000,  the greater of (A)  $800,000.00,  and (B)
                           subject to Section 2.6, the amount,  if any, by which
                           the then  Outstanding  Principal  Amount  of the Loan
                           exceeds  the  Borrowing  Base as of such  date as set
                           forth in the Collateral  Servicing Report required to
                           be delivered with respect to such Payment Date; and

                           (iii) with respect to any Payment  Date  occurring on
                           or  after  June  15,   2000,   the  greatest  of  (A)
                           $1,700,000.00,  (B) 50% of the aggregate B-Piece Cash
                           Flows for the then most recently ended monthly period
                           as set  forth  in  the  Collateral  Servicing  Report
                           required to be delivered with respect to such Payment
                           Date,  and (C) the amount,  if any, by which the then
                           Outstanding  Principal Amount of the Loan exceeds the
                           Borrowing  Base as of such  date as set  forth in the
                           Collateral  Servicing Report required to be delivered
                           with respect to such Payment Date.

3. The  definition of  "Securitization  Period" in the Loan  Agreement is hereby
amended and restated in its entirety to read as follows:

                  "Securitization   Period"  shall  mean  the  period  from  and
                  including   the  date  hereof  to  and   including   the  date
                  immediately  following  the date on which  Borrower  completes
                  securitizations  of at  least  $75,000,000  of  Ugly  Duckling
                  Collateral  in the  year  2000;  provided,  however,  that  if
                  Borrower has not completed a  securitization  of Ugly Duckling
                  Collateral  during the month of November or December 1999, the
                  Securitization   Period  shall   extend  until   Borrower  has
                  completed two (2)  securitizations of Ugly Duckling Collateral
                  with an aggregate value of Ugly Duckling Collateral subject to
                  such securitizations of not less than $150,000,000.

4. The second and third  paragraphs  of Section  2.6 of the Loan  Agreement  are
hereby amended and restated in their entirety to read as follows:

                  Any provision hereof to the contrary  notwithstanding,  if, at
                  any time  prior to June 15,  2000,  immediately  after  giving
                  effect to the payment of any Monthly  Amortization Amount, the
                  aggregate  amount of all principal  payments  actually made by
                  Borrower hereunder and received by the Lenders (as of any date
                  of determination,  the "Actual Amortization Amount") since the
                  date hereof  exceeds the sum of (i) the product of $500,000.00
                  multiplied  by the number of Payment  Dates that have occurred
                  prior  to  November  15,  1999,   plus  (ii)  the  product  of
                  $800,000.00  multiplied  by the number of  Payment  Dates that
                  have occurred from and after November 15, 1999 (as of any date
                  of determination,  the "Required Amortization  Amount"),  then
                  Borrower, upon written request to the Collateral Agent (with a
                  copy to the Lenders),  may reduce the amount of any subsequent
                  Monthly  Amortization  Amount with respect to any Payment Date
                  occurring  prior to June 15, 2000, by such amount as would not
                  cause  the  Actual  Amortization  Amount  to be less  than the
                  Required   Amortization  Amount  immediately   following  such
                  Payment Date.

                  With  respect to any Payment  Date prior to November 15, 1999,
                  in the  event  clause  (i)(B)  of the  definition  of  Monthly
                  Amortization  Amount  would  result in a Monthly  Amortization
                  Amount  with   respect  to  any  Payment  Date  in  excess  of
                  $500,000.00,   Borrower   may  elect  by  written   notice  to
                  Collateral  Agent and Lenders  received at least one  Business
                  Day in advance of such Payment Date, to repay only $500,000.00
                  of the Outstanding  Principal Amount on such Payment Date and,
                  in lieu of repaying  the  remainder of any such excess on such
                  Payment  Date,  elect  to  have  such  excess  remain  in  the
                  Collateral Account (to be held by Collateral Agent pursuant to
                  the Collateral  Account  Agreement and this Section 2.6). With
                  respect to any Payment Date from and after  November 15, 1999,
                  in the event  clause  (ii)(B)  of the  definition  of  Monthly
                  Amortization  Amount  would  result in a Monthly  Amortization
                  Amount  with   respect  to  any  Payment  Date  in  excess  of
                  $800,000.00,   Borrower   may  elect  by  written   notice  to
                  Collateral  Agent and Lenders  received at least one  Business
                  Day in advance of such Payment Date, to repay only $800,000.00
                  of the Outstanding  Principal Amount on such Payment Date and,
                  in lieu of repaying  the  remainder of any such excess on such
                  Payment  Date,  elect  to  have  such  excess  remain  in  the
                  Collateral Account (to be held by Collateral Agent pursuant to
                  the Collateral Account Agreement and this Section 2.6).

5.  Section  6.16 of the Loan  Agreement  is hereby  amended and restated in its
entirety to read as follows:

                  6.16 Minimum B-Piece Cash Flows. Not permit aggregate  B-Piece
                  Cash Flows deposited to the Collateral Account with respect to
                  any month to be less than the following amounts  determined as
                  of the applicable  Payment Date (it being  understood that for
                  purposes of determining  compliance with this Section 6.16 the
                  amount  deemed  deposited  with respect to any B-Piece may not
                  exceed the B-Piece Cash Flow with respect to such B-Piece):

                           (a) For Payment Dates through and including September
                           15, 1999  (which  represent  B-Piece  Cash Flows with
                           respect to months through August 1999), $2,000,000.

                           (b) For Payment Dates from October 15, 1999,  through
                           and  including   March  15,  2000,   $900,000  (which
                           represent  B-Piece  Cash Flows with respect to months
                           from September 1999 through February 2000)

                           (c) For the  Payment  Date on April 15,  2000  (which
                           represents  B-Piece  Cash Flows  with  respect to the
                           month of March 2000), $1,200,000.

                          (d) For the Payment Date on May 15, 2000, and
                          thereafter, $2,000,000.

6. Section 8.1(j) of the Loan Agreement is hereby amended to provide as follows:

                  (j) If a default  or event of  default  occurs  under the GECC
                  Agreement or under the terms of any other Indebtedness  (other
                  than  Non-Recourse  Debt)  aggregating in excess of $3,000,000
                  (with respect to any particular item of Indebtedness or in the
                  aggregate and in each case after any applicable  cure or grace
                  period) regardless of whether such default or event of default
                  is waived or amended.

7. A new  Section  6.22 is hereby  added to the Loan  Agreement  to  provide  as
follows:

                  6.22 Required Number of Securitization Trusts. Borrower agrees
                  that as of each  Payment  Date the  number  of  Securitization
                  Trusts with respect to which  Borrower has either  pledged the
                  stock of a  bankruptcy  remote  entity  pursuant  to the Stock
                  Pledge Agreement or otherwise pledged B Certificates  pursuant
                  to the Loan Documents shall not be less than the following:

                  (i) For the  period  ending on July 14,  2000,  the  result of
                  dividing  (A) the unpaid  principal  balance of the Loan as of
                  such Payment Date (after  giving  effect to any payments  then
                  being made) by (B) $5,000,000; and

                  (ii) For the period from and after July 15,  2000,  the result
                  of dividing (A) the unpaid principal balance of the Loan as of
                  such Payment Date (after  giving  effect to any payments  then
                  being made) by (B) $4,000,000.

8.  Section  3(ii) of the Cash  Collateral  Account  Agreement  is  amended  and
restated in its entirety to read as follows:

                  (ii) If, at any time prior to June 15, 2000, immediately after
                  giving  effect  to the  payment  of any  Monthly  Amortization
                  Amount,   the  aggregate  amount  of  all  principal  payments
                  actually  made by UDC and  received  by the Lenders (as of any
                  date of determination, the "Actual Amortization Amount") since
                  the  date  hereof  exceeds  the  sum of  (A)  the  product  of
                  $500,000.00  multiplied  by the number of  Payment  Dates that
                  have occurred prior to November 15, 1999, plus (B) the product
                  of $800,000.00  multiplied by the number of Payment Dates that
                  have occurred from and after November 15, 1999 (as of any date
                  of determination,  the "Required Amortization  Amount"),  then
                  UDC, upon written request to Secured Party (with a copy to the
                  Lenders),  may  reduce the  amount of any  subsequent  Monthly
                  Amortization Amount with respect to any Payment Date occurring
                  prior to June 15, 2000,  by such amount as would not cause the
                  Actual  Amortization  Amount  to be  less  than  the  Required
                  Amortization Amount immediately following such Payment Date.

9.  Section  3(iii) of the Cash  Collateral  Account  Agreement  is amended  and
restated in its entirety to read as follows:

                  With  respect to any Payment  Date prior to November 15, 1999,
                  in the  event  clause  (i)(B)  of the  definition  of  Monthly
                  Amortization  Amount  would  result in a Monthly  Amortization
                  Amount  with   respect  to  any  Payment  Date  in  excess  of
                  $500,000.00, UDC may elect, by written notice to Secured Party
                  and  Lenders  received  at least 1 Business  Day in advance of
                  such Payment Date, to have Secured Party pay only  $500,000.00
                  of the Outstanding  Principal Amount on such Payment Date and,
                  in lieu of paying  the  remainder  of any such  excess on such
                  Payment  Date,  elect  to  have  such  excess  remain  in  the
                  Collateral Account.  With respect to any Payment Date from and
                  after  November 15, 1999,  in the event clause  (ii)(B) of the
                  definition  of Monthly  Amortization  Amount would result in a
                  Monthly  Amortization  Amount with respect to any Payment Date
                  in excess of $800,000.00,  UDC may elect, by written notice to
                  Secured Party and Lenders  received at least 1 Business Day in
                  advance of such Payment  Date,  to have Secured Party pay only
                  $800,000.00  of  the  Outstanding  Principal  Amount  on  such
                  Payment Date and, in lieu of paying the  remainder of any such
                  excess on such Payment Date,  elect to have such excess remain
                  in the Collateral Account.

10.  Section  7(c) of the Stock Pledge  Agreement  is hereby  amended to add the
words "During the Securitization Period," at the beginning of such Section.

         Except as  specifically  modified by this waiver and agreement,  all of
the terms and  provisions  of the Loan  Agreement,  each other Loan Document and
each of the documents  referred to therein or delivered in connection  therewith
shall  remain in full force and effect.  The waivers set forth  herein  shall be
limited  precisely as written and shall not be deemed,  except as expressly  set
forth herein,  (a) to be a consent to any  modification or waiver of other terms
or  conditions  of the Loan  Agreement,  any other Loan  Document  or any of the
documents  referred to therein or  delivered in  connection  therewith or (b) to
prejudice any right,  remedy,  power or privilege  which any party hereto or any
party consenting hereto now has or may have in the future under or in connection
with the  Loan  Agreement,  any  other  Loan  Document  or any of the  documents
referred to therein or delivered in connection  therewith.  Without limiting the
generality of the  foregoing,  the Security  Documents and all of the Collateral
described  therein do and shall,  to the extent set forth  therein,  continue to
secure the payment of all  obligations and liabilities of the Borrower under the
Loan Agreement  and/or any of the other Loan Documents,  in each case as amended
hereby.

         Upon the  execution  and delivery  hereof by the  Required  Lenders and
Collateral Agent, Borrower shall pay to Lenders,  ratably, a modification fee in
the aggregate amount of $50,000.

         The Borrower shall promptly pay the reasonable  out-of-pocket  expenses
incurred  by the  Collateral  Agent  and the  Lenders  in  connection  with  the
preparation  of  this  waiver  and  agreement  including  the  reasonable  fees,
disbursements and other charges of its counsel

         This letter  agreement shall be governed by and construed in accordance
with the laws of the State of New York.

         Borrower hereby represents and warrants to Collateral Agent and Lenders
as follows:

         (i) The execution, delivery and performance of this Letter Agreement by
Borrower and  Guarantor  has been duly  authorized  by all  necessary  corporate
action of Borrower and Guarantor.

         (ii) This Letter  Agreement  has been duly  executed  and  delivered by
Borrower and Guarantor and constitutes the legal,  valid and binding  obligation
of Borrower and Guarantor in accordance  with its terms,  except as  enforcement
may  be  limited  by  equitable   principles  or  by   bankruptcy,   insolvency,
reorganization,  moratorium,  or similar laws relating to or limiting creditors'
rights generally.

         (iii) As of the date hereof,  the  representations  and  warranties  of
Borrower and Guarantor  set forth in the Loan  Documents are true and correct in
all material respects.

         (iv) As of the date hereof and after giving effect to the execution and
delivery of this Letter Agreement by Borrower,  Collateral Agent and Lenders, no
Default or Event of Default has occurred and is continuing.

         This  Agreement  may be executed in any number of  counterparts  and by
different  parties  hereto  in  separate  counterparts,  each of  which  when so
executed and delivered  shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.


<PAGE>


         Please sign and return the enclosed copy of this letter.

                               Very truly yours,

                               UGLY DUCKLING CORPORATION, a Delaware corporation

                               By:  /S/ DONALD L. ADDINK
                               -------------------------
                               Name:  Donald L. Addink
                               Title:  Vice President


<PAGE>


CONSENTED:

GALAXY CLO 1999-1, LTD.

By:      SAI Investment Adviser, Inc.,
         its Collateral Manager

         By:  /S/ JAMES K. HUNT
         ----------------------
         Name:  James K. Hunt
         Title:  Executive Vice President

SUNAMERICA LIFE INSURANCE
COMPANY

By:  /S/ JOHN L?????????
------------------------
Name:  John L???????????
Title:  Authorized Agent

KZH SOLEIL-2 LLC

By:/S/ PETER CHIN
-----------------
Name:  Peter Chin
Title:  Authorized Agent

HARRIS TRUST & SAVINGS BANK,
as Collateral Agent

By:  /S/ MEGAN CARMODY
----------------------
Name:  Megan Carmody
Title:  Assistant Vice President


<PAGE>


         Guarantor  hereby  consents and agrees to the foregoing and agrees that
the  Guaranty  remains  in  full  force  and  effect  and  that  the  Guaranteed
Obligations (as defined in the Guaranty) include, without limitation, payment of
the obligations of Borrower  pursuant to the foregoing  Letter Agreement and the
Loan Documents as amended by the foregoing Letter Agreement.

                  UGLY  DUCKLING CAR SALES AND FINANCE
                  CORPORATION, an Arizona corporation

                  By:  /S/ JON D. EHLINGER
                  ------------------------
                  Name:  Jon D. Ehlinger
                  Title: Secretary