EXHIBIT 10.2
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                THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT




                           Dated as of August 2, 1999



                                 by and between




                           UGLY DUCKLING CORPORATION,
                             a Delaware corporation
                                   ("Lender")



                                       and



                     FIRST MERCHANTS ACCEPTANCE CORPORATION,
                             a Delaware corporation
                                  ("Borrower")




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                THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT

         This THIRD  AMENDMENT TO CREDIT AND SECURITY  AGREEMENT (the "Amendment
to  Agreement"),  is entered into as of August 2, 1999,  between  UGLY  DUCKLING
CORPORATION,  a  Delaware  corporation  ("Lender"  or  "UDC"),  with a place  of
business  located at 2525 East  Camelback  Road,  Suite 1150,  Phoenix,  Arizona
85016,  and FIRST  MERCHANTS  ACCEPTANCE  CORPORATION,  a  Delaware  corporation
("Borrower" or "FMAC"),  with a principal place of business  located at 303 West
Erie, Suite 410, Chicago, IL 60610.

         WHEREAS, Lender agreed to make available to Borrower a revolving credit
facility  (the "Loan") upon the terms and  conditions  set forth in that certain
Credit and Security  Agreement  dated as of July 17, 1997, by and between Lender
and Borrower (the "Agreement");

         WHEREAS,  the Agreement was amended by that certain First  Amendment to
Credit and Security Agreement, dated as of January 21, 1998.

         WHEREAS,  the Agreement was amended by that certain Second Amendment to
Credit and Security Agreement, dated as of April 1, 1998.

         WHEREAS,   Lender  has  asserted  that  Borrower  defaulted  under  the
Agreement.

         WHEREAS,  the  Lender  and the  Borrower  have  agreed  to  modify  the
Agreement,  as amended,  as set forth  below to,  among  other  things,  clarify
certain  of  Lender's  rights and to  provide  for the cure of certain  asserted
defaults under the Agreement.

         NOW, THEREFORE,  in consideration of the mutual agreements,  provisions
and  covenants  contained  herein,  the  parties  agree  to  modify,  amend  and
supplement the Agreement only as follows, all other provisions of the Agreement,
as amended, not effected hereby to remain in full force and effect:

                                    ARTICLE I

                                 THE COMMITMENT

         1.1  Lender's  Ability  to Draw Down on Line of  Credit to Pay  Monthly
Interest Charges. Section 2.4 of the Agreement is hereby modified and amended by
the addition of the following new paragraph to be designated Section 2.4(e):

                    "(e) Borrower hereby  authorizes Lender to, on the first day
of each consecutive month, draw down on the Loan an amount sufficient to pay the
monthly  interest  charge  at the  non-default  rate due and  payable  to Lender
pursuant to Section  2.4(c).  Any such draw shall be  considered  an Advance and
shall be repaid pursuant to this Agreement."

         1.2 Cure Fee.  Borrower and Lender agree that,  on or before  August 2,
1999,  Borrower  shall  pay the  sum of  $100,000.00  to  Lender  as an  Advance
hereunder in full and final  satisfaction of any and all default interest,  late
payment fees,  legal  expenses and other  Lender's  Expenses  resulting from and
associated  with  (i)  Borrower's  default  under  the  Agreement  and  (ii) the
preparation,  drafting  and  negotiation  of that  certain  Credit and  Security
Agreement II dated August 2, 1999 by and between Borrower and Lender.



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                  Lender  hereby  accepts  the  Cure  Fee in full  and  complete
satisfaction  of all  alleged  defaults  hereunder  and  acknowledges  that upon
signing this  Amendment to Agreement,  Lender no longer asserts that Borrower is
in default.

         1.3 Transition Fee. Borrower and Lender agree that, on before August 2,
1999,  Borrower  shall  pay to  Lender  the  sum of  $130,240.70  as an  Advance
hereunder in full and complete satisfaction of all obligations owed to UDC under
the Transition Services Agreement.

         1.4 Dividend  Direction  Letter.Borrower,  as sole shareholder of First
Merchants Auto Receivables Corp.  ("FMARC") and First Merchants Auto Receivables
Corp. II ("FMARC II"), shall direct the directors of FMARC and FMARC II to adopt
the resolutions set forth in an Action by Unanimous Consent in the form attached
hereto as Exhibit "1." Borrower shall also deliver to Lender  executed  Dividend
Direction Letters,  addressed to Harris Trust & Savings Bank and Chase Manhattan
Bank Delaware  ("Distributors") and directing  Distributors to deliver to Lender
any and all  dividends  and/or  other  distributions  to  which  Borrower  would
otherwise  be  entitled as a  shareholder  of FMARC and FMARC II. A form of such
Dividend  Direction  Letter is attached  hereto as Exhibit "2." On the date such
dividends and/or other distributions are made by Distributors to Lender,  Lender
shall apply any such monies to permanently  reduce the Commitment  Amount and to
pay any other  amounts  due and owing by  Borrower  to  Lender  pursuant  to the
Agreement,  the  Contribution  Agreement,  the Credit and Security  Agreement II
dated August 2, 1999,  the  Modified  UDC Fee,  any advance  under the UDC Stock
Option and any other obligation  secured by the B Pieces arising under the Plan;
provided,  however,  that  nothing  herein  shall be deemed to grant a  security
interest in the B Pieces to secure  obligations such as servicing fees which may
be owed from time to time to UDC, Cygnet Financial or their affiliates which are
not  currently  directly  secured by the B Pieces and the UDC.  Once  Borrower's
Obligations to Lender,  pursuant to the Agreement,  the Contribution  Agreement,
the Credit and Security Agreement II dated August 2, 1999, the Modified UDC Fee,
any advance under the UDC Stock Option and any other obligation secured by the B
Pieces arising under the Plan; provided,  however,  that nothing herein shall be
deemed to grant a security  interest in the B Pieces to secure  obligations such
as servicing fees which may be owed from time to time to UDC,  Cygnet  Financial
or their affiliates which are not currently directly secured by the B Pieces are
paid in full, Borrower shall be entitled to revoke the Dividend Direction Letter
using  the  form of  revocation  letter  attached  hereto  as  Exhibit  "3" (the
"Revocation  Letter").  Lender  shall  provide  Borrower and  Distributors  with
monthly  reports,  on or  before  the 15th  day of each  month,  reflecting  the
outstanding amount due and owing by Borrower to Lender under the Agreement,  the
Contribution  Agreement,  the Credit and Security Agreement II, the Modified UDC
Fee, any advance under the UDC Stock Option and any other obligation  secured by
the B Pieces arising under the Plan.

                  FMAC shall not give the  Revocation  Letter for payments under
the B Pieces  until it has either (i) obtained a report from UDC showing that no
further  obligations  secured by the B Pieces are owed to UDC or (ii) obtained a
final  order  from  the  Bankruptcy  Court  or  any  other  court  of  competent
jurisdiction  after  notice to UDC and a hearing that all such amounts have been
satisfied.  The form of  Revocation  Letter  shall be in the form of Exhibit "3"
hereto,  shall attach the UDC report or applicable court order as an exhibit and
shall be sent to UDC prior to or at the same time it is sent to the Trustee. The
Distributors  shall be  expressly  directed not to honor the  Revocation  Letter
unless it receives a fully signed copy of the  Revocation  Letter  together with
the required report from UDC or final order of the applicable court.

         1.5 Application of Owned Loan and B Piece Distributions. The provisions
of the Settlement  Agreement regarding the application of Owned Loan and B Piece
Distributions  shall  govern  such  application.  The  Settlement  Agreement  is
incorporated herein by this reference.




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                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         In order to  induce  Lender  to enter  into  this  Amendment,  Borrower
represents and warrants that the  Representations  and Warranties made by Debtor
in the Credit and Security Agreement II are true,  correct,  and complete in all
respects as of the date hereof.  The covenants,  representations  and warranties
and disclosure  schedules thereto in Credit and Security Agreement II are hereby
incorporated  by reference  and replace for all  purposes  from the date of this
Amendment forward the  representations,  warranties and covenants and disclosure
schedules in the Agreement. Any liens granted or other actions taken pursuant to
the Credit and Security Agreement II shall not be a breach hereunder.

                                   ARTICLE III

                                  MISCELLANEOUS

         3.1 Amendments and Waivers.  No amendment or waiver of any provision of
this  Amendment,  the Agreement or any other Loan Document,  and no consent with
respect to any departure by Borrower  therefrom,  shall be effective  unless the
same shall be in writing and signed by Lender and Borrower, and then such waiver
shall be effective  only in the specific  instance and for the specific  purpose
for which given.

         3.2      Notices.

                  (a) All notices,  requests and other  communications  provided
for  hereunder  shall be in writing  (including,  unless the  context  expressly
otherwise  provides,  by  facsimile  transmission,  provided,  that,  any matter
transmitted by facsimile (i) shall be immediately  confirmed by a telephone call
to the  recipient,  and (ii) shall be followed  promptly by a hard copy original
thereof by over-night  courier to the address set forth below,  or to such other
address as shall be  designated  by such party in a written  notice to the other
party) and  directed  to each other party at the  following  address (or at such
other address as shall be  designated by Lender or Borrower in a written  notice
to Borrower and Lender).

                  If to Borrower:   FIRST MERCHANTS ACCEPTANCE CORPORATION
                                            303 West Erie, Suite 410
                                            Chicago, Illinois 60610
                                            Attn: Ms. Teresa McMahon, President
                                            Facsimile No.  (312) 397-1050

                  With a copy to:   Sonnenschein Nath & Rosenthal
                                            8000 Sears Tower
                                            Chicago, Illinois 60606-6404
                                            Attn: Robert Richards, Esquire
                                            Facsimile No. (312) 876-7934

                  If to Lender:             UGLY DUCKLING CORPORATION
                                            2525 East Camelback Road
                                            Suite 1150
                                            Phoenix, Arizona 85016
                                            Attn: Steven Johnson
                                            Facsimile No.: (602) 852-6696


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                  With a copy to:   Snell & Wilmer L.L.P.
                                            One Arizona Center
                                            Phoenix, Arizona 85004-0001
                                            Attn: Christopher H. Bayley, Esquire
                                            Facsimile No.: (602) 382-6070

                  (b) All such notices,  requests and communications shall, when
transmitted  by overnight  delivery or faxed,  be effective  when  delivered for
overnight (next day) delivery,  transmitted by facsimile machine,  respectively,
or if delivered, upon delivery, except that notices pursuant to Article II shall
not be effective until actually received by Lender.

                  (c)  Borrower  acknowledges  and agrees that any  agreement of
Lender to receive  certain  notices by telephone and facsimile is solely for the
convenience and at the request of Borrower.  Lender shall be entitled to rely on
the authority of any Person  purporting to be a Person authorized by Borrower to
give such notice and Lender shall not have any liability to Borrower or to other
Person on account of any action  taken or not taken by Lender in  reliance  upon
such  telephonic or facsimile  notice.  The  obligation of Borrower to repay the
Advances  shall not be  affected  in any way or to any extent by any  failure by
Lender to receive written  confirmation of any telephonic or facsimile notice or
the  receipt by Lender of a  confirmation  which is at  variance  with the terms
understood by Lender to be contained in the telephonic or facsimile notice.

         3.3 No Waiver: Cumulative Remedies. No failure to exercise and no delay
in  exercising,  on the part of Lender,  any right,  remedy,  power or privilege
hereunder,  shall operate as a waiver  thereof;  nor shall any single or partial
exercise of any right,  remedy,  power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.

         3.4 Counterparts.  This Amendment may be executed by one or more of the
parties to this Amendment in any number of separate counterparts, each of which,
when so  executed,  shall be deemed an  original,  and all of said  counterparts
taken together shall be deemed to constitute but one and the same instrument.

         3.5 Severability.  The illegality or  unenforceability of any provision
of this Amendment or any instrument or agreement required hereunder shall not in
any way  affect  or impair  the  legality  or  enforceability  of the  remaining
provisions of this Amendment or any instrument or agreement required hereunder.

         3.6 No Third Parties Benefited. This Amendment is made and entered into
for the sole  protection  and legal  benefit of Borrower  and Lender,  and their
permitted  successors  and  assigns,  and no other  Person  shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection  with,  this  Amendment or any of the other Loan  Documents.
Lender shall have no obligation  to any Person not a party to this  Amendment or
other Loan Documents.

         3.7      Time.  Time is of the essence as to each term or provision of
this Amendment and each of the other Loan Documents.
                  ----

         3.8      Governing Law and Jurisdiction.



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         THE  VALIDITY  OF THIS  AGREEMENT  AND THE OTHER  LOAN  DOCUMENTS,  THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING  HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED  UNDER,  GOVERNED
BY, AND  CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE UNITED STATES OF AMERICA
(INCLUDING THE BANKRUPTCY CODE), IT BEING THE INTENT OF THE PARTIES THAT FEDERAL
LAW SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES  HERETO  WITHOUT REGARD TO
THE  APPLICATION  OF ANY  PROVISION OF STATE LAW. TO THE EXTENT THAT FEDERAL LAW
WOULD  APPLY THE LAW OF ANY STATE AS THE FEDERAL  RULE FOR THE  PURPOSES OF THIS
AGREEMENT, THE PARTIES AGREE THAT THE LAWS OF THE STATE OF ARIZONA SHALL BE USED
TO SUPPLEMENT APPLICABLE FEDERAL LAW.

         THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT  SHALL BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY  COURT.
BORROWER AND LENDER WAIVE,  TO THE EXTENT  PERMITTED  UNDER  APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON  CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
3.8.

         BORROWER  AND LENDER  HEREBY  WAIVE THEIR  RESPECTIVE  RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR  ARISING  OUT OF ANY OF THE
LOAN  DOCUMENTS  OR ANY  OF THE  TRANSACTIONS  CONTEMPLATED  THEREIN,  INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY  CLAIMS.  BORROWER AND LENDER  REPRESENT  THAT EACH HAS REVIEWED  THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION  WITH LEGAL  COUNSEL.  IN THE EVENT OF  LITIGATION,  A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

         3.9 Entire  Agreement.  The  Agreement,  as amended,  together with the
other Loan  Documents and that certain  "Settlement  Agreement"  dated August 2,
1999 by and between  Borrower  and Lender,  embodies  the entire  Agreement  and
understanding   among   Borrower  and  Lender  and   supersedes   all  prior  or
contemporaneous  agreements  and  understandings  of  such  Persons,  verbal  or
written,  relating  to the  subject  matter  hereof  and  thereof  and any prior
arrangements   made  with   respect  to  the   payment  by   Borrower   (or  any
indemnification  for) any Lender  Costs  incurred  (or to be  incurred) by or on
behalf of Lender.

         3.10  Interpretation.  This  Amendment  is the  result of  negotiations
between and has been reviewed by counsel to Lender,  Borrower and other parties,
and is the product of all  parties  hereto.  Accordingly,  this  Amendment,  the
Agreement and the other Loan  Documents  shall not be construed  against  Lender
merely because of Lender's  involvement in the preparation of such documents and
agreements.


                  [Remainder of page left intentionally blank]


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         IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed as of the date first written above.

                                         FIRST MERCHANTS ACCEPTANCE CORPORATION,
                                                          a Delaware corporation


                                             By: /S/ GREGORY L. BURDETT
                                             Name:   Gregory L. Burdett
                                             Title:  Vice President & Controller



                                          UGLY DUCKLING CORPORATION,
                                                          a Delaware corporation


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