Sprentd\PHX\785667.7                                 6

Sprentd\PHX\785667.7


                                                         As of February 15, 2000

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 (as  previously  amended,  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").
Reference  is also made to that  certain  letter,  dated  February  7, 2000 from
Borrower to John Lapham of  SunAmerica  Life  Insurance  Company  (the  "Request
Letter")  which  describes a proposed  tender offer (the "Tender  Offer")  under
which the Borrower  would tender for up to 2.5 million  shares of the Borrower's
stock at a price of $11 per share (the  "Exchange")  and  pursuant  to which the
purchase  price would be paid in  subordinated  debt  securities of the Borrower
(the  "Exchange  Debt").  All  capitalized  terms used herein and not  otherwise
defined shall have the meanings given to such terms in the Loan Agreement.

         For 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 Lenders and Collateral  Agent hereby consent to the Tender Offer
and the  Exchange,  as  described  in the Request  Letter,  notwithstanding  any
provision of the Loan Agreement or the Loan Documents to the contrary including,
without  limitation,  Section  7.8 of the  Loan  Agreement  (Distributions)  and
Section 7.13 of the Loan Agreement  (Transactions With Affiliates) (which may be
applicable by virtue of the fact that the Tender Offer and the Exchange involves
a transaction with Borrower's shareholders,  who include Ernest C. Garcia II and
certain other  directors and  officers).  The Lenders also agree that so long as
the  Exchange  Debt  is (a)  subject  to  the  subordination  provisions  of the
Indenture,  dated  October 15, 1998 (the  "Indenture"),  from Borrower to Harris
Trust and Savings Bank, as trustee (pursuant to which existing Subordinated Debt
described on Exhibit G to the Loan  Agreement  was issued and the Exchange  Debt
will be issued) as in effect on the date  hereof  and (b) issued  pursuant  to a
supplemental  indenture in substantially the form delivered to the Lenders prior
to the date hereof,  the Exchange Debt shall be Subordinated  Debt as defined in
the Loan Agreement.  Borrower hereby  designates the Loan as "Designated  Senior
Indebtedness"  pursuant to the Indenture and agrees to maintain such designation
at all times.  Borrower will promptly  notify the trustee under the Indenture of
such designation and in connection with each  supplemental  indenture  hereafter
entered  into in  connection  with  the  Indenture,  Borrower  will  cause  such
supplemental  indenture  to provide  that the Loan is  included  as  "Designated
Senior Indebtedness."

2.  Section  6.13 of the Loan  Agreement  is hereby  amended in its  entirety to
provide as follows:

                  6.13.   Tangible  Net  Worth.   Borrower   shall   maintain  a
         consolidated  Tangible  Net  Worth  of not  less  than  the  sum of (i)
         $100,000,000, plus (ii) 50% of the cumulative net earnings (but only to
         the extent  positive) after taxes of the Borrower and its  Subsidiaries
         on  a  consolidated  basis  determined  in  accordance  with  generally
         accepted  accounting  principles  for each period ending after December
         31, 1999, plus (iii) 75% of the cumulative net proceeds of the issuance
         of any  additional  shares of capital stock of Borrower  after February
         15, 2000, and minus (iv) the cumulative  amount of payments received by
         Borrower pursuant to that Promissory Note, dated December 30, 1999 made
         by Cygnet Capital  Corporation to Ugly Duckling Finance  Corporation in
         the original principal amount of $12,000,000  through the retirement of
         stock in Borrower  held by Ernest C. Garcia II. As used in this Section
         6.13,  "net  proceeds" of the issuance of capital  stock shall mean the
         gross cash proceeds of such issuance less reasonable and customary fees
         and expenses  actually  incurred in  connection  therewith,  including,
         without  limitation,   underwriting  fees,   investment  banking  fees,
         attorneys' and accountant's  fees,  regulatory and listing fees and due
         diligence costs and expenses.

3. A new  Section  6.13A is hereby  added to the Loan  Agreement  to  provide as
follows:

                  6.13A.  Tangible Net Worth and  Subordinated  Debt. The sum of
         (i) the  consolidated  Tangible  Net  Worth  of  Borrower  and (ii) the
         outstanding  amount  of  indebtedness  of  Borrower  as  to  which  the
         repayment of principal and interest is subordinated to repayment of the
         Loan, shall not be less than $150,000,000.

4.  Section  6.14 of the Loan  Agreement  is hereby  amended in its  entirety to
provide as follows:

                  6.14 Consolidated EBITDA to Consolidated  Interest Expense. As
         of the end of each  quarterly  fiscal period of Borrower for the fiscal
         quarter  then  ended and the  immediately  preceding  three (3)  fiscal
         quarters  taken  as a  whole  (each a "Test  Period"),  Borrower  shall
         maintain  a ratio  of  Consolidated  EBITDA  to  Consolidated  Interest
         Expense  of not less  than the  amount  set  forth  below for each Test
         Period ending during the period set forth below:

                  Period                                          Ratio

         Closing to and including June 30, 1999                   0.60 to 1.0

         July 1, 1999 to and including September 30, 1999         0.85 to 1.0

         October 1, 1999 to and including December 31, 1999       1.00 to 1.0

         January 1, 2000 to and including March 31, 2000          1.35 to 1.0

         April 1, 2000 and thereafter                             1.50 to 1.0

5. A new  Section  6.14A is hereby  added to the Loan  Agreement  to  provide as
follows:

                  6.14A.  Quarterly Consolidated EBITDA to Consolidated Interest
         Expense.  As of the end of each fiscal  quarter of Borrower  commencing
         with the fiscal quarter ending March 31, 2000,  Borrower shall maintain
         a ratio of Consolidated EBITDA to Consolidated  Interest Expense of not
         less than 1.1 to 1.0 for such fiscal quarter.

         Except as specifically modified by this 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  amendments  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.

         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 agreement  including the reasonable fees,  disbursements and
other charges of its counsel.  The Borrower agrees to pay a modification  fee of
$25,000 to the Lenders upon the execution and delivery of this  agreement by the
parties hereto.

         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.

         Please sign and return the enclosed copy of this letter.

                               Very truly yours,

                               UGLY DUCKLING CORPORATION, a Delaware corporation

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


<PAGE>


CONSENTED:

GALAXY CLO 1999-1, LTD.

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


         By:
         Name:
         Title:


SUNAMERICA LIFE INSURANCE
COMPANY

By:
Name:
Title:

KZH SOLEIL-2 LLC

By:
Name:
Title:


HARRIS TRUST & SAVINGS BANK,
as Collateral Agent

By:
Name:
Title:


<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