Exhibit 4.2

         THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT ("Third Amendment") is entered into as of June 27, 1996, 
between  McGRATH RENTCORP, a California corporation and UNION BANK OF 
CALIFORNIA, NATIONAL ASSOCIATION, formerly known as The Bank of California, 
National Association, as agent for Banks (sometimes "Agent", sometimes 
individually "Bank" and sometimes with Fleet Bank, N.A. (formerly known as 
National Westminister Bank, USA) and Bank of America National Trust and 
Savings Association, "Banks").

                               RECITALS

A.  Borrower is obligated to Banks pursuant to that certain Amended and 
Restated Credit Agreement dated as of June 14, 1994 (as amended from time 
to time, "Agreement").

B.  The parties mutually desire to amend the Agreement as set forth herein.

NOW, THEREFORE, the parties hereto agree as follows:

1.  Section 7.12(c) is hereby deleted in its entirety and replaced with the 
following:

    "(c)  a utilization ratio of at least six-tenths (6/10) for Eligible 
    Inventory and four-tenths (4/10) for Eligible Equipment, with each such 
    utilization ratios to be the average of the utilization ratios calculated
    as of the last day of each calendar month in the calendar quarter for
    which compliance is being determined. For purposes of this Section 7.12,
    "utilization ratio" means the ratio of (i) the net book value of all
    Eligible Inventory and Eligible Equipment subject to valid existing
    leases by Borrower as lessor, as the numerator; to (ii) the net book
    value of all Eligible Inventory and Eligible Equipment held under or for
    lease by Borrower as lessor, as the denominator; and"

2.  FULL FORCE AND EFFECT. Except as specifically provided herein, all terms 
and conditions of the Agreement and each Loan Document remain in full force 
and effect, without waiver or modification. This Third Amendment, the 
preceding amendments and the Agreement shall be read together as one document.

3.  REPRESENTATIONS AND WARRANTIES. As part of the consideration for the 
Banks and Agent to enter into this Third Amendment, the Borrower represents 
and warrants to the Banks and Agent as follows:

    (a)  The execution, delivery and performance by the Borrower of this 
    Third Amendment are within the Borrower's corporate powers, have been 
    duly authorized by all necessary corporate action by or in respect of, or 
    filing with, any governmental body, agency or official, and the 
    execution, delivery and performance by the Borrower of this Third 
    Amendment do not contravene, or constitute a default under, any provision 
    of applicable law or requirements or of the certificate or articles of 
    incorporation or the by-laws of the Borrower or of any material 
    agreement, judgment, injunction, order, decree or other instrument 
    binding upon the Borrower or any assets of the Borrower, or result in the 
    creation or imposition of any Lien on any asset of the Borrower.

    (b)  This Third Amendment constitutes the valid and binding obligation of 
    the Borrower, enforceable against it in accordance with its terms, except 
    as enforceability may be subject to 


                                PAGE 1





    applicable bankruptcy, insolvency, reorganization, equity of 
    redemption, moratorium or other laws now or hereafter in 
    effect relating to creditors rights, and to general principles 
    of equity (regardless of whether enforcement is sought in a 
    proceeding in equity or at law).

    (c)  No Event of Default has occurred and is continuing, and the 
    representations and warranties of the Borrower in the Agreement and other 
    Loan Documents delivered pursuant thereto are true and correct in all 
    material respects as of the date hereof as if made on the date hereof.

    (d)  The officer of the Borrower executing and delivering this Third 
    Amendment on behalf of the Borrower has been duly authorized by 
    appropriate corporate resolutions to so execute and deliver this Third 
    Amendment.

4.  COUNTERPARTS.  This Third Amendment may be executed by the parties hereto 
in one or more counterparts and all such counterparts, when taken together, 
shall constitute one and the same Third Amendment.

IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to 
become effective as of the date and year first written above.

BANKS:                                        BORROWER:

UNION BANK OF CALIFORNIA,                     MCGRATH RENTCORP, a
NATIONAL ASSOCIATION                          California corporation
formerly known as The Bank of California,
National Association, as a Bank and as Agent

By:  /s/(signature illegible)                    By:  /s/ Dwight Saxton
    ----------------------------------            ---------------------------

Title:  Vice President                        Title:  Vice President of Admin
       -------------------------------               ------------------------

FLEET BANK, N.A.,
formerly known as National Westminister Bank, USA

By:
    ---------------------------------

Title: 
      -------------------------------

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION

By:
    ---------------------------------

Title: 
      -------------------------------



                                PAGE 2