I've bought my last two cars on ebay and if you buy carefully you can get a really good deal. But then I don't drive more than 3k miles a year - living in central London makes car ownership a complete luxury and only used for trips out of town - usually to France to fill up the wine rack!
£750 for a 1987 BMW 528i 6 months ago was a right result - only needed half an exhaust in that time and running really well with only 54k on the clock.
The 316 I bought before that was more of a mistake though - at least I only lost £100 when I sold it!!