A mate of mine has bought dozens of cars in that pricerange at auction and has always bought gems. However, I took him with my to buy a £500 banger and got badly stung.
The trick is to get there early, have a good nosey around all the cars, and set yourself a price limit that is below book price. DON'T go over your limit if you get into a bidding war - it's not worth the risk of paying over the odds for something that may be past it.
We arrived late, it was dark, and the exact type of car we wanted (big diesel estate) was just rolling into the auction arena. On my mate's advice I bid straight away without having a chance to properly check the car over. We immediately saw a few minor marks and a missing rear lamp cluster, but otherwise it looked like a good motor with only 130,000 miles. We got it for £300 plus fees. Upon trying to drive it home, I discovered it had:
No MOT
No tax
Virtually no clutch (slipping all the way home)
Central locking completely screwed
Alarm siren missing, alarm system active and screwed
Keyfob inoperable
Outside doorlocks inoperable
Passenger doorlock smashed off
Attempted breakin to passenger side
No diesel
Inoperable fuel guage
Inoperable speedo
Rear footwells swimming with rainwater
175,000 miles
And in the weeks following, to pass the MOT and make it roadworthy I had to replace:
£150 suspension spheres
£70 doorlocks and ignition barrel
£200 drive belt tensioners
£70 cam belt
£10 headlamp bulb
And had to do all sorts of annoying jobs like disconnecting the alarm, fixing the leak, adjusting all the suspension, and various other annoying jobs. In the end the car cost over £1,000 - significantly higher than my £500 banger budget...
That said, over a year later and the only major repair has been a new clutch - admittedly most of the interior electronics have now packed up, but engine-wise it's still going strong on nearly 200,000 miles, and is parked just down the road waiting to take me home tonight...
You CAN get some good bargains at auction, but you need to be prepared, go with someone who knows what they're talking about, don't rush to buy a car if you haven't had a chance to look it over, and don't go for the first car you see.

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