One thing to know. EBAY is the largest "seller" of automobiles in the world. More cars are sold on ebay than any dealer or dealer chain. All that really means is that many, many people buy and sell cars on ebay. Just like many who go to used car dealers or buy from private owners - some end up very happy and some don't!
My perspective as a private owner selling cars on ebay.
I have sold 2 cars on ebay. A 96 Land Cruiser and a 00 Lexus LX470. My reason for selling on ebay was simply to widen my audience. I found that it eliminated the hassle of having tire kickers come by my house just to have a look. If someone with a good feedback rating places a bid, then I consider them a serious buyer, especially since they are typically from a different state. In both cases I got what I was looking to get for my cars $$$ wise. In both cases I required payment within 5 days of the auction closing. Both were purchased by out of state buyers that drove up and drove home within the 5 day period. If i misrepresented the car then i would not have got paid and would have received negative feedback. I would say that the large majority of sellers on ebay are actually dealers. What you have to be careful about with dealers is that some will put no reserve on auctions but never sell the cars. More bidders typically means a higher sale value as the competitive "must win" phenominon or bidders kicks in. However, if a dealer sees that they are going to take a beating on the car they simply cancel the auction. Remember, the entire time the auction is listed the dealer is still fielding interest from actual customers coming to their retail location. If they are offered a reasonable price for the car they will take it and cancel the auction.
Buyers perspective on buying cars on ebay.
I have purchased 2 cars on ebay. One was a 01 BMW X5 3.0 and the other was a 97 VW Jetta (for my son). In both cases I got great deals and was very happy. I purchased the X5 sight unseen and had it shipped 2700 miles. The Jetta was only 500 miles away so I flew down and picked it up. The reason I purchased on ebay was because of the price. Resale values vary widely from state to state on specific cars. Supply and demand drives much of this. I purchased my 01 X5 (3.0, sport pkg, premium pkg, 65k miles) from a dealer in MA for 23500 which was 7k less than what i could get it for from a dealer in the Seattle area where X5's are hot items. I paid 1200 to ship it. The moment it arrived I washed it (open road transport makes your vehicle look like it was offroad for a month) and promply traded it in the same day (+5k) for a 01 x5 4.4 with 52k on it with upgraded wheels and a 3500 stereo system which I couldn't touch for less than 37k. My wife (the primary driver) didn't like the color combination (silver with tan interior) which was the ONLY reason I traded the car. The jetta was a faboulous deal as well.
Anyway - these were my buying and selling experiences on ebay. Would I do it again - ABSOLUTELY. Everytime I buy a car I will look to ebay first.