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@mooks
I think you should weigh up the likely difference between selling privately (which means you'll get a higher price than a dealer) and just being as honest as you can about the problems and discount accordingly. If you're open and honest, a potential buyer won't necessarily be put off if you can show you're aware of the problems and have priced the car with those in mind.
You're kind of tied into things if you go down the dealer route and you usually end up paying more in the long run.
Depending on what you're after though, you can get a really good second hand car for that price, and you get all the usual benefits of any 1st owner faults having been fixed, as well as the depreciation taken into account. I have a 54 plate Seat Leon TDI FR, which has enough power at 150bhp to be a lot of fun (as some on here will attest) and was well within your price range.
What exactly are you looking for though? It looks like you're looking at superminis, but can you go bigger? Are you going to be driving in the city or on A-roads and motorways? Are you after something that's purely fun, or is practicality an issue as well?