FR - why didn't you post, I'd have taken it!!
Bangers can be very economical to run IF you buy the right one. Used car prices are plunging at the moment and dealers seem to be having a lot of trouble shifting stock so you are in a strong position, espically as a cash buyer with no trade in to get rid of.
I would say not to write off a new car straight away without some thought. A brand new off the forecourt Ford Ka will cost around €5k which you can finance through Alliance and Leicester for £60/month (assuming you put down your £500 as a deposit). £60 is a decent meal in a resteraunt and for teh comfort and peace of mind it may be worth considering. This link has 2nd hand Ka's from £500 to 3000 in Manchester and it's worth a nose.
If you do decide to go teh banger route then I would always advise going for a good quality car. Cars liek Citroens and Vauxhalls are built to a price and so - when miles get high - will generally have more failures than a more expensive when new car. A BMW 3 series or even a big 'ol Volvo estate will probably cost teh same as an Astra but run further. Repairs may be more expensive but will generally be much less frequent. 80s Mercs and even VWs have been known to clock up 200K without signifigant problems. In particular when looking pay attention to service history and mileage rather than age. An older car with regular oil changes and fewer miles will be a better bet than a much younger car with higher miles that has been neglegted.
And finally pay attention to the total cost of ownership. A newer car will cost less to repair and (with lower CO2 emissions) be cheaper to tax and possibly insure. Likewise they will be more fuel efficient and so cost less to keep on teh road. A £500 banger that you have to pay a hundred quid to get through the MOT every time and drinks like Ollie Read ona bender isn't really such a bargain