I think garage sales are a good source of used bikes. They take alot of time, though. I haven't had the patience to chase these bikes down. I did buy a $15 1980's Raleigh 12 speed bike from an individual. It almost qualifies as a garage sale. I was in his garage when I bought it.
My best luck has been buying bikes at bike stores that sell used bikes. I paid a premium for the convenience of not having to track the bikes down myself. There is one LBS here that takes trad-ins and resells those bikes. I find a bigger selection at bike stores near college campuses.
Paid $150 for 1980's Specialized Hardrock rigid steel MTB at LBS in early 1990's. Was a rental bike.
Paid $100 for used Specialized Hardrock rigid steel MTB at bike store near a college in 2005.
Paid $185 for 1990's really nice Rocky Mountain steel hardtail MTB at bike store near a college in 2005.
Paid $15 for 1980's Raleigh 12 speed road bike advertised in credit union ads.
Paid $250 for 1995 Bianchi Premio at LBS in 2006. Was a trade-in bike.