The OFT says customers complained that Carcraft, which has 11 car supermarkets across England and Wales, did not carry out the pre-sale inspections it advertised, resulting in significant problems after purchase.
The watchdog found that the company did not repair or replace some cars which were unsatisfactory and misled customers about the scope of its after-sales guarantee.
Last year the OFT warned used car dealers they must comply with the law or face enforcement action, after receiving high levels of complaints.
Carcraft has outlets in Rochdale, Newport, Sheffield, Merseyside, West Midlands, Leeds, North East, Lakeside, Trafford, Enfield and Chertsey.
It co-operated with the investigation and says it has changed its business practices.