Why are tip tanks used?
Tip tanks are only used when the wing volume is not sufficient to carry the needed fuel. They can mostly be found on the early jets which had thin wings for a higher Mach number of drag rise onset and very thirsty engines. They offer two advantages over conventional external tanks:


Their wing tip location allows the highest wing bending relief for a given fuel mass. 
They widen the wing by their diameter, so reducing induced drag a bit.


Later designs used the area rule to shape the tip tanks, so they could help to reduce wave drag a bit, especially on designs which predated the knowledge of efficient transsonic shaping.

On fighter aircraft, tip tanks should be jettisoned with the start of air combat because their high roll inertia contribution puts the aircraft at a clear disadvantage.



The XF-104, the prototype of the Lockheed Starfighter. Where else would it allow to store all the fuel?