Buyer’s premium is a fee that auction houses add on top of the hammer price, charged to the buyer for the service of running the auction. If you win a lot for 100 and the buyer’s premium is 15%, you owe 115 before tax, not 100. It is one of the most commonly forgotten costs when resellers calculate what an item actually cost them.
How buyer’s premium is calculated
Buyer’s premium is usually a percentage of the hammer price, the amount you bid and won the item for. The auction house sets this percentage, and it is added to what you owe, separate from the hammer price itself and separate from any sales tax that applies afterward. Some auction houses use a tiered structure, where the percentage changes above certain price thresholds, and some charge a different rate for online bidding versus bidding in the room.
Because the rate and structure vary by auction house and by region, always check the specific terms of the sale you are bidding at rather than assuming a flat percentage across every venue.
A worked example
Suppose you win a set of vintage tools at auction with a hammer price of 200 units (use your own local currency). The buyer’s premium is 20%.
- Hammer price: 200
- Buyer’s premium at 20%: 40
- Subtotal before tax: 240
- Sales tax, if applicable, is calculated on top of this subtotal depending on local rules.
Your actual cost for the tools, before any tax, is 240, not 200. If you plan to resell the set, 240 is the number that belongs in your cost basis, not the 200 hammer price alone.
Why it belongs in your cost basis
If you calculate profit using only the hammer price, you will consistently overstate how much you made on every item bought at auction. Buyer’s premium is money you actually spent to acquire the item, the same as the hammer price itself, so it needs to be included alongside purchase price when you work out what an item cost you. For the full method, including taxes, repair costs, and selling fees, see our guide to tracking flip profit.
This is a common blind spot. It is easy to remember the number you bid, since that is the figure shown on the paddle or the winning bid screen, and easy to forget the percentage tacked on afterward at checkout.
Recording buyer’s premium as you buy
The simplest fix is recording buyer’s premium as a line item at the time of purchase, not trying to calculate it later from a receipt you may misplace. LotsRoute has a dedicated field for buyer’s premium on each item, alongside price, condition, and quantity, so it is captured in the same step as logging the purchase rather than as a separate task you have to remember.
Whether you use an app or a spreadsheet, the habit matters more than the tool: write down the percentage and the resulting amount the moment you check out, while the receipt or invoice is still in your hand.
How buyer’s premium affects your bidding strategy
Once you factor in buyer’s premium, your real maximum bid is lower than the number you might have in mind before the auction starts. If you have set a hard ceiling of 300 for an item and the buyer’s premium is 20%, your actual hammer price ceiling is closer to 250, since 250 plus 20% brings you to 300. Working this backward before you start bidding keeps you from winning an item at a price that no longer leaves room for profit once fees and repair costs are added on top.
This matters even more when you plan to resell the item. A margin that looked comfortable based on the hammer price alone can shrink fast once buyer’s premium, tax, and selling fees are subtracted. Working out your true ceiling before you raise your paddle is a simple habit that protects your margin on every single lot.
Buyer’s premium varies, so always check the terms
Buyer’s premium rates and rules differ by auction house, by region, and sometimes by how you bid, in person, online, or by phone. Nothing in this guide should be treated as a fixed rate or as tax or legal advice. Always check the specific terms and conditions posted by the auction house you are buying from, and consult a tax professional for questions about how buyer’s premium interacts with local tax rules.
