What is a buyer’s premium?
A buyer’s premium is a fee the auctioneer adds to the winning hammer price. An 18% premium on a $500 bid adds $90 before sales tax, freight, storage, or card fees. The premium belongs in your cost basis whether you are buying for yourself or planning to resell.
The buyer’s premium formula
When tax applies to both the hammer price and the premium, the basic checkout calculation is:
If tax applies only to the hammer price, calculate the premium and sales tax separately, then add both to the bid. The switch in the calculator handles either method.
How to back into a maximum hammer bid
Start with the highest all-in amount you are willing to pay, subtract fixed fees, then divide out the tax and premium. For a taxable premium:
For resale inventory, the budget itself should come from expected sold revenue after marketplace fees, freight, prep, dead inventory, and target profit. The full auction profit calculator does that reverse math automatically.
Costs people still forget
- Online bidding or payment-processing surcharges
- Loading, rigging, documentation, or wire fees
- Storage charges triggered by a short pickup window
- Freight, liftgate, residential delivery, and fuel
- Tax treatment that differs from your assumption
Always use the auctioneer’s posted terms and your actual invoice rules. This calculator is an estimate, not a substitute for the sale contract.
Frequently asked questions
Is the buyer’s premium refundable?
That depends on the auction terms and why a transaction is reversed. Do not assume the premium is refundable; treat the posted terms as controlling.
Does the premium include shipping?
Usually not. Shipping, freight, loading, storage, and payment fees are commonly separate. Add known fixed charges here or model the full deal with the auction profit calculator.
Why do auction houses charge a buyer’s premium?
It is part of the auctioneer’s compensation structure. For the bidder, the reason matters less than correctly including it in the maximum bid.