Buyer's Premium

A fee charged by an auction house to the winning bidder, calculated as a percentage of the hammer price.

Example

A 25% premium on a 100,000 hammer price means the buyer pays 125,000.

Important

It raises your real entry price immediately, so the object must appreciate by that much just for you to break even at the same hammer price.

Related terms

  • Hammer Price — The winning bid at auction, before the buyer's premium and other charges are added.
  • Seller's Commission — A fee deducted by an auction house from the hammer price before paying the seller.

Lessons that explain it

  • A round trip through an auction house can cost 40 percent before the item has moved at all — Buyer's premium going in and seller's commission coming out compound into a breakeven hurdle most buyers never calculate - on top of holding costs and, in several jurisdictions, a higher tax rate reserved specifically for collectibles. This lesson is general information, not personal tax or legal advice, and rules vary by jurisdiction. (13 min)

All 578 terms in the Investing glossary