If you’ve ever taken part in an auction — online or in person — you’ve probably noticed an extra fee added to the final selling price. That fee is known as a buyer’s premium. But many people still wonder, “What does it mean? Why is it added? And where does the money go?”
In this guide, we’ll break down what is a buyer’s premium, how it works, and why auctions around the world rely on this fee. We’ll also look at real-world examples like the Sotheby’s buyer’s premium and Nellis Auction buyer’s premium to give you a complete understanding.
What Is a Buyer’s Premium?
A buyer’s premium is an additional fee charged to the winning bidder on top of the hammer price (the final bid). For example, if you win a car at auction for $10,000 and the buyer’s premium is 10%, you’ll pay $11,000 in total.
Understanding what is a buyer’s premium is crucial because it affects your total purchase cost and helps you bid more strategically.
Why Do Auctions Charge a Buyer’s Premium?
Auction houses use the buyer’s premium to:
- Cover administrative, listing, and operational costs
- Pay auction staff and support teams
- Improve marketing and auction software
- Keep seller fees low
In many cases, the buyer’s premium helps auction companies maintain a profitable business model without burdening sellers.
Who Gets the Buyer’s Premium at Auction?
A common question is: “Where does this money actually go?”
The short answer is that the auction company keeps the buyer’s premium, not the seller. This fee supports the platform or auction house and is part of how they generate revenue.
You can learn more about who gets the buyer’s premium at auction and how it affects auction pricing in the detailed guide.
Real-World Examples of Buyer’s Premiums
Sotheby’s, one of the world’s most prestigious auction houses, charges a tiered buyer’s premium based on the hammer price. This structure can significantly increase the final cost for high-value art, luxury items, and rare collectibles.
Nellis Auction, known for liquidating consumer goods, typically charges a flat buyer’s premium on all winning bids. This helps keep seller fees low while maintaining platform operations.
Both examples highlight how widely used buyer’s premiums are across the industry.
How Much Is a Typical Buyer’s Premium?
The amount varies depending on the auction type:
- General merchandise auctions: 10–15%
- Vehicle auctions: 5–10%
- Luxury auctions (like Sotheby’s): 20% or more
- Online auctions: 10–18% depending on the platform
Knowing what is a buyer’s premium helps you calculate your true bidding limit before you start competing.
Is the Buyer’s Premium the Same Everywhere?
No — each auction house sets its own premium. Some charge flat rates, while others apply tiered percentages. The key is to always check the terms before placing a bid.
If you're comparing the best auction premium structures across platforms, look for transparency and fairness. Some modern auction sites keep fees lower to remain competitive.
Pros & Cons of Buyer’s Premiums
Pros
- Helps auction platforms keep seller fees low
- Funds platform improvements and customer support
- Encourages more sellers to list valuable items
Cons
- Increases the final cost for buyers
- Can confuse first-time bidders
- Bidders must calculate total cost manually
This is why reading about what is a buyer’s premium before entering an auction is essential.
Tips for Bidders: How to Avoid Surprises
- Read Terms Carefully: Always check the buyer’s premium percentage before bidding.
- Calculate in Advance: Add the premium to your max bid limit.
- Compare Platforms: Look at the best auction premium across different sites.
- Beware of Extra Fees: Some auctions add document fees or storage fees.
- Bid Strategically: Premiums can change the actual value you’re paying.
Final Thoughts
Understanding what is a buyer’s premium is key to becoming a smarter, more confident auction participant. Whether you're examining the Sotheby’s buyer’s premium or reviewing how the Nellis Auction buyer’s premium works, the core idea remains the same: the buyer’s premium is a fee added to support auction operations.
Before bidding on anything — from cars to art to everyday goods — always check who gets the buyer’s premium at auction and calculate your total cost ahead of time.
With the right knowledge and strategy, you can find great deals while navigating auction premiums confidently.