What is a buyer's premium?
If you've ever bid at auction and paid more than the hammer price, that gap is usually the buyer's premium. It's one of the most common — and most misunderstood — parts of how auctions make money. Here's exactly what it is, how it stacks with commission and VAT, and how to set one.
By the BidWright team · Auction software studio
The simple definition
A buyer's premium is a percentage added to the winning bid that the buyer pays on top of the hammer price. If a lot hammers at R100,000 with a 10% premium, the buyer owes R110,000 (before VAT). The premium goes to the auctioneer, not the seller — it's revenue from the buy side of the sale.
How it stacks: premium, commission and VAT
Three things can sit on top of a hammer price, and it helps to keep them separate:
Buyer's premium
Added to the hammer price; paid by the buyer. Revenue for the auctioneer.
Seller's commission
Deducted from the seller's proceeds; paid by the seller. Also revenue for the auctioneer.
VAT
Applied per the tax rules on the sale and/or the premium, depending on registration and goods.
Many auction houses charge both a buyer's premium and a seller's commission — earning a margin from each side. A good platform calculates all of this automatically at settlement so nobody does the maths by hand.
A worked example
What's a typical percentage?
There's no fixed rate — it depends on your sector and what the market accepts. Specialist art and antique houses often sit at the higher end (15–25%), while vehicle, equipment and commodity sales are usually lower. Whatever you choose, it must be disclosed clearly in the conditions of sale so buyers factor it into their bidding.
Setting one on your own auctions
Because BidWright's billing engine is built in-house, the buyer's premium, seller's commission and fee model are fully configurable — flat or tiered, per category or per sale — and applied automatically at checkout alongside deposits and payouts. You're not limited to whatever a plugin happens to expose. To see how the wider economics fit together, read how to choose auction software.