How Does a Buyer's Premium Work at an Online Equipment Auction?
A buyer's premium is an additional fee added to your winning bid, calculated as a percentage of the final sale price. If you win an item for $1,000 and the buyer's premium is 18%, your total before taxes is $1,180. It shows up on your invoice every time, and for new bidders, it's one of the most important numbers to understand before you place your first bid.
This post breaks down exactly how buyer's premiums work, how to calculate your true total cost, what's typical across the industry, and how Grafe Auction's typical no-reserve auction model factors into the bigger picture. New to bidding in auctions? Find our most frequently asked questions here.
What Is a Buyer's Premium?
A buyer's premium is a percentage added to the hammer price, which is the price at which bidding ends. It is paid by the buyer on top of their winning bid. It is separate from the item's sale price and generally, but not always, goes to the auction company, not the seller.
The buyer's premium is standard practice across commercial equipment auctions, art auctions, real estate auctions, and most other auction formats. It exists whether you're bidding online or in person.
How Do You Calculate Your Total Cost at Auction?
Your total cost at a Grafe Auction is the sum of three things:
- Your winning bid (the hammer price)
- The buyer's premium (18% of your winning bid)
- Applicable sales tax (applied to both the winning bid and the buyer's premium)
Here's a simple example:
- Winning bid: $500
- Buyer's premium (18%): $90
- Subtotal: $590
- Sales tax (varies by state): calculated on $590
- Total due: $590 + tax
The buyer's premium at Grafe Auction is 18%. That number is consistent across auctions and is always disclosed in the auction terms before you bid. There are no surprise fees at checkout beyond sales tax and any removal or shipping costs you arrange separately.
What Is a Typical Buyer's Premium for Online Equipment Auctions?
Buyer's premiums across online commercial equipment auctions commonly range from 10% to 25%, with variation depending on the auction company, the type of equipment, and the platform used. Some auctions charge a flat fee per lot rather than a percentage. Others tier their premiums based on sale price.
Before bidding on any auction, check the terms. The buyer's premium should be clearly stated. If it isn't, that's worth pausing on before you register.
What Is Grafe Auction's Buyer's Premium?
Grafe Auction charges an 18% buyer's premium on all purchases. It is applied to the final bid price of every lot and is a taxable addition to the item price.
One thing worth knowing: that 18% includes credit card processing fees. There is no separate transaction fee added at checkout on top of the buyer's premium. What you see in the terms is exactly what you pay.
This rate is fixed and consistent. You will see it disclosed on every auction event page and in the terms before you bid. When you receive your invoice after the auction closes, the buyer's premium will be itemized separately so you can see exactly how your total was calculated.
Is the Buyer's Premium Taxable?
Yes, by law in all states that charge tax, the buyer's premium is considered part of the taxable purchase price of the item. Sales tax applies to the combined total of your winning bid and the buyer's premium.
If your business qualifies for a sales tax exemption, you can submit your exemption certificate to info@grafeauction.com before the auction closes. The sales tax post on the Grafe Auction blog covers that process in full detail.
Why Do Auction Companies Charge a Buyer's Premium?
The buyer's premium is how most auction companies structure their revenue. Rather than charging sellers a high commission on the sale, auction companies collect a portion of their fees from the buyer's side of the transaction.
At Grafe Auction, the buyer's premium is part of what makes it possible to keep seller commissions competitively low. For sellers, that means more of the sale proceeds stay in their pocket. For buyers, it means you're participating in auctions where sellers are motivated to list, which keeps inventory strong and auction quality high.
It's a structure that works for both sides of the transaction when it's transparent, and at Grafe Auction, it always is.
How Do You Factor the Buyer's Premium Into Your Bidding Strategy?
Work backward from your total budget before you place a bid. If you're willing to pay $1,000 all-in for a piece of equipment, your maximum bid is not $1,000.
Here's the math:
- Maximum total you want to spend: $1,000 (before tax)
- Divide by 1.18: $847
- That's your maximum bid
Bid up to $847 and your total before tax lands at $1,000. Bid $1,000 and your invoice before tax is $1,180.
What Other Costs Should You Budget For?
Beyond the buyer's premium and sales tax, there are two additional cost categories to plan for:
Removal costs. Items are picked up during a stated removal window at the auction location. If you hire the on-site removal and rigging team to help with loading or disconnection, that is an additional cost arranged directly with them.
Shipping costs. Grafe Auction does not provide shipping. If you need items shipped rather than picked up, that is arranged and paid for by the buyer. Freight contacts familiar with Grafe Auction's process are listed in the "Removal, Shipping and Special Terms" section of each auction event page.
Registering to bid at Grafe Auction is free. The buyer's premium, sales tax, and any removal or freight costs are the full picture of what you'll pay.
Where Is the Buyer's Premium Listed Before You Bid?
The buyer's premium is disclosed in the auction terms on every event page at grafeauction.com. Look for the "Fees and Payment Terms" section or the "Removal, Shipping Information and Special Terms" section at the top of the auction listing.
Read those terms before you bid. They contain the buyer's premium rate, the payment deadline, the removal window, and anything specific to that auction. Taking five minutes to read them saves a lot of confusion after the auction closes.
Understanding the buyer's premium is one of the most useful things a new bidder can do before placing their first bid. Once you know how to calculate your true total cost, you can bid with confidence and avoid the surprises that catch unprepared buyers off guard.
Browse upcoming auctions at grafeauction.com and review the terms on any event page before you bid.
You might also like: