The buyer premium is one of the most misunderstood aspects of auction purchases. Understanding it is crucial for accurate budgeting.
What is the Buyer Premium?
The buyer premium is a percentage added to the hammer price, charged by the auction house for their services. It is the primary way auctioneers generate revenue.
Typical Premium Rates
In South Africa, buyer premiums typically range from 10% to 15%, though some may charge more or less:
- Standard rate: 10-12%
- Premium properties: 12-15%
- Specialist auctions: May vary
Calculating the Total Cost
Here is an example of how to calculate your total cost:
- Hammer price: R1,000,000
- Buyer premium (10%): R100,000
- VAT on premium (15%): R15,000
- Total: R1,115,000
Tips for Managing Premium Costs
- Factor the premium into your maximum bid
- Look for auctions with lower premium rates
- Ask if there are discounts for certain payment methods
- Verify if VAT is included in the quoted premium