Buyer's Premium

A buyer's premium is a fee paid by the winning bidder to the auction house, calculated as a percentage of the hammer price. It is charged in addition to the hammer price — the final bid amount announced when the auctioneer's gavel falls.

If you are new to buying art at auction, the buyer's premium is one of the most important costs to understand. It directly affects your total purchase price and should be factored into every bid you place.

How the Buyer's Premium Works

When you win a lot at auction, you do not simply pay your winning bid. The auction house adds a buyer's premium on top.

Example: You win a painting with a hammer price of $5,000 at an auction house charging a 20% buyer's premium.

Component	Amount
Hammer price	$5,000
Buyer's premium (20%)	$1,000
Subtotal	$6,000
Sales tax (e.g. 8%)	$480
Total you pay	$6,480

Note that sales tax in most jurisdictions is calculated on the combined hammer price plus premium, not just the hammer price alone.

Tiered Premium Structures

Most major auction houses use a tiered (or sliding-scale) premium, where the percentage decreases as the hammer price increases. For a $2 million painting at Christie's current rates:

• 26% on the first $1,000,000 = $260,000
• 21% on the next $1,000,000 = $210,000
• Total premium: $470,000 (23.5% effective rate)

Current Rates at Major Auction Houses

Buyer's premium rates vary between auction houses and change periodically. Here are the current rates at the major art auction houses as of 2025:

Auction House	Rate Structure
Christie's	26% up to $1M, 21% on $1M–$6M, 15% above $6M
Sotheby's	20% up to $6M, 10% above $6M (plus ~1% overhead premium)
Phillips	26% up to $1M, 21% on $1M–$6M, 15% above $6M
Bonhams	27.5% up to $12,500, 26% on $12,500–$600K, 20% above $600K
Heritage Auctions	20–25% (varies by category)

Online-only auctions and smaller regional houses typically charge between 15% and 25%, sometimes with a flat rate rather than tiers.

A Brief History of the Buyer's Premium

The buyer's premium was introduced in 1975 when both Christie's and Sotheby's simultaneously added a 10% charge to buyers in their London salesrooms. Before that, auction houses earned revenue solely from seller commissions.

The move was controversial. Dealers and collectors protested, and some boycotted sales. But the premium stuck, and it has only grown since:

• 1975: 10% introduced at Christie's and Sotheby's
• 1990s: Premiums rose to 15–17.5%
• 2000s: Tiered structures introduced, top tiers reaching 20–25%
• 2024: Sotheby's restructured to a simplified 20%/10% model with an added overhead premium

Today the buyer's premium is standard practice across virtually all auction houses worldwide.

Buyer's Premium vs. Seller's Commission

Auction houses charge fees to both sides of a transaction:

• Buyer's premium: Paid by the buyer, added on top of the hammer price
• Seller's commission: Paid by the consignor (seller), deducted from the hammer price

These are separate revenue streams for the auction house. The seller does not receive any of the buyer's premium, and the buyer does not pay the seller's commission. For high-value consignments, auction houses sometimes reduce or waive the seller's commission to attract top lots — which is one reason buyer's premiums have risen over the decades.

How to Factor the Premium into Your Bidding

This is where many new collectors make a costly mistake: they set a budget of $10,000, bid up to $10,000, and then discover they owe $12,500 or more.

Always calculate your maximum bid by working backward from your total budget:

1. Start with your all-in budget (say $10,000)
2. Estimate the combined premium + tax rate (say 28% total)
3. Divide your budget by 1.28: $10,000 / 1.28 = $7,812
4. Set your paddle limit at $7,800

This way, when the premium and tax are added, you stay within budget. Check the auction house's "Conditions of Sale" document before every sale — premium rates can change, and some categories (wine, jewelry, cars) may have different rates.

Is the Buyer's Premium Negotiable?

For most buyers and standard lots, no. The buyer's premium is a fixed fee published in the auction house's conditions of sale.

However, there are exceptions:

• Major collectors spending significant sums regularly may negotiate reduced premiums as part of their relationship with the auction house
• Private sales arranged through an auction house may have different fee structures
• Charity auctions sometimes waive or reduce the premium

For the average art collector buying in the low-to-mid price range, you should treat the buyer's premium as a non-negotiable cost of doing business at auction.

Tax Implications

Tax treatment of the buyer's premium varies by location:

• United States: In most states, sales tax applies to the total price (hammer + premium). Some states exempt art purchases above certain thresholds or have specific rules for auction sales.
• United Kingdom: VAT (20%) may apply depending on the import status of the work and the auction house's margin scheme. An additional Artist's Resale Right (Droit de Suite) may also apply.
• European Union: Similar VAT considerations, plus Droit de Suite on works by living artists or those deceased less than 70 years.

Always ask the auction house for a complete cost breakdown before bidding. Many publish online calculators or will provide estimates upon request.

Tips for Art Collectors

• Read the conditions of sale before every auction — premium rates and terms can change
• Budget for the all-in cost, not just the hammer price, using the formula above
• Compare total costs between auction houses when the same artist appears at multiple sales
• Factor in shipping and insurance costs on top of the premium and taxes
• Consider alternatives like gallery purchases or art fairs, where there is no buyer's premium (though galleries take their own commission from the artist or consignor)
• Learn more key auction and art market terms in our art collector terms guide and understanding art pricing guide