How to Calculate Buyers Premium? | Buyers Premium Calculator

buyers premium calculator

Auctions frequently utilize a buyer’s premium but the question is what is buyers premium in auction? Buyers premium is a percentage of the final bid price, added to such to then calculate the final sales price. For example, a car selling at auction for $15,000 with a 10% buyer’s premium would then require the buyer to tender $15,000 + (.10*15000) = $16,500. This article is about how to calculate buyers premium in auction. 

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How to calculate buyers premium based upon either the high bid price or the total sales price including the buyers Premium? 

How to Calculate Buyers Premium from High Bid

If the high bid price is known, the buyers premium is calculated by taking the BP as a percentage times the high bid price.

For example, a diamond ring sells for $4,900 and a 10% BP is charged. The BP alone would be 4,900*.10 = $490. 

How to Calculate Buyers Premium from Total Payable Amount

If the total sales price is known, including the BP, we can calculate what the BP was by taking the total sales price times [buyer’s premium / 1+buyer’s premium]. For example, our aforementioned diamond ring sells for $5,390 including a 10% BP. If we want to know how much the BP was, we take 5,390*.10/1.10 = $490. Some other examples: 

  • $27,500 price including 10% BP: 27,500*.10/1.10 = 2,500 buyer’s premium 

  • $525 price including 5% BP: 525*.05/1.05 = 25 buyer’s premium 
  • $10,637.50 price including 15% BP: 10,637.50*.15/1.15 = 1,387.50 buyer’s premium 

Care must be taken to ensure the buyer’s premium numbers are calculated correctly. 

How to Calculate Total Amount Including Buyers Premium

There is the conventional manner in which this calculation is completed, as we noted above. Most everyone takes the final hammer price times the BP and then adds the final hammer price. While this method is acceptable, there is an easier way to calculate buyers premium if one has a handy calculator. 

Our quicker method involves the principle that adding a percentage to a number is the same as multiplying it by [1+that percentage]. For example, adding 10% is the same as multiplying by 1.10 where “10%” is expressed as the decimal “.10” 

Therefore, when adding a buyers premium, convert it to a decimal and add it to 1. The multiply the final bid by this number to calculate the total including the buyers premium. Some examples: 

  • $150,000 home selling with a 15% buyers premium: 150,000*1.15 = $172,500 
  • $1,050 wristwatch selling with a 10% buyers premium: 1,050*1.10 = $1,155 
  • $45,000 horse selling with an 8% buyers premium: 45,000*1.08 = $48,600 

How to Calculate Hammer Bid from Total Payable Amount? 

Let’s move on to calculating what the high bid was, if we know the number which includes the buyers premium. 

For example, someone says that a John Deere tractor recently sold at auction for $60,500 including a 10% buyers premium. How would we figure what the hammer price was? 

By taking the $60,500 total price for the John Deere tractor and dividing  by 1.10 we get $55,000, which must have been the high bid, prior to adding the buyers premium. 

Therefore, when backing out a buyers premium, convert it to a decimal, add it to 1 and divide the total price by this number for the high bid excluding the buyers premium. Some examples: 

  • $253,000 price including 15% buyers premium: 253,000/1.15 = 220,000 bid price 
  • $55,000 price including 10% buyers premium: 55,000/1.10 = 50,000 bid price 
  • $2,100 price including 5% buyers premium: 2,100/1.05 = 2,000 bid price 

Conclusion

That’s all about buyers premium calculator. If you participate any auction,  you have to pay buyers premium along with auctioneer commission most of the time . Because, this is one of the most important income source of auctioneer. It is always recommended to determine a border line of your maximum bid before entering the auction house to be in the safe side and never cross that line.  If you face still any issue understanding buyer premium calculation, please call our auction expert at 512-261-3838. Good Luck!!

FAQs

What is 10 buyer’s premium at an auction?

When the buyers premium is 10%, it is called 10 buyer’s premium. Like, if the hammer or high bid price is $5,000 the 10 buyer’s premium is 5000 * 0.10 = $500

What is 15 buyer’s premium at an auction?

When the buyers premium is 15%, it is called 15 buyer’s premium. Like, if the hammer or high bid price is $5,000 the 15 buyer’s premium is 5000 * 0.15 = $750

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