Auction charges / fees etc - can anyone explain in very simple terms!

[SWnewstart]

I've only ever bid at small village hall type auctions where you were charged a couple of £s entrance fee then simply paid whatever the winning bid was. I'd like to have a go at larger sales with a couple of local auction houses, now doing this online but don't really understand the extra costs involved.

For example, there's a lot consisting a crate of fabric offcuts, some bolts of material, other sewing stuff etc, with a guide price of £20-30. Then it states a Buyer's Premium of £20 including VAT. Does this mean that if I bid say £25 (and won) that I'd then have to pay another £20 - almost doubling the cost?

I get that the auction house needs to make money but thought that came from a charge to the seller and maybe VAT charge on the bid price from the buyer. I'm obviously misunderstanding something!

It is more usual to charge a percentage of the hammer price as Buyers premium. Where I used to work - a long time ago - it was 20% of the hammer price plus vat.

Eg. Say a hammer price of £10 plus BP (so additional £2+ VAT on the BP) it would work out to something like £12.40 total.

I've not seen a fixed buyers premium before, however if they are selling low value lots then they would need to cover their overheads and productions costs (and still make a profit).

Sorry that's so long winded, but yes you would pay for example £25 hammer price, plus fixed BP (Inc Vat) of £20, so £45 total.

Auctions generally charge the sellers a % of the hammer price AND the buyers a % of the hammer price. Commission charges vary from auction house to auction house though.

Usually buyers commission is a certain percentage plus vat there is no VAT on hammer price just the commission generally it is 20-24% so if hammer falls at £100 it is 100 +( 20% + VAT ) ie £124

Thank you for the explanations. I'll have to bear those costs in mind very carefully when bidding or the "bargains" won't be quite such bargains and I still think it's a bit steep, coming in at almost double the cost of winning bid, as per my example!