Effective Buyer's Premium - A New Term
 

I would maintain that it would be prudent in the auction game to consider all costs whether buying or selling including hammer price, Buyer's Premium, Auction Site Premium, State Tax, Insurance, Shipping and Handling and consignor fees (for sellers). Only then do you know the true cost of (or return on) your cardboard treasures. All these issues have been discussed before on the Forum, but I bold enough to propose a new term which I will call the Effective Buyer's Premium (EBP), which can result in sticker shock. :eek:

Recently I prevailed in an online auction winning two lots for a grand total of $35.00 and here is what happened.

The auction house BP was stated at 15%, so add $5.25.

They also added 3% for Auction Zip fee, so add another $1.05.

They do not ship, but send their lots via the local UPS Store.

The UPS Store's cheapest option added another $20.76. We are talking cards here and less than 100, not a Grecian Urn.

I chose not to insure my $35 gems.

There was no State Tax, whew!

The total cost added to the hammer price was therefore $27.06.

Applying the Effective Buyer's Premium formula

(Cost of added expense / hammer price) * 100 = Effective Buyer's Premium (or EBP) expressed as a percentage of the winning bid.

In the example presented, my EBP was 73%.:eek:

We all complain periodically about the Buyer's Premium, but a slightly higher BP to cover shipping and handling and other extras might not be a bad idea.

Uh-oh
 

I won two lots of three cards each in that same auction and haven't paid yet. Not looking forward to seeing how this ends...

I like the EBP concept, but I guess you need to know shipping costs up front too. Seems like my buffering of 20-25% about the gavel price isn't enough in some cases. :eek:

Hidden costs such as these is part of why I have avoided auctions.

I won a card in Joe's last night. My EBP is 7.5% because I chose the PayPal route as opposed to a check, in which case it would have been zero.

I won 5 items at an auction recently for a total of $220, add 10% buyers Fee it was now $242, then they added 7% sales tax AFTER the 10% buyers fee so then it was $258.94. So $38.94 in fees and taxes, thankfully I didn't have to have the items shipped and took them home right from the place. and just to add 3 of the 5 items I won were $10, $25, and $35, so less than the fees

Yep. You can't beat Joe's EBP when paying by check. :D

I think that varies from state to state. Some states don't allow you to tax the "service" of the BP.

welcome to NJ

Frank - You'r real problem is that you're not buying expensive enough stuff. If you'd have won some $10,000 cards, your EBP would have been much closer to 20%. Think of the money you would have saved!

All the more reason to avoid AHs and buy from our very own BST section! :cool:

There seem to be more auction houses than ever before. Why hasn't the competition lowered BPs?

There is a bunch of competition among auction houses. However, it is practically all on the consignor side, especially with the lower seller commissions (e.g., see Mile High's latest offers). In fact, to offset, lower seller commissions, auction houses often have to raise buyer premiums. Auction houses make their money through consignments. The more consignments they get, the better off they are. Consignors take into account multiple factors such as the seller's fee, the buyer's premium, the prices that the auction houses typically deliver, the auction houses' customer list, the AH's advertising, speed of consignment payout, auction ending style, and so forth to decide best where to send their items. As long as auction houses have stuff that buyers want, they will do just fine.

Got it. From now on I will spend $10,000 in every auction. Get ready, Lee and Al.;)

In my example though, had I spent $10,000 I would have won all the lots and ended up owning the UPS Store and perhaps the Auction House as well.:D

Thank God, you are not bidding against me.:D

auction
 

Frank,
You might as well go back to collecting Grecian Urn's !!

For now.

Whenever an auction requires third party shipping I know I am going to get hosed on the deal.

The sales taxes are something to be paid on every deal; either sales tax or use tax to your home state, unless you are buying as a dealer for resale. I always factor that in.

With a typical AH I just assume BP + sales tax + 5% for shipping as the surcharge on the bid. Around 35% on average. Really dissuades me from making casual bids on stuff I don't really want.

I just printed this out and pinned it above my computer. My name is John, and I collect sportscards.