Is Bidding at an Auction Still a Great Idea? And How Accurate Are Those TV Auction Programs?

Is Bidding at an Auction Still a Great Idea? And How Accurate Are Those TV Auction Programs?

Auctions have long been a thrilling way to bag rare and hard-to-find items, and with the rise of online auctions, this excitement has reached new heights. We've all seen those gripping TV auction programs, where bidders win priceless treasures for what seems like a fraction of their value. It looks easy and, at times, even fun. However, is bidding at an auction really the bargain-hunting dream it’s made out to be, especially when factoring in all the hidden costs? And how accurate is what we see on TV?

The Reality of Auction Pricing

We recently had a conversation with one of our customers who was somewhat shocked after bidding £310 at an online auction. They assumed that the hammer price—£310—would be the total they’d pay. But after the final bill arrived, they were taken aback to find that their total costs had ballooned to over £450. Here's the breakdown:

  • Hammer price: £310

  • Premium (auction house fee, usually 27-30%): £93

  • Charge Total (sometimes a fixed additional fee): £15.35

  • VAT on Charge: £3.07

  • Shipping: £35

  • Total: £456.42

When you factor in these extra fees, suddenly a seemingly affordable auction item turns into something far more expensive. And this is just for one item.

The Common Pitfalls of Online Auctions

What often gets lost in the excitement of bidding online is the additional costs that can accumulate quickly. The cost of the item itself (the hammer price) is only the tip of the iceberg. The premium, which is the seller's commission, can range from 27% to 30% of the hammer price. Then, there’s the online bidding surcharge, VAT, shipping fees, and potential additional charges depending on the auction house. All of these can add up fast, making what seemed like a bargain at the outset into a more expensive purchase.

Many people come to online auctions with an expectation that their winning bid is the price they’ll pay, but as you can see from the example above, that’s often far from the case.

The Myth of Big Profits from Auction Flips

One thing that often gets portrayed on TV auction programs is the idea of buying something for a steal and flipping it for a massive profit. Let’s break down how this looks in practice, using the £310 auction purchase as a case study.

Let's say a UK VAT-registered business buys this item for £456.42 (the full price after all charges) and sells it for £600. The initial assumption might be that a tidy profit of £150 is made. However, here’s the reality of the costs involved:

  • Sell price: £600

  • Cost of goods: £456.42

  • VAT: £24 (on the sale price)

  • Card processing fee: £11

  • P&P costs: £35

That brings the total costs to £526.42. Now, subtract that from the £600 sale price, and you’re left with a gross profit of £73.58. But it doesn’t stop there—this is where the true reality of the auction business sets in.

If the seller is operating as a VAT-registered business, they will also be subject to corporation tax, which can take a hefty slice of that profit. With a corporation tax rate of 25% on profits, the net profit becomes:

  • Profit before tax: £73.58

  • Corporation tax (25%): £18.39

  • Net profit: £55.19

The Hidden Costs of Auction Flipping

As you can see, the dream of buying low and selling high isn’t always as lucrative as it seems once all the hidden costs are accounted for. These include not only the auction premiums, VAT, and shipping but also the time spent hunting for items, cleaning, photographing, listing, and packing them for resale. In the end, the £55.19 profit from a £310 auction win might not even be worth the time invested, especially considering overheads like rent and utilities for your premises, or the cost of hiring additional staff as a business scales up.

Is Bidding at an Auction Still Worth It?

Despite the hidden costs, bidding at an auction can still be an incredibly rewarding experience. For collectors, the thrill of securing a rare or unique item is hard to beat. And for businesses, there are still opportunities to make profits, though they may be slimmer than anticipated. However, to truly succeed in the auction world, it’s essential to have a full understanding of all the potential costs involved.

So, is auction bidding still a great idea? Absolutely—if you go into it with eyes wide open. The key is to understand the full scope of charges and to keep expectations grounded. After all, the real value of an auction experience isn’t just about the price you pay but also the hunt, the thrill, and the chance to add something special to your collection.

Final Takeaways:

  • Always factor in additional costs like auction premiums, VAT, and shipping.

  • Don’t expect massive profits from flipping auction items. The hidden costs can eat into your margin.

  • Understand that TV auction programs may not give you the full picture—they often simplify or gloss over the realities of auction costs and profits.

  • Enjoy the auction experience, but make sure you're fully informed before placing that next bid.

Happy bidding!

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